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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Evolving Patent Business

Evolving Patent Business

LIM Young-Mo

Jan. 4, 2011

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Originally released on December 2, 2010

Patents, which have long been considered a protective tool for a company's business, are now evolving into a means of creating profit. The idea of patents was first introduced in 1474 in Venice, Italy. The city government came up with a patent system to attract talented craftsmen from outside and stimulate the economy. Thereafter, the patent system spread throughout Europe. With the exception that the validity of the patents was only 10 years, patents in those days are not much different from now. People, however, started to take a second look at the value of patents in the 1990s, when TI (Texas Instrument), and Polaroid won disputes involving semiconductors and instant cameras and reaped hundreds of millions of dollars. In the 2000s, this gave rise to a market where specialized companies with various business models could trade patents. In particular, this also led to the rapid emersion of licensing-specialized firms, NPEs (Non-Practicing Entity) or patent trolls, who abuse inventors' rights as stipulat ed in the patent law by filing aggressive lawsuits. During this time, NPEs raked in a huge amount of royalties on patents they bought from IT companies which went out of business during the 2001 dot.com bubble collapse. With growing disputes between NPEs and manufacturers, the patent trade market grew steeply. The size of the patent trade market in the US totaled merely US$200 million in 2000, but expanded to over US$1.4 billion in 2008. In addition, along with the expansion of the patent business, related supporting services such as brokerage, assessment and finance increased, speeding up the change in the patent ecosystem.

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