Critics, including Meurer, call such firms “patent trolls,’’ likening them to creatures from Norse mythology who hid under bridges and collected steep tolls from travelers.
Patent lawsuits from such entities date to the 19th century. But back then, patents generally protected precisely defined inventions, such as the molecular composition of an industrial chemical. In recent years, the government has issued patents on innovations that are harder to pin down as original creations, like computer software or innovative business methods. In one famous case, the Internet retailer Amazon.com patented the concept of using a single mouse click to place an order.
The result, Meurer said, is a horde of vaguely defined patents that can be interpreted so broadly that many major companies could be sued for violations. Firms specializing in patent lawsuits scoop up many such patents, demand that companies pay to license them, then file lawsuits against those that don’t comply.
“Judges are often sensible,’’ Meurer said, “and will often read these apparently broad claims narrowly. But not always.’’
Patent lawsuits can be damaging regardless of who wins.
When publicly traded companies are hit with such actions, their stock values may decline. Meurer and his colleagues studied 1,630 such lawsuits over a 20-year period, most involving software patents. More than 4,100 companies were targeted by NPEs, which often sued multiple companies with a single complaint. Meurer found that the stock of affected companies lost a total of more than half a trillion dollars in value between 1990 and 2010. The losses in stock value amounted to an average of $83 billion a year in the last four years, or about one-fourth of US industrial research and development spending during the same period.
This would not be a problem if the money went to the NPEs that owned the patents; then there would be no net effect on the overall economy.
