>You're not trying to minimize litigation costs, but rather maximize R&D investment net of litigation costs. So the question is, if competitors could quickly copy the results of R&D efforts, would R&D investment be more or less than 14% lower?

I think you missed the part where, "during the 1990s such costs rose substantially." To give further evidence, from 2006 to 2012 the number of patent troll lawsuits increased by a factor of six [3]. But, "the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure." So the answer is no, all of this litigation is not encouraging R&D spending (for some reason).

> That incorrectly assumes that the only "contribution" is producing an end-user product.

Perhaps I wasn't clear. I'm not saying that ARM doesn't contribute value. I'm saying that a system that allows the separation of "design from production" also allows patent trolls, and you have to trade the benefits of one against the costs of the other. For the benefit of your one ARM example we pay the cost of 2,900 lawsuits by trolls in the year 2012 alone [3], making up 61% of all patent cases [4] (I wish I had more recent numbers).

> If standards don't embody important technical contributions, then why don't implementers rush to create alternative, unpatented standards?

You mean like <https://aomedia.org/>? They do, but I think that there are a few reasons that this doesn't happen more often:

(a) Avoiding patent thickets once they have already been created is incredibly hard work. Much harder than just developing the technology, in my opinion.

(b) It is even harder to collaborate without incurring substantial legal liability. But no such collaboration is required to create the thickets.

(c) Standards organizations often have policies which make it difficult or impossible to achieve these results, and many participants have strong incentives to prevent you from achieving them.

(d) Even if you make something "better", it is not "the standard". Displacing entrenched incumbents is incredibly hard (again, because of the network effects).

The places where you will see this happen is where there are business models that cannot support any per-unit royalty (e.g., giving away your software for free on the internet), because that provides strong incentives to make it happen.

Laptops and routers are not such an industry. They can just pass on the cost to consumers, who are not represented when these standards are set. This is the basic public goods problem.

Again quoting the article: "Notice, too, that many patent lawsuits have a public goods aspect. Consider a case in which the plaintiff is asserting that its patent has been infringed. If the plaintiff wins the lawsuit, by confirming its monopoly position it appropriates all the benefits of winning the lawsuit. A victory by the defendant, by contrast, benefits partly itself, but also other firms that might be sued by the plaintiff for patent infringement as well as consumers who would have a more competitive market.
Thus, the defendant receives only a slice of the overall benefits from winning the lawsuit, and will be willing to spend less on such lawsuits than it would if it were to
receive all the benefits." The parallel with getting your patent-encumbered technology into a standard vs. some other firm trying to keep it out is exactly equivalent. The correct play is for the other firm to just file their own patents, but this tragedy-of-the-commons result isn't exactly ideal.

[3] https://www.wsj.com/articles/SB10001424127887323469804578525...

[4] https://money.cnn.com/2013/07/02/technology/enterprise/paten...