The Direct Costs from NPE Disputes

54 Pages Posted: 25 Jun 2012 Last revised: 27 Mar 2015

James E. Bessen

Boston University - School of Law; Research on Innovation

Michael J. Meurer

Boston University - School of Law

Date Written: June 28, 2012

Abstract

In the past, “non-practicing entities” (NPEs), popularly known as “patent trolls,” have helped small inventors profit from their inventions. Is this true today or, given the unprecedented levels of NPE litigation, do NPEs reduce innovation incentives? Using a survey of defendants and a database of litigation, this paper estimates the direct costs to defendants arising from NPE patent assertions. We estimate that firms accrued $29 billion of direct costs in 2011. Although large firms accrued over half of direct costs, most of the defendants were small or medium-sized firms. Moreover, an examination of publicly listed NPEs indicates that little of the direct costs represents a transfer to small inventors. This updated version of the paper includes a reply to critics.

Keywords: patent, litigation, litigation cost, non-practicing entities, software patents

JEL Classification: O31, O34, K41

Suggested Citation

Bessen, James E. and Meurer, Michael J., The Direct Costs from NPE Disputes (June 28, 2012). 99 Cornell L. Rev. 387 (2014); Boston Univ. School of Law, Law and Economics Research Paper No. 12-34. Available at SSRN: https://ssrn.com/abstract=2091210 or http://dx.doi.org/10.2139/ssrn.2091210

James E. Bessen

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Research on Innovation ( email )

202 High Head Rd.
Harpswell, ME 04079
United States
617-531-2092 (Phone)

Michael J. Meurer (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-6292 (Phone)
617-353-3077 (Fax)

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