Study calculates cost of patent troll lawsuits

June 26, 2012: 2:46 PM ET

Litigation prompted by patent trolls amounted to about $29 billion last year, according to a new study. And that doesn't even include indirect costs that stymie innovation.

FORTUNE -- Patent trolls last year cost defendants $29 billion in "direct costs", according to a study by James Bessen and Michael Meurer of Boston University's School of Law. But that's only the beginning -- accounting just for legal fees and licensing.

"This figure does not include indirect costs to the defendants' businesses, such as diversion of resources, delays in new products, and loss of market share," the study asserts. Even so, the direct costs alone "effectively impose a significant tax on investment in innovation" the authors say.

MORE: An audience with the King of the Patent Trolls

Patent trolls are entities that own the intellectual rights to innovations without innovating anything themselves -- so-called "non-practicing entities." They buy patents in order to sue infringers.

The study determined that 1,150 companies defended themselves against 5,842 lawsuits last year. About half of those companies earned less than $100 million during the year, showing that "NPEs are not just a problem for large firms," according to the authors.

One of the best-known trolls is Intellectual Ventures. That company's founder, Nathan Myhrvold, was interviewed earlier this month by tech journalist Walt Mossberg at the All Things D conference. In defending his company's practice during the 45-minute discussion, he noted that he "was never the popular kid in class."

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