Last week at a panel discussion, a representative from Intellectual VenturesThe largest patent aggregator, currently holding around 40,000 patents. Closely associated with co-founder Nathan Myhrvold. IV is often viewed as a patent assertion entity, although much of its activities are conducted through spinoffs, and the company is at least nominally in the business of producing inventions in-house. See our posts on Intellectual Ventures. made a complaint. Why, this person asked, don’t people take into account the negative effect of patent infringement on the economy?
This being a blog in the public interest, we are more than happy to help out. We’ll address the question that’s most relevant for IV, namely, what’s the negative effect on the economy of infringing patents owned by PAEs?
SPOILER ALERT: there is none.
Why is that? It’s because even though a PAE might have less money than it otherwise wants to have, the economy loses nothing.
Consider an example. Suppose I’m in line to buy a lottery ticket. The guy in front of me, Bob, has his numbers picked randomly, as do I. I, as I always do, lose. But Bob wins a multimillion dollar prize. If only I’d cut in front of him!
What is the effect on the economy? Nothing. I am worse off in the sense that I think those should be my millions, but the economy still gets the benefit. The economy doesn’t care who wins the lottery. The same money is out there in circulation.
Similarly, just because some PAE thinks it should be entitled to be paid off for having purchased someone else’s patent, the economy is no worse off.
Put another way, your disappointment in your get-rich quick scheme failing is not a drag on the economy.
Businesses wasting millions defending against lawsuits by patent trolls, however, is.