Patent trolls and startups don’t mix: San Mateo “virtual eyewear” company Ditto.com laid off four employees and lost $4 million in value after patent attacks.
Patent reform advocates have long argued that “patent trolls”—companies that do nothing but sue over patents—are harmful to innovation, not just a plague on big companies. A new study attempted to find out if there’s any real data behind that accusation or if it’s just a few sad anecdotes.
Turns out there is a very real, and very negative, correlation between patent troll lawsuits and the venture capital funding that startups rely on. A just-released study [PDF] by Catherine Tucker, a professor of marketing at MIT’s Sloan School of Business, finds that over the last five years, VC investment “would have likely been $21.772 billion higher… but for litigation brought by frequent litigators.”
The study defines “frequent litigators” as companies that file 20 or more patent lawsuits, which limits the definition to true-blue “patent trolls,” or Patent Assertion Entities (PAEs), the term used by the paper. The study covers the period from 1995 to 2012.
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