Recently, I wrote a post on why I think that patent litigation is not a viable business model for inventors. Given a realistic deconstruction of the costs and possible damage awards, I concluded that, in most situations, it is not realistic for an inventor to presume that she will “hit the jackpot” by suing infringers and extracting settlement or damage awards. I obtained some pushback from this post, mostly from patent litigation lawyers, who contend that I am wrong in my view that patent litigation does not pay for inventors. Of course, everyone is entitled to their opinion, and I respect the views of others, however, no one who objects to my (somewhat) negative view of patent litigation as a business model, has provided me with numbers to discount my economic analysis of patent litigation.
This recent post from The Prior Art blog entitled “Revealed! How Much Money a “Patent Troll” Makes” provides some insight into usually confidential inventor returns when dealing with a patent licensing program. The underlying patents related to GPS technology and were asserted against several prominent technology companies. The post gives a rare look into the numbers involved obtained in sending “patent licensing letters” to technology companies. In sum, the inventor, who obtained 21 patents, has garnered $748K from the total $2.17MM settlement with 4 leading technology companies.
While $748K is certainly nothing to sneeze at, it does not seem like a huge return on an investment when the patents probably cost $10-$20K each to obtain and took several years of effort on the part of the inventor. Of course, there is likely much more to the story–especially given the fact that the inventor is currently encarcerated in a Federal Prison–but it nonetheless provides a “peek behind the curtain” of the usually highly confidential settlements involved in patent litigation.
This Prior Art blog post is definitely a fun read for those who wish to know more. The key takeaway for me, however, is that there are likely better ways to make money than being an inventor involved in patent troll litigation. Maybe if you were the law firm or aggregator, that would be a different story, but for 21 patents, this does not seem like a lot of money. As a friend of mine who is a prominent IP valuation expert said: “It certainly doesn’t seem to generate income commensurate with the investment or risk.”
If anyone has non-confidential numbers that would confirm or refute my ongoing belief that patent litigation is in all likelihood a bust for most independent inventors. As it stands now, the absence of information about what an inventor can make by suing infringers makes it impossible for inventors to generate a realistic view of what they can hope to make by bringing suit against companies. It may be that the numbers are better than it now appears to me. But, as someone who works with inventors to provide them strategic and pragmatic business advice, I cannot in good faith recommend that they hope that patent litigation can be a viable source of income for them.