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The New Patent Intermediaries: Platforms, Defensive Aggregators, and Super-Aggregators

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  • Andrei Hagiu
  • David B. Yoffie
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    Abstract

    The patent market consists mainly of privately negotiated, bilateral transactions, either sales or cross-licenses, between large companies. There is no eBay, Amazon, New York Stock Exchange, or Kelley's Blue Book equivalent for patents, and when buyers and sellers do manage to find each other, they usually negotiate under enormous uncertainty: prices of similar patents vary widely from transaction to transaction and the terms of the transactions (including prices) are often secret and confidential. Inefficient and illiquid markets, such as the one for patents, generally create profit opportunities for intermediaries. We begin with an overview of the problems that arise in patent markets, and how traditional institutions like patent brokers, patent pools, and standard-setting organizations have sought to address them. During the last decade, a variety of novel patent intermediaries has emerged. We discuss how several online platforms have started services for buying and selling patents but have failed to gain meaningful traction. And new intermediaries that we call defensive patent aggregators and superaggregators have become quite influential and controversial in the technology industries they touch. The goal of this paper is to shed light on the role and efficiency tradeoffs of these new patent intermediaries. Finally, we offer a provisional assessment of how the new patent intermediary institutions affect economic welfare.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1.45
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 27 (2013)
    Issue (Month): 1 (Winter)
    Pages: 45-66

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    Handle: RePEc:aea:jecper:v:27:y:2013:i:1:p:45-66

    Note: DOI: 10.1257/jep.27.1.45
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    1. Benjamin Chiao & Josh Lerner & Jean Tirole, 2005. "The Rules of Standard Setting Organizations: An Empirical Analysis," NBER Working Papers 11156, National Bureau of Economic Research, Inc.
    2. Lampe, Ryan & Moser, Petra, 2010. "Do Patent Pools Encourage Innovation? Evidence from the Nineteenth-Century Sewing Machine Industry," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 70(04), pages 898-920, December.
    3. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    4. James Bessen & Jennifer L. Ford & Michael J. Meurer, 2011. "The Private and Social Costs of Patent Trolls," Working Papers, Research on Innovation 1103, Research on Innovation.
    5. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
    6. Lerner, Josh & Strojwas, Marcin & Tirole, Jean, 2005. "The Design of Patent Pools: The Determinants of Licensing Rules," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 187, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Layne-Farrar, Anne & Lerner, Josh, 2011. "To join or not to join: Examining patent pool participation and rent sharing rules," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(2), pages 294-303, March.
    8. Joshua S. Gans & Scott Stern, 2010. "Is there a market for ideas?," Industrial and Corporate Change, Oxford University Press, vol. 19(3), pages 805-837, June.
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    Cited by:
    1. Christian Le Bas & Julien Pénin, 2014. "Patents and innovation : Are the brakes broken, or how to restore patents’ dynamic efficiency ?," Working Papers of BETA 2014-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Giovanni Dosi & Joseph Stiglitz, 2013. "The Role of Intellectual Property Rights in the Development Process, with Some Lessons from Developed Countries: An Introduction," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Jay Pil Choi & Heiko Gerlach, 2013. "A Theory of Patent Portfolios," CESifo Working Paper Series 4405, CESifo Group Munich.

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