Empirical Evidence Of Just How Much Patent Trolling Hinders Innovation

from the the-evidence-keeps-rolling-in dept

Wed, Apr 11th 2012 2:40pm — Mike Masnick

Over at Slate, Ray Fisman has an excellent article discussing some recent research on how patent trolling hinders innovation. Much of the story focuses on the research of Catherine Tucker at MIT, which looked specifically at patent trolling in medical imaging, and presents incredibly compelling evidence of just how massively innovation is hindered in that space, thanks mainly to patent trolling by famed patent trolling giant, Acacia. To account for other possibilities, she compared both medical imaging storage and medical text storage systems. Both types of software are similarly complex, and many of the first sued produce both kinds of software -- but the patent lawsuit here only impacted the imaging side of the business. But the results were clear:

Basically, the companies that got sued started selling a lot less product on the imaging side -- but remained about equal on textual data storage. The same was not seen for those who were not sued. To account for the idea that this might have been due to a sudden drop in demand, she also researched the number of RFPs (requests for proposal) that were sent out for both medical imaging storage systems and textual data storage systems -- and saw both continue to increase at pretty massive rates. In other words, demand remained quite high (and growing) even as sales massively dropped.

So why the sharp drop? Basically, the companies that were sued stopped innovating. As Fisman summarizes:

Why the slowdown in sales? Imagine what would happen to iPhone sales if Apple’s last product was its 3G phone introduced in 2009: Android-based devices would be running away with the market. Tucker claims that at least part of the reason imaging software sales were slowed by the Acacia suit is that R&D at the affected companies went into a deep freeze. In the two years following the suit, none of the defendants came out with a single new version of their products, while improvements continued in their text-based systems and at smaller competitors not subject to the suit.

One of the most difficult things about discussing how the pace of innovation is held back is the difficult of showing what doesn't happen. We get this all the time, where people who can't understand the difference between absolute changes and the rate of change, insist that because there is still innovation in a market, that innovation hasn't been hindered. Of course, that's ridiculous. No one is saying that all innovation ceases. The concern is merely with the rate of change: the pace of innovation, and how it may be slower than would otherwise be seen. The difficulty, of course is in how do you show what would have been? That's the most challenging part. But this study does a really nice job of showing how innovation in the space slowed down massively just after the lawsuits, when there's almost no other explanation for how that might have happened. It's an incredibly damning report against patent trolls and how they hinder innovation.

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Filed Under: innovation, medical imaging, patent troll, software
Companies: acacia

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Anonymous Coward, 11 Apr 2012 @ 2:46pm

But this study does a really nice job of showing how innovation in the space slowed down massively just after the lawsuits, when there's almost no other explanation for how that might have happened. It's an incredibly damning report against patent trolls and how they hinder innovation.

You definitely want to extrapolate that as much as your faith will allow, and then spin three times while chanting: "The sky is falling!" It's the TD Mantra!
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- silverscarcat (profile), 11 Apr 2012 @ 3:00pm
  
  Re:
  "You definitely want to extrapolate that as much as your faith will allow, and then spin three times while chanting: "The sky is falling!""
  
  That's the MPAA and RIAA's mantra.
  
  Do you want to get sued for copyright infringement?!
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- Anonymous Coward, 11 Apr 2012 @ 3:07pm
  
  Re:
  Actually "The Sky is Rising" is the TD Mantra for those of us with a reading comprehension and memory surpassing a toddler.
  
  The article points out how the R&D(Research and Development, or people who make stuff, think Santa's elves) was pretty much forced to stopped because some one decided that working was to hard and it was just easier to force the Government to give them money for their incompetence.
  
  Sorry for all the big words. Hopefully once you get to Elementary School a nice and patient teacher will explain them to you.
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- Chosen Reject (profile), 11 Apr 2012 @ 3:09pm
  
  Re:
  It's not a sky-is-falling issue; it's a stagnant-air problem, where harmful pollutants can't clear out of the air. It's not surprising at all that innovation in an area slows down once patent lawsuits come out. Patents do nothing but impede progress and that is by their very design and nature. There is nothing you can do to fix patent law to make it otherwise. Telling someone they can't work in a field because you got there first doesn't do anything to encourage new work in that field.
  
  Patents are, by definition, a limit on progress.
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- Lawrence D'Oliveiro, 11 Apr 2012 @ 3:24pm
  
  Re: You definitely want to extrapolate that as much as your faith will allow, and then spin three times while chanting: "The sky is falling!" It's the TD Mantra!
  Wonderful riposte! I must keep it in mind for use in future. The next time some patentard tells me that we can�t have innovation without patents, I�ll simply reply �You definitely want to extrapolate that as much as your faith will allow, and then spin three times while chanting: "The sky is falling!" It's the Patentard Mantra!�
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- rubberpants, 11 Apr 2012 @ 3:26pm
  
  Re:
  I'd like you to explain to me how patent trolls do not hinder innovation. Is that what you're trying to say?
  
  How can companies that didn't invent something, don't make it, and don't sell it but can stop those who because they have a piece of paper help innovation?
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- Anonymous Coward, 11 Apr 2012 @ 3:54pm
  
  Re:
  There is very little to no evidence that IP promotes the progress. Plenty of evidence suggests that it hinders invention and innovation.
  
  Government established monopolies cause known economic harm. They reduce aggregate output and increase prices. Consumers are harmed. No one is entitled to a government established monopoly. As such, they need to be justified with empirical evidence. Your faith in their justification is not sufficient. Their current lack of justification warrants their abolition.
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Mobile Phones, 11 Apr 2012 @ 3:02pm

I think we need to follow the medical industries approach on prescription drug patents. Give them 10 years of profit, then allow generics to come out.
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- Anonymous Coward, 12 Apr 2012 @ 5:01am
  
  Response to: Mobile Phones on Apr 11th, 2012 @ 3:02pm
  Better yet, any lawsuit alleging infringement should force the plaintiff to release a an itemized ledgers R&D expenditures along with production costs and total revenues and if it shows that R&D costs have been recovered, then the suit is dismissed.
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Anonymous Coward, 11 Apr 2012 @ 3:10pm

This is exactly what happens when you grant monopolies to stupid people, they stop time and it is going to be hell to get them off the lawn.
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Anonymous Coward, 11 Apr 2012 @ 3:19pm

Something that people overlook and many don't pay much attention is not that just innovation is hurt but the actual pool of employers in the market is reduced by monopolies that are enforced by governments, it reduces everything(economic activity, employers, innovation, etc), now why any caring person in this world would want that?

They wouldn't, only the selfish bastards that can see past their noses believe granted monopolies are a good thing and that is because they are so stupid they don't see that it also harms them in the long run, without employment there is no market with no market or economic activity economic leverage against other countries also is reduced.
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Anonymous Coward, 11 Apr 2012 @ 4:17pm

Partly thanks to an over reaching patent system, it's obvious that the U.S., which currently lacks innovation and invention, is desperate to spur these things. Other countries keep advancing and the U.S. simply copies everyone else and adopts their technologies or imports them, but the U.S. is simply not advancing. The govt doesn't want to disappoint government established monopolists by reducing their IP privileges, that might reduce political campaign contributions and harm the revolving door. So they keep on ignoring the issue and pretending strict IP laws are not a contributing factor to our lack of advancement.
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Anonymous Anonymous Coward, 11 Apr 2012 @ 4:18pm

This is not Movies, et al, What are other possibilities?
The medical imaging market is not one that has been written about on Techdirt much, if at all. I think there may be more to the decline than just the patent issue.

I do think patents are not fulfilling their promise, as in benefiting the general public, so I am not denying the results of the study. I wonder if it tells the whole story.

I remember one of the arguments for rising health care costs was the move for every hospital to buy MRI machines and etc. in order to remain competitive. Then it was realized that there were not only more MRI machines than there was demand, but they were poorly disbursed.

There is also the argument that the medical/caide methodology is fee for service, rather than getting paid for actual results. This increases, artificially, the demand for images that don't actually help, but do drive up the costs, and the demand for machines.

So, I wonder how much of the decline in demand for such devices is actually due to saturation, and not just patents? Or, is the medical industry realizing that gouging fees from the government is not such a great idea?

We need to know more about this market, like we know more about movies and music and books.
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- Torg (profile), 11 Apr 2012 @ 4:34pm
  
  Re: This is not Movies, et al, What are other possibilities?
  "To account for the idea that this might have been due to a sudden drop in demand, she also researched the number of RFPs (requests for proposal) that were sent out for both medical imaging storage systems and textual data storage systems -- and saw both continue to increase at pretty massive rates."
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- Mike Masnick (profile), 11 Apr 2012 @ 7:46pm
  
  Re: This is not Movies, et al, What are other possibilities?
  So, I wonder how much of the decline in demand for such devices is actually due to saturation, and not just patents?
  
  As stated in the post, she controlled for that by looking at the number of RFPs, and showed that demand increased. So, no, it does not appear that it had anything to do with a decline in demand.
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Anonymous Coward, 11 Apr 2012 @ 6:13pm

I would that imaging side of the business is likely much more competitive, with many more patents issued for this emerging field. Is the textual stuff really an emerging field?
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William Purnell, 11 Apr 2012 @ 6:42pm

Patent's were supposed to encourage R&D.....
I do know that Patents were SUPPOSED to protect a company's investment in R&D by allowing them to capitalize on what they've invested in. Like someone else said with regards to the drug industry, there should probably be a patent expiration date. Agree 100% that these companies that buy up patents and simply litigate should be stopped. That said, if a big company puts millions into a new product and I copy it the day they are done, how fair is that? I don't have the answer.... just saying there is/was a legitimate reason behind patents.....
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- Anonymous Coward, 12 Apr 2012 @ 3:43am
  
  Re: Patent's were supposed to encourage R&D.....
  Quote:
  That said, if a big company puts millions into a new product and I copy it the day they are done, how fair is that? I don't have the answer.... just saying there is/was a legitimate reason behind patents.....
  
  Nope that is not a legitimate reason, if it was lawyers would get protection, food chefs would get protections, carpenters would get protections.
  
  Copying is part of what the human race is all about, we see, we copy and we adapt, it doesn't matter that you expend your whole life doing something, it doesn't matter how much you expend on it or how much emotionally invested you are in that thing, nobody should be able to tell others what, when or where to use something or ideas just out of commercial interests it has to have a negative impact on others somehow, some health, safety concerns involved to justify the exclusion of everybody else from that, else it is just wrong to ask everybody else to involuntarily surrender their own rights so another person would benefit or ask that society create less opportunities to others so one person or entity could benefit from it and not the rest.
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  - MonkeyFracasJr (profile), 12 Apr 2012 @ 12:38pm
    
    Re: "Nope that is not a legitimate reason,"
    While I tend to agree with the spirit of your position there is a still a problem. If the system were suddenly wiped away and there were no patents the type of people who parasitically prey off the system buy hoarding patents (or copyright) would change tactics and parasitically prey off the system by selling direct knock-off copies of 'things'. Both types of parasitic behavior are a drain on the system in both innovative and financial metrics. I do think there is some merit in some limited protection of financial investment. But like the above poster (William Purnell) I do not know how that can be accomplished with out someone being a parasite and screwing us all.
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    - Torg (profile), 12 Apr 2012 @ 3:56pm
      
      Re: Re: "Nope that is not a legitimate reason,"
      Make them non-transferable, with the only legal licenses being for actual use? That way you'd need to actually innovate in order to own an innovation, and litigation-oriented businesses wouldn't be able to increase their arsenal.
      
      There'd still be problems with the number of patents and stuff, but that one problem would be solved.
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Dave Nelson (profile), 11 Apr 2012 @ 7:00pm

Corporate innovation
Of course the medical imaging industry, and most other technical companies, are not innovating. They don't want to get sued. The trolls are just waiting for them. If you want real numbers and reasons, try to talk to the chief engineers of those companies, and ask why they have stopped (or slowed down) R&D efforts. They (being engineers) will likely answer you truthfully.
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