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Crafting Intellectual Property Rights: Implications for Patent Assertion Entities, Litigation, and Innovation

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  • Josh Feng
  • Xavier Jaravel

Abstract

We show that examiner-driven variation in patent rights leads to quantitatively large impacts on several patent outcomes, including patent value, citations, and litigation. Notably, Patent Assertion Entities (PAEs) overwhelmingly purchase patents granted by "lenient" examiners. These examiners issue patents that are more likely to be litigated by both PAEs and conventional companies, and that also have higher invalidity rates. PAEs leverage a specific friction in the patent system that stems from lenient examiners and affects litigation more broadly. These patterns indicate that there is much at stake during patent examination, contradicting the influential "rational ignorance" view of the patent office.

Suggested Citation

  • Josh Feng & Xavier Jaravel, 2020. "Crafting Intellectual Property Rights: Implications for Patent Assertion Entities, Litigation, and Innovation," American Economic Journal: Applied Economics, American Economic Association, vol. 12(1), pages 140-181, January.
    • Handle: RePEc:aea:aejapp:v:12:y:2020:i:1:p:140-81
    DOI: 10.1257/app.20180361
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    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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