Patent trolling pays: Since 2010, trolls have made 3 times as much money in court as real companies
Two charts show how, even though patent trolls have lost recent battles, they are still winning the war. — Who deserves more money from a jury: a company that uses its patents to sue a competitor using its technology?
Context & Ripple Effects
The Gigaom charts land mid-arc in a debate that has been building for years: Google warned about patent system flaws being exploited by trolls back in November 2012, and a June 2014 study argued trolls are killing startups outright. The new data adds a financial scoreboard — since 2010, non-practicing entities have reportedly collected three times as much money from court judgments and settlements as operating companies have.
That asymmetry explains why individual troll defeats keep mattering less than the aggregate economics: even when defendants like Samsung win or verdicts get overturned, the expected value of suing still favors the entity that owns patents but builds nothing. The target list skews large — Apple was identified in August 2013 as the company most targeted by patent trolls — but the costs of defending spread across every operating firm that could be next.
First-order effects
- Defendant companies — with Apple the most-targeted example — face a litigation environment where paying settlements remains cheaper than fighting, since trolls' court winnings outpace operating companies' three-to-one since 2010.
Second-order effects
- Operating companies are pushed further toward defensive responses Google called for in 2012: lobbying for patent-system changes, cross-licensing pools, and acquisition of patents purely to deny trolls inventory.
Third-order effects
- If litigation keeps outpaying product-building as a use of patents, capital and legal talent shift from R&D toward assertion, strengthening the case that startup-killing litigation costs documented in June 2014 become a systemic tax on new entrants rather than isolated disputes.
The trend: Patent monetization is consolidating around entities whose business model is litigation itself, tilting the economics of holding intellectual property away from the companies that practice it.