Patent Trolls and Licensing Revenue by the Numbers

Following up on my posts about patent trolls, here are some interesting financial statistics about the patent assertion business from the Boston University School of Law. The data is derived from 10 publicly listed firms over the 2005-2010 time period (Acacia, Asure, Interdigital, Mosaid, Network-1, OPTi, Rambus, Tessera, Virnetx, and Wi-Lan). Licensing Revenue

    • Licensing revenue totaled nearly $6 billion, which equates to $3.8 million per defendant in 2010 dollars

    • These numbers are understated as they don’t account for accruals from 2010 lawsuits (and 2010 was a heavy year for patent litigation)Business Models and Respective Revenue

    • “Middlemen” model

      • Acquire or license patents from third party inventors (e.g., Acacia)

      • File 80% of lawsuits, but earn only $700,000 per defendant

    • “R&D-based” model

      • Conduct R&D and file their own patents (e.g., Rambus)

      • Account for only 6% of lawsuits, but earn 83% of the revenues ($54 million per defendant)

    • “Salvage” model

      • An operating company becomes a troll using patents it developed for its own business (e.g., Assure / Forgent)

      • Account for the balance of lawsuits and revenue

Inventor’s Cut of Licensing Revenue

  • Of the $6 billion total, only 6% flowed to third party inventors

  • 31% of licensing revenue flows to third party inventors under the “middlemen” model

  • Most licensing revenue is consumed as transaction cost, even for “middlemen” models

Source: http://www.patentlyo.com/patent/2013/03/patent-trolls-in-public.html

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LawDarin M. KlemchukComment