Patent Trolls Cost The Economy Half A Trillion Dollars
from the ouch dept
Last month, in talking about an episode of Planet Money with James Bessen on it, we mentioned his new research suggesting that patent trolls evaporated half a trillion dollars in wealth. Now that research, done with Michael Meurer and Jennifer Ford has been released (thanks to Tim Lee for the pointer): The Private and Social Costs of Patent Trolls.Note that this isn't trying to count "losses" like the entertainment industry in trying to make up numbers about what would have sold. This is a direct observation on value of companies sued by patent trolls, and looking at how much of their value evaporates in response to the lawsuits. The $500 billion number represents a total over 20 years -- from 1990 to 2010. But, even worse (and not surprisingly), the numbers show that this number has been going up. Over the last four years, the total decimation of value from patent troll cases has averaged over $80 billion per year. In other words, over $320 billion of that $500 billion came in just the last four years.
Does this mean that some of this money is being transferred to actual inventors? Nope. Again, the research finds otherwise. The incentive to inventors has not increased by nearly the same amount. The research points out that licensing companies could add value -- but that under the current system, they do almost certainly do not. And as the problem is getting worse, all Congress can do is pass some hapless reform bill that doesn't even deal with the patent trolls issue at all.
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Filed Under: cost, economy, james bessen, jennifer ford, michael meurer, patent trolls, patents, software patents
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"$80 million per year. In other words, over $320 million of that $500 million"
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FTA (page 2): During the last four years the lost wealth has averaged over $80 billion per year.
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Mike, does the money evaporate? Do the litigants take their settlements and push the money into a furnace, burning it and making it disappear? Or, just like your supposition in the music world, the money just goes in another direction and stays in the economy?
A transfer of money from place to another doesn't change anything. It's net nothing. It's lower on this side, higher on the other side, right?
So what exactly is your point here? Is the Movie industry right when they say that the economy has lost income, or are they full of it? If they are full of it, then this report is equally full of it because it looks too closely at only one side of the deal.
Come on Mike, pick one side and work with it.
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If you had read the *second* paragraph of the article before posting, it would have made you look much less stupid.
Here, I'll quote it for you:
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Would you like to try again?
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http://en.wikipedia.org/wiki/Deadweight_loss
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Re: Re: Nussing!
Just click 'report' and ignore them--they die off from starvation if nobody feeds them.
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Re: Re: Re: Nussing!
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You don't have a point. You just want to derail the discussion.
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Re: Re: Re: Re: Re: Nussing!
What else can you do when you are sitting all alone living in your parent's basement?
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Wouldn't this money be used elsewhere though? Doesn't it still go through the economy in another place? Also, are we talking about 'value' or 'price'? The price of something going down does not necessarily mean that it has any less value.
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An innovative new start up forms using a some cool technology. They get a bunch of press and some venture capital financing. The markets then value the company and its technology at a total of $50 billion.
Then a patent troll lumbers from under its bridge and sues said tech company for infringement. No matter the out come, whether they settled or lost, the market then reduces the valuation of the company to $5 billion or less. That is a $45 billion loss in value. That is what is measured.
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Nope. This isn't *money*. This is *valuation*. Valuation can be turned into money, but it's not the same thing. It's valuation that is disappearing. Valuation can evaporate. And that's what this report shows.
Doesn't it still go through the economy in another place?
Nope. Valuation can disappear.
Also, are we talking about 'value' or 'price'? The price of something going down does not necessarily mean that it has any less value
Valuation is not "value." Valuation is a form of price.
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Also, how do they measure "value"? Since you keep telling us that price and value are not the same, why are they measuring value in dollars? It would seem to be a contradiction to basic economics.
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Or you could just make yourself look like a fool. Your choice.
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Value isn't taken out.
Also, how do they measure "value"? Since you keep telling us that price and value are not the same, why are they measuring value in dollars? It would seem to be a contradiction to basic economics.
You don't. We're not talking about value.
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Responded in the post already. These are entirely different numbers looking at different things. The MPAA's numbers look at "missing transactions" which makes no sense. These numbers look at actual value of corporations -- which is a case where value can and does evaporate. So there's no money going somewhere else in that situation.
If you're really interested in this topic (which I know you're not), there's a really good episode of Planet Money (a very early one) on how companies valuation can, in fact, evaporate.
So it's perfectly fair to talk about losses from diminished valuation. But talking about losses because people choose to spend money elsewhere doesn't make any sense.
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Patents encourage the employment of more lawyers. Since lawyers and litigation don't produce anything beneficial, such deters labor power away from the production of useful product and towards litigation. Sure, those lawyers could spend that money elsewhere, in sectors of the economy that does produce stuff, but that's not fair to those that do produce. Why should others work hard to produce stuff just to give it to lawyers that produce and contribute nothing of value beyond worthless litigation.
When companies have to litigate, they are wasting resources, and labor hours, litigating, which directs attention and human labor power away from innovation and the production of useful goods.
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Re: You got flagged for that !!!!
Or that the money has to be made in the first place, for it to be distributed to the owner of the IP.
You are right it is a tacid admission that the patent system works and that companies can make high profits by applying technology developed by someone else.
It is proof that the IP has value, and that the patent system does in fact work very well.
I hope they flag me as well, :)
It's great to see the fear in their eyes when they work see the that it is a clear argument that is PRO patent and IP...
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speaking of trolling
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mike is pointing out the direct cost of patent trolls sucking money from companies/individuals that actually create. if you wish think of it this way simply. for each dollar made 50 cents is then taxed by the trolls. where that money goes IS NOT AN ISSUE! all the actual inventors/creators are losing out and having NO desire to then make things causing less innovation.
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Great with no innovation or new invention there is nothing for trolls to do.
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I wonder...
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That was /estimated/ value on paper.
THERE IS NO "direct observation", it's just etimates on paper. If turned out FALSE DUE TO patent infringement, then simply the estimate didn't forecast accurately. The "wealth" didn't evaporate: WEALTH CAN'T EVAPORATE! Your notion of "wealth" isn't tied to physical goods, is all, typical ivory-tower notion.
And NO, you can't make yourself right and immune to controversy by stating obvious objections first. That's just a childish trick.
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Re: That was /estimated/ value on paper.
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No. "valuation" is not "value". You can't even discuss it without repeating the essential error.
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Re: Re: Re: That was /estimated/ value on paper.
valuation [val-yoo-ey-shuhn]
noun
1. the act of estimating or setting the value of something; appraisal.
2. an estimated value or worth.
3. the awareness or acknowledgment of the quality, nature, excellence, or the like of something: public valuation of the importance of education.
value [val-yoo] Show IPA noun, verb, -ued, -u·ing.
noun
1. relative worth, merit, or importance: the value of a college education; the value of a queen in chess.
2. monetary or material worth, as in commerce or trade: This piece of land has greatly increased in value.
3. the worth of something in terms of the amount of other things for which it can be exchanged or in terms of some medium of exchange.
4. equivalent worth or return in money, material, services, etc.: to give value for value received.
5. estimated or assigned worth; valuation: a painting with a current value of $500,000.
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Re: That was /estimated/ value on paper.
Let your car to the elements and never service it and you will see wealth evaporate right in front of you.
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Re: Re: That was /estimated/ value on paper.
Buy a new car and drive it off the lot; 25% of the car's "worth" is instantly and permanently gone in smoke.
Or more insidious:
After driving the car home, some scandal occurs which causes public perception of the car you drive to plummet; the resale value suddenly goes down 50% because nobody wants to own one (even though the car's actual utility and material worth haven't changed one iota).
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Is it Possible you could examine a solution like a Patent Mediator?
No inventor wants to give up more then 90% of the value of the invention to lawyers.
A special industry by industry supported board of mediators could help substantially by giving the inventor someplace to go other then a law enforcement group.
After rejection or insubstantial attention by a given company the inventor could approach the mediator and try to settle based on a general industry understanding of reasonable allocation of value. Failure to follow the mediators recommendation might then lead to a suit.
In general the inventor would be better compensated and the industry pay less for a given invention, if not other reason then the fixed 5 million plus cost of a trial.
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another biased article
“Patent troll”
Call it what you will...patent hoarder, patent troll, non-practicing entity, etc. It all means one thing: “we’re using your invention and we’re not going to pay”. This is just dissembling by large infringers to kill any inventor support system. It is purely about legalizing theft.
Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now some of those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.
For the truth about trolls, please see http://truereform.piausa.org/default.html#pt.
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Re: another biased article
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Re: another biased article
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more corporate theif propaganda
“Thanks to research assistance from Tim Layton, data from Patent Freedom and support from the Coalition for Patent Fairness”
Coalition for Patent Fairness: from their web site..."Coalition's members include Apple, Autodesk, Cisco Systems, Dell, Google, HP, Intel, Micron Technology Inc., Oracle, RIM, SAP and Symantec"
Another study bought and paid for by the world's largest patent infringers!
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Re: more corporate theif propaganda
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To 'lose' it you have to have earned it in the first place.
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To "lose" it you have to make it in the first place
If you are found using a patent that is not making your any profit, then you will not be fined massive amounts of money for damages (damages are much less) it is only in the cases where the patent infringer has made a great deal of money by apply a patent (that they do not own) and makeing large profits.
Therefore, you do not get to pay out large sums unless you have gains alot from that patent.
The way Mike puts it, that money just 'evaported' when in reality it want from the management of a large corporation that is large because of the exploitation of a patent they do not own.
All that is happening is the rightfull owner (of the patent, not of the invention) is rightfully claiming his share of the profit being made from his patent.
And yes, alot of people invent things but do not have the ability or finances to commercialise those patents, they use a third party for that purpose also to reduce risk.
As most patents fail to make profit, there is a high risk, if the inventor decides to cut that risk and sell that patent for a flat rate that is his right to do that.
So that figure you state as a loss is actually a GAIN of funds and certainly economic stimulation.
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a step?
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