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Are patent trolls really bad news for innovation?

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Are patent trolls really bad news for innovation?

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I’ve written previously about how patents are, in my opinion, a poor proxy for innovative output, with data suggesting that productivity has barely improved in recent years, despite the number of patents registered going up considerably in the same time.

Research from the University of Buffalo nicely emphasizes this point.  The study suggests that the benefits of giving up patent protection far outweigh the risks of surrendering market share.  Their findings reveal that by opening up their original innovation to further research it helps to stimulate demand for the product, whilst at the same time enabling it to evolve more rapidly.

“This research arose from the notion that a too-tight patent protection actually may hinder technological progress, reflected in sovereign acts taken by firms who give it up,”Gilad Sorek, author of the study explains.

Suffice to say, patent trolling is the antithesis of this, and drives up the cost of innovation considerably.  At least that’s the standard thinking on them.

A recent paper from Stanford academics suggests that the myth surrounding patent trolls may be a bit overblown.It goes as far as to suggest that patent trolls can actually play a useful intermediary role between individual inventors and large organizations.

The study explored why inventors sell up to the trolls rather than license their technology directly to manufacturers.  It emerged that a major reason for doing so was the difference in resources between the inventor and manufacturer.

“A primary reason why individual patent holders sell to patent assertion entities is that they offer insurance and liquidity,” the authors say.

The role of the troll

The study found that the costs involved in litigation are often a major reason for an inventor ‘selling out’ to a PAE.

Indeed, the more risk averse the inventor, the more likely they were to sell up to the middle man.

“First, individuals may not be able to cover the upfront costs associated with litigation. Second, unsuccessful litigation can result in legal fees so large as to bankrupt the individual. Therefore, PAEs offer a way for individual inventors to guarantee profits from their patents without having to engage in costly litigation,” the authors reveal.

So, in other words, if the trolls didn’t exist to offer this service, inventors would be more limited presences in the innovation ecosystem.

The paper goes on to suggest that the apparent rise in patent trolling doesn’t appear to be discouraging innovation (at least as measured by the number of new patents registered).

It believes that the rise in litigation around patents is more a case of the rising complexity of the modern economy, with products such as a smartphone often containing thousands of patented components.  The easier it is to negotiate through that process, the better for all concerned.

It’s certainly a shift in the usual narrative of patent trolls as an unmitigated stain on the innovation process.

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