Patent trolls

Apple is the patent trolls' No. 1 target, with 171 suits since 2009

August 28, 2013: 9:02 AM ET

So-called non practicing entities filed a total of 3,025 lawsuits last year and collected on 1 of 4.

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FORTUNE -- Buying patents and suing companies for violating them is a large and growing business, and nobody has felt its impact more than Apple (AAPL).

Of all the companies sued over the past five years by so-called non practicing entities (NPEs) -- a.k.a. "patent trolls" -- Apple got hit the most: 171 patent lawsuits as of June, according to PatentFreedom, a community of companies that tracks the activity of 710 parent NPEs and their 2,500 subsidiaries and affiliates.

Among the fattest targets, Apple was followed by Hewlett-Packard (137 lawsuits), Samsung (133) and AT&T (127). (See list below.)

The targets of these lawsuits tend to view patent trolls as technological parasites. NPEs, by definition, don't actually manufacture anything. Instead, they either develop a process and patent it, or they buy or license the patents from others.

"Ultimately, a patent is nothing more or less than a license to sue someone," Michael Brody, an intellectual property specialist at Winston & Strawn, told an audience at Stanford University earlier this week.

An account of Brody's talk posted Wednesday by TechHive's Mark Hachman is packed with trollish facts and figures:

  • About 125,000 software patents are filed annually. "And that kind of meat has attracted sharks," writes Hachman.
  • In 2012, more than 4,200 separate companies or individuals were sued by NPEs.
  • The average licensing cost for a case that goes to trial is $7.5 million
  • The average licensing cost for an out-of-court settlement is $29.75 million.
  • The cost to defend each suit ranges from $800,000 per suit for startups to an average cost of $7.9 million for the those firms with over $50 billion of annual revenue.
  • In total, the annual cost or "troll tax" for defending NPE suits is $1.04 million annually for firms with annual revenue under $1 billion, and up to $57.67 million for those with revenues over $50 billion
  • All told, an NPE has a 24.1% chance of "winning," either by negotiating a settlement, winning at court or winning at appeal.
  • The "net discounted value" of an NPE suit is $800,000; i.e., it's likely that the suit itself will net at least that much just by being filed.

"That's a good business to be in," says Brody. "And that's why a lot of people are in it."

Below, PatentFreedom's list of the most pursued companies.

Patent trolled

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