Few people cheer an economic downturn but, when it comes to the patent troll economy, many in the tech industry are likely watching its recent struggles with glee.
As Bloomberg News noted, recent court rulings have caused the share price of two publicly-traded patent trolls, which make their living by way of extortionate lawsuits, to collapse. Here’s a chart of what the market did to a troll called [company]VirnetX[/company] holdings after an appeals court on Tuesday threw out a $368 million jury verdict it had won against Apple:
Another troll called [company]Vringo[/company] suffered a similar fate last month after an appeals court found two patents it was using to sue Google Adwords were invalid because they were obvious:
The collapse of VirnetX and Vringo is directly tied to those two court rulings, but there are also dark clouds gathering around the patent troll economy in general. In particular, a Supreme Court ruling in June has led a series of court decisions declaring that various software-related patents are invalid because they are no more than old ideas applied on a computer.
At the same time, another Supreme Court ruling has made it easier for the targets of patent trolls to recoup their legal fees. This finally introduced an element of risk for patent trolls, which are normally immune from counter lawsuits since they are structured as shell companies that contain no assets.
While it may be too soon to declare a cause and effect, three other troll companies have also been faltering since the Supreme Court rulings. Here is a chart of the performance of [company]Interdigital[/company], [company]Rambus[/company] and [company]Acacia[/company], all of which appeared on a list of “Tech’s 8 Most Fearsome Patent Trolls.”
The chart shows how the share price of two of the three trolls have fallen more than 10 percent, while that of Acacia is flat, during a period when the tech-heavy NASDAQ index is up five percent.
Meanwhile, the performance of other well-known patent trolls, like RoundRock and Intellectual Ventures (IV), is harder to gauge since they are privately-held, and don’t publish their financial statements. IV’s decision to lay off 20 percent of its workforce last month suggests, however, that it is on hard times too.
All of this could be good news for in the tech sector. If patent trolling becomes less lucrative, it may lead to fewer trolls, which will turn allow productive companies to more spend money on research or hiring — rather than sinking millions on defending troll claims.
Conversely, the trolls’ troubles could also bring new danger if they grow desperate in search of new revenue. Unlike real tech companies, some of the troll firms are no more than lawyers backed by private equity, which will make it hard to pivot into a constructive line of work.