An Irrational Market
Patents are assets. They have financial value, and owners should be readily able to realize that value. Unfortunately, the mechanism that NPEs use to monetize their patent assets is litigation – and litigation is one of the most inefficient forms of financial transaction ever devised.
Lawsuits are clouded in secrecy, meaning price discovery is all but impossible. Litigations are constrained unilateral transactions between two parties, rather than a transparent and negotiable transaction between multiple participants. And valuation decisions in a court of law are made by disinterested juries instead of engaged buyers and sellers of the asset. Compounding this illogical state of affairs is the vast amount of wasted time and money spent on legal discovery, due diligence, court proceedings and settlements.
In fact, in 2012, operating companies incurred nearly $11 billion in NPE-related costs. Fully half of this was spent on defense counsel, other legal services and court costs (and these figures don't include significant tangential costs, such as reduced R&D spending, delayed or suspended product launches, and time lost by management and engineering staff).