Report: Is Innovation being Stifled by Frivolous Lawsuits of Patent Trolls?

By Dennis Kuba
September 21, 2011

• Looking at a database of over 1,600 patent troll lawsuits compiled by Patent Freedom, a team of Boston University researchers estimate that these suits have cost companies some $500 billion since 1990. These costs include not only legal fees and payouts to plaintiffs, but indirect costs such as employee distraction, legal uncertainty, and the need to redesign or drop key products.
• The authors of the study also estimate that the original inventors received less than 10 percent of the “defendant’s lost wealth.”
• Additionally, they found that software patents accounted for approximately 62 percent of the lawsuits (while a mere two percent of suits were related to drug or chemical patents, and only six percent involved mechanical patents).
• The article concludes that the patent system is becoming a disincentive to innovation. “These results are important because the patent system is supposed to reward companies who invest in innovation,” suggests Ars Technica. “Yet thanks to the growing blizzard of frivolous patent lawsuits against technology companies, the patent system is actually becoming a net disincentive to innovation, especially software. We hope Congress and the Supreme Court are paying attention.”

Will the Proposed American Jobs Act Have an Impact on Crowdfunding?

By Rob Scott
September 13, 2011

• Part of President Obama’s proposed American Jobs Act includes exempting small businesses that receive startup funds through “crowdfunding” from having to pay the Securities and Exchange Commission.
• If the newly proposed $447 billion plan was to pass through Congress, it could impact services such as Kickstarter, possibly turning the “crowdfunding” model into an “investment mechanism for a whole new generation of small business,” suggests Digital Trends.
• The plan would allow individuals to invest in a piece of the company (instead of the current model that offers rewards such as an early-run edition of the product), but without the company having to pay SEC fees.
• “…[G]adget-makers are already using crowdfunding platforms to raise hundreds of thousands of dollars in pure donations – imagine the possibilities if these small-dollar donors became investors with a stake in the venture,” reads a post on WhiteHouse.gov.
• Kickstarter, for example, has already helped more than 10,000 projects by raising more than $75 million in pledges. Digital Trends indicates that currently, “Out of all projects submitted to Kickstarter, 44 percent go on to meet their fundraising goals.”
• Details of the plan can be found in a White House website post on innovation and entrepreneurship.