Assignment 9- Part 2

Assignment 9- Part 2
Based on the Harvard Business Review Article - https://hbr.org/2014/07/the-evidence-is-in-patent-trolls-do-hurt-innovation

The costs fall disproportionally on companies that perform R&D as the more R&D a company conducts the more likely they are to be sued. Research from MIT showed that medical imaging companies that were sued by patent trolls decreased revenue for the company as well as overall innovation.

Unfortunately the most common targets of Patent trolls are not generally companies that can afford it or have large legal departments, rather it is startups that disproportionally targeted. 41% of software startups reported "significant operational impact" due to the paten troll lawsuits which overall made them exit a business or change their strategy. Another survey showed that 74% of startups funded by VCs experience "significant impacts" from patent demands. A third study showed that constant law suits from patent trolls overall led to a decrease of 22 billion in venture capital investing over five years which was a 14% decrease.

Rutgers conducted another study that showed that after having patent litigation most startups with R&D departments decreased their R&D budget by about 20%.

Harvard and University of Texas conducted a study of public firms  who had been sued by patent trolls. In cases where the law suit was deemed spurious and dismissed compared to cases that were either lost or settled companies ended up decreasing their R&D spending an average of 211 million dollars opposed to 0 when the case was dismissed. This represents a 48% decline in R&D spending which is extremely significant.

Overall when we look at all this data nothing is definitive, but it is quite telling. It is simple logic to understand that if a company is constantly being sued and having to decrease revenue because of their R&D then it makes perfect sense for a company to decrease their R&D spending significantly. With decreased R&D spending it is fairly safe to assume that innovation goes down if the investment in innovation goes down. Potentially not directly proportionally but it is safe to assume that this has a net negative effect on innovation as a whole.