$30 Billion in Annual Economic Losses--1/2 to Small Businesses--From Patent Trolls

There's a fine line between copyright and patent protection and patent and copyright abuse. But a study by James Bessen and Michael J. Meurer of Boston University School of Law suggests the annual cost to firms to defend themselves against "patent trolls" ("non-practicing entities" that buy patents only to sue others for infringement)  runs as high as $29 billion annually. 


That amount includes the actual direct costs of litigation and non-litigated legal expenses, plus diversion of resources, delays in new products, and loss of market share.


Much of this burden falls on small and medium-sized companies. The median company sued had $10.8 million in annual revenues. Some 82 percent of the defendants had less than $100 million in revenue and these accounted for 50 percent of the defenses. 

Small and medium-sized companies account for 37 percent of the accrued direct costs, the study estimates. 


The annual wealth lost from NPE lawsuits--for public companies--is about $80 billion, another study also estimated.  

To be sure, some might argue that such lawsuits allow some small inventors to make more money. But that has to be balanced against the damage such litigation imposes on firms trying to innovate. 

Also, to be fair, one firm's "expense" is another firm's "income." There is a good reason attorneys like NPEs: it is revenue for them, even if that comes at social and economic expense for technology innovators.