Boston University School of Law

The Private and Social Costs of Patent Trolls

Boston University School of Law Working Paper 11-45
(September 19, 2011)


James E. Bessen
Boston University School of Law

Jennifer Ford
Boston University School of Law

Michael J. Meurer
Boston University School of Law

Abstract

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

Keywords: patent, litigation, litigation cost, non-practicing entities, software patents

JEL Classifications: O31, O34, K41

Size: 160 KB

James E. Bessen Contact Information

Director
Research on Innovation
202 High Head Road
Harpswell, ME 04079

Phone: (617) 531-2092
Email: jbessen@researchoninnovation.org

Lecturer in Law
Boston University School of Law
765 Commonwealth Avenue
Boston, MA 02215

Email: jbessen@bu.edu

Michael J. Meurer Contact Information
Boston University School of Law
765 Commonwealth Avenue
Boston, MA 02215

Phone: (617) 353-6292
Fax: (617) 353-3077

Email: meurer@bu.edu

Jennifer Ford Contact Information

Email: jlf@jlford.me

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