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The half trillion dollar question



How much is half a trillion dollars? Picture a million dollars, then times it by 5,000.

Now picture a palette stacked with $100 bills. You'd have to stack 10,000 bills on a palette to equal a million dollars, and 5,000 palettes - if they were an oversize four-feet-by-four-feet - would fill a Costco.

That half trillion number was in the media a lot last week following a very surprising study by James Bessen and Mike Meurer - authors of Patent Failure - that discovered high tech companies have spent half a trillion dollars since 1990 settling patent disputes. And costs are rising - the average in the last four years alone is $83 billion per year!

You can bet those billions of dollars are written into the costs of every tech product we buy, and that for every billion spent to settle a suit another billion was spent on patent lawyers trying to avoid suits in the future.

The real shame in all of this is that most of the money has gone to patent trolls, companies that patent general ideas and sit on them until somebody develops them, or that patent "around" another idea. Somebody patents a tablet? You patent a stand for it, tablet-sized carrying cases or a variation of software that every tablet owner will need.

Another shame is the fact that patent trolls and lawsuits are slowing down the pace of innovation. It's estimated that a quarter of research and development costs in the U.S. in recent years has been wrapped up in patent disputes.

One online commenter noted that a friend of his was an engineer for a company that goes through patent applications to look for reasons that a product won't work, solves the issue in-house, patents the solution, and then either goes to market with it or sells it back to the company. Another commenter talked about a company that steals ideas from the patent sheet all the time, knowing that a small business or entrepreneur doesn't have the financial power to see through a decade-long lawsuit. In the end they'll force you to sell your idea for pennies on the dollar.

Software patents represented about 62 per cent of the lawsuits, which is a difficult area to patent anything pure given that all software starts with a set of core programming languages and most programs are derivative of other work.

Hardware patents are also increasing.

Take Apple's many patent lawsuits against Samsung - the one that recently prevented the sale of Galaxy Tabs in Germany. Samsung replied by showing clips from 2001: A Space Odyssey and Star Trek using tablets, implying that Apple could similarly be accused of ripping off its iPad concept from science fiction. Besides, it's not as if tablet computers are anything new as credible tablets have been available for over a decade, but with the shrinking of technology and improvements to batteries the form factor at last makes them practical.

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