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The Effect of Patent Litigation Insurance: Theory and Evidence From NPEs

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  • Bernhard Ganglmair
  • Christian Helmers
  • Brian J. Love

Abstract

We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). We study the effect that a patent-specific defensive insurance product, offered by a leading litigation insurer, had on the litigation behavior of insured patents' owners, all of which are NPEs. We first model the impact of defensive litigation insurance on the behavior of patent enforcers and accused infringers. We show that the availability of defensive litigation insurance can have an effect on how often patent enforcers will assert their patents. We confirm this result empirically showing that the insurance policy had a large, negative effect on the likelihood that a patent included in the policy was subsequently asserted relative to other patents held by the same NPEs and relative to patents held by other NPEs with portfolios that were entirely excluded from the insurance product. Our findings suggest that market-based mechanisms can deter so-called "patent trolling."

Suggested Citation

  • Bernhard Ganglmair & Christian Helmers & Brian J. Love, 2020. "The Effect of Patent Litigation Insurance: Theory and Evidence From NPEs," CRC TR 224 Discussion Paper Series crctr224_2020_196, University of Bonn and University of Mannheim, Germany.
  • Handle: RePEc:bon:boncrc:crctr224_2020_196
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    References listed on IDEAS

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    Cited by:

    1. Ganglmair, Bernhard & Helmers, Christian & Love, Brian J., 2020. "The effect of patent litigation insurance: Theory and evidence from NPEs," ZEW Discussion Papers 20-037, ZEW - Leibniz Centre for European Economic Research.
    2. Juranek, Steffen & Otneim, Håkon, 2021. "Using machine learning to predict patent lawsuits," Discussion Papers 2021/6, Norwegian School of Economics, Department of Business and Management Science.

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    More about this item

    Keywords

    NPEs; patents; insurance; litigation;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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