Patent Trolls
As we learned in class, patents are a good way to encourage companies to spend money on R&D. Without patents, drug companies would have no incentive to develop new treatments because their competitors could immediately produce a generic brand of the drug and sell it for much less than the cost of research. Patents allow companies to recoup their R&D costs for the new and experimental life-saving drugs they develop.
Patents are definitely necessary in industries with high R&D costs. However, what are the effects of patents in industries without those costs, especially in our modern high tech world? In this article (https://hbr.org/2014/07/the-evidence-is-in-patent-trolls-do-hurt-innovation), the Harvard Business Review claims that patents are harmful to innovation in high tech companies.
The article’s main claim is that patent trolls, firms that own many patents but don’t make a useful product, are harming innovation by suing anyone who tries to use one of their many patents. Last year, there were 6 times as many patent lawsuits than 30 years ago and patent trolls now make up the majority of patent lawsuits. These trolls are costing defendants ~$29 billion a year and the litigation itself costs ~$60 billion each year.
The article states that innovative firms are more likely to be sued for patent infringement. This is mostly an issue with small startups – patent trolls are more likely to target firms selling less than ~$100 million a year which causes many startups to close down. These costs also discourage venture capitalists from investing in innovative startups, with evidence pointing to a $22 billion decline in investing in small companies over the last 5 years.
It’s clear that patents are harmful to high tech industries. They make innovation difficult for small companies which don’t have the money to fight for themselves against trolls which own patents on a lot of important ideas which probably shouldn’t be patentable. Recently, the idea of patent reform has been thrown around in government to fix the issues that patent trolls cause. Patent reform could work to keep the benefits of patents – protection of techniques and ideas that encourage R&D – and make abuse of the system much more difficult which would keep innovation in a high tech world important.