The costs of litigation

During the early days of the health care reform debate there was some push to include tort reform in any legislation. The idea being that tort reform would have a significant impact on the cost of health care. The CBO estimated that these reforms would cut around $11 billion a year out of the health care system or 0.5% of the total cost of health care.

Perhaps $11 billion is a big enough number to make it valuable to pursue or perhaps it isn't. Regardless, the recent patent litigation between Apple and Samsung where Apple is suing for infringement and Samsung has counter sued should shine a spot light on another aspect of the legal system that should be examined.

If the belief is that consumers are hurt by the legal costs incurred in the health care industry then the same must be true of the consumer product industry. According to research done by the Boston University school of Law, patent litigation costs the economy around $25 billion a year.

While the America Invents Act does alter patent law it does little for the litigation costs. Some even argue the act makes litigation an even more likely outcome.

Why so much time an effort was focused on tort reform in the health care industry and so little on something like patent litigation is odd given the relative saving available.

The one part of both debates that you almost never hear about is the cost of lawyers. According to a elawforum paper by Harvard professor Clayton M. Christensen and Scott D. Anthony - "Law firms are among the most profitable and least risky businesses in the world. The profit margins of the top 100 U.S. law firms are at least twice those of America’s largest publicly traded corporations."

Perhaps the segment that we really need to consider a cap on is not "pain and suffering" or "patent troll awards" but lawyers profits. Just imagine the boom the economy would experience if law firms were forced to keep their profits in line with those companies they have been charged with defending.