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  • Mathieu Provencher

Patent Trolls

Anyone can guess (or research) what Patent-Trolls are? They recently sparked debates on the current Patent system in the USA. What impacts do you guys think they may have on the economy? Hint: this is a Micro topic.


A person answered:

Patent trolls are people or companies that buy patents and then they launch lawsuits against infringing companies or they simply hold the patent and do nothing with it to make other companies' productivity slow down. It's a dirty business strategy because they don't use the patent, they just have it to make money out of lawsuits that they file.

The problem is that they increase the risk and cost of manufacturing and if there's more risk, investors could get scared and stop investing in a business. If there's more manufacturing costs, the companies affected will produce less and won't make as much profits as they could. If there are enough companies affected, the whole industry could be affected and new technologies, I think, wouldn't be developed soon enough because of fear of investing in them and high prices. The industry couldn't move forward because of lack of investment in research and development.


I replied:

Excellent answer! They have really grown as an industry over the past few years, going from only a dozen at best five years ago to most probably thousands today. A good number of them seem to rely on fear tactics to make their profits, sending vague and ambiguous legal challenges to companies and expecting them to set outside the legal system. Our models in the Theory of the Firm (SR) explain very well how the receiving companies will be affected, in a way very similar to publicity (entry barriers of Oligopolies for those that remember).


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