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The Private and Social Costs of Patent Trolls

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  • James Bessen

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

  • Jennifer L. Ford
  • Michael J. Meurer

Abstract

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.

Suggested Citation

  • James Bessen & Jennifer L. Ford & Michael J. Meurer, 2011. "The Private and Social Costs of Patent Trolls," Working Papers 1103, Research on Innovation.
  • Handle: RePEc:roi:wpaper:1103
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    Cited by:

    1. CHOI, Jay Pil & GERLACH, Heiko, 2015. "A model of patent trolls," Discussion paper series HIAS-E-9, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    2. Alexy, Oliver & Reitzig, Markus, 2013. "Private–collective innovation, competition, and firms’ counterintuitive appropriation strategies," Research Policy, Elsevier, vol. 42(4), pages 895-913.
    3. repec:oup:oxford:v:33:y:2017:i:4:p:541-571. is not listed on IDEAS
    4. Dr Chiara Rosazza Bondibene, 2012. "A Study of Patent Thickets," National Institute of Economic and Social Research (NIESR) Discussion Papers 401, National Institute of Economic and Social Research.
    5. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press, vol. 33(4), pages 541-571.
    6. Bogdan Genchev & Julie Holland Mortimer, 2016. "Empirical Evidence on Conditional Pricing Practices," Boston College Working Papers in Economics 908, Boston College Department of Economics.
    7. Lauren Cohen & Umit Gurun & Scott Duke Kominers, 2014. "Patent Trolls: Evidence from Targeted Firms," NBER Working Papers 20322, National Bureau of Economic Research, Inc.
    8. Catherine Tucker, 2012. "Patent Trolls and Technology Diffusion," NBER Chapters,in: Standards, Patents and Innovations National Bureau of Economic Research, Inc.
    9. Hong Luo & Julie Holland Mortimer, 2016. "Copyright Enforcement: Evidence from Two Field Experiments," NBER Working Papers 22082, National Bureau of Economic Research, Inc.
    10. Eli Dourado & Alex Tabarrok, 2015. "Public choice perspectives on intellectual property," Public Choice, Springer, vol. 163(1), pages 129-151, April.
    11. 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.
    12. repec:eee:ecanpo:v:54:y:2017:i:c:p:26-48 is not listed on IDEAS
    13. Alon Brav & Wei Jiang & Song Ma & Xuan Tian, 2016. "How Does Hedge Fund Activism Reshape Corporate Innovation?," NBER Working Papers 22273, National Bureau of Economic Research, Inc.
    14. Ben Klemens, 2017. "Intellectual Property Boxes and the Paradox of Price Discrimination," Working Papers 1703, Council on Economic Policies.
    15. Andrei Hagiu & David B. Yoffie, 2013. "The New Patent Intermediaries: Platforms, Defensive Aggregators, and Super-Aggregators," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 45-66, Winter.
    16. Tucker, C.E., 2012. "Institutions, competition and regulation : Intellectual property and innovation," Discussion Paper 2012-030, Tilburg University, Tilburg Law and Economic Center.
    17. Pellens, Maikel & Della Malva, Antonio, 2016. "Changing of the guard: Structural change and corporate science in the semiconductor industry," ZEW Discussion Papers 16-050, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    18. Schwiebacher, Franz, 2013. "Does fragmented or heterogeneous IP ownership stifle investments in innovation?," ZEW Discussion Papers 13-096, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    19. Pénin, Julien, 2012. "Strategic uses of patents in markets for technology: A story of fabless firms, brokers and trolls," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 633-641.

    More about this item

    Keywords

    patent; litigation; litigation cost; non-practicing entities; software patents;

    JEL classification:

    • 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
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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