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The Private and Social Costs of Patent Trolls

  • James Bessen


    (Research on Innovation, Boston University School of Law, Berkman Center for Internet and Society (Harvard))

  • Jennifer L. Ford
  • Michael J. Meurer

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

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Paper provided by Research on Innovation in its series Working Papers with number 1103.

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Date of creation: 2011
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Handle: RePEc:roi:wpaper:1103
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