IP Litigation Can Kill Jobs: The True Cost of Patent Trolliing

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Photo by Joe Raedle/Getty Images

Photo by Joe Raedle/Getty Images

Several months ago, Tesla CEO Elon Musk sent ripples across the business landscape when he announced that he was releasing all of his company’s patents to the public, effectively making Tesla an open source company. This was a huge deal for a number of reasons, but it was most notable because it was an unprecedented move for a large company in the modern era.

While most companies are prepared to defend their intellectual properties in order to secure more revenue, Musk cast that logic aside in favor of allowing others to copy his engineering team’s designs. Granted, Tesla had its reasons for making the move it did, but it still comes in stark contrast to how almost every other business handles patents in America today. That might be a very good thing, considering how patent issues can actually become an economic drag.

While it’s not uncommon to hear the term ‘patent troll’ thrown around in headlines, consumers usually only pay attention when it has a direct effect on some of the products they love. One patent battle that has been watched closely by many in the public is the ongoing battle between Samsung and Apple, which have gone back and forth over designs of mobile phones, tablet devices, and other products. Apple famously patented devices with rounded edges, giving consumers an inside glimpse at how paltry and ridiculous the U.S. patent system can actually be.

A fairly recent study has shown that not only is the patent system inherently flawed, but it is also taking a huge toll on the economy. Put together by Catherine Tucker, a marketing professor at the Sloan School of Business at MIT, the study indicates that patent lawsuits are a huge threat to startups and have also played a large part in discouraging investments and economic growth over the past decade or so. Tucker found that between 2004 and 2012, patent lawsuits doubled from around 2,500 per year to 5,000, and that over the course of five years, venture capital investment in startups would have been more than $8 billion higher if not for patent trolls constantly seeking an avenue for litigation.

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