A Model of Patent Trolls

Choi, Jay Pil; Gerlach, Heiko

doi:10.1111/iere.12330

Cited by 24 publications

(13 citation statements)

References 19 publications

(26 reference statements)

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“…However, if we consider multiple PEs, the NPE may have higher incentives to acquire the patent portfolio due to a free-rider problem among PEs. See Choi and Gerlach (2015) for more details.…”

Section: A the Market Expansion Effectmentioning

confidence: 99%

“…In ex ante settlement negotiations with equal bargaining powers, the PE agrees to pay α j D to the NPE, anticipating court outcomes and subsequent bargaining on ex post licensing fees. Let Π i XY denote firm i 's expected payoffs when firm i is in state X 7 See also Choi and Gerlach (2015) for an analysis of various NPE business models in the presence of multiple PEs.…”

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confidence: 99%

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A Theory of Patent Portfolios

Choi¹,

Gerlach

2017

American Economic Journal: Microeconomics

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This paper develops a theory of patent portfolios in which firms accumulate an enormous amount of related patents, which makes it impractical to develop new products that avoid inadvertent infringement. We show that patent peace arises if product market competition is weak and patent portfolios are either sufficiently weak or sufficiently strong with comparable size. An increase in one firm's patent portfolio reduces the innovation incentives of its rivals but does not necessarily increase its own. Firms with larger patent portfolios have stronger incentives to acquire additional patents, while consumers may be better off if firms with weaker portfolios acquire them. (JEL D43, K11, L13, O34)

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Section: A the Market Expansion Effectmentioning

confidence: 99%

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confidence: 99%

A Theory of Patent Portfolios

Choi¹,

Gerlach

2017

American Economic Journal: Microeconomics

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“…Scott Morton and Shapiro () also present a model of PAE intermediation in which an individual inventor cannot enforce its patent, whereas the PAE can acquire the patent from the inventor and enforce it. Choi and Gerlach () study the litigation incentives of a PAE that faces a sequence of potential infringers, as does Hovenkamp (), in a model of reputation. In Turner (), firms discover and patent complementary innovations and decide whether to produce or act as nonpracticing entities.…”

Section: Literature Reviewmentioning

confidence: 99%

Patent privateering, litigation, and R&D incentives

Lemus

Temnyalov

2017

The RAND J of Economics

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We model “patent privateering”—whereby producing firms sell patents to Patent Assertion Entities (PAEs), which then license them under the threat of litigation—in a bargaining game. PAEs can negotiate higher licensing fees than producing firms because they cannot be countersued for infringement. Privateering produces two countervailing effects: it increases the offensive value of patents, whereas it decreases their defensive value and lowers the aggregate surplus of producing firms. Embedding the bargaining game into a Research and Development (R&D) contest for multiple complementary technologies, we find that privateering may increase R&D investments, even as it induces more litigation threats and reduces industry profits.

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“…More recent works have aimed to capture the interaction of these conflicts in contexts like SSOs analyzing the litigation between producers and Non-Practicing Entities (NPEs). This is the case, for example, of Choi and Gerlach (2015a) that studies the information externalities that arise when a NPE sequentially litigates against several producers.…”

Section: Literature Reviewmentioning

confidence: 99%

The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents

Llobet

Padilla

2017

SSRN Journal

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It has been commonly argued that the decision of a large number of inventors to license complementary patents necessary for the development of a product leads to excessively large royalties. This well-known Cournot-complements or royaltystacking effect would hurt efficiency and downstream competition. In this paper we show that when we consider patent litigation and introduce heterogeneity in the portfolio of different firms these results change substantially due to what we denote the Inverse Cournot e ect. We show that the lower the total royalty that a downstream producer pays, the lower the royalty that patent holders restricted by the threat of litigation of downstream producers will charge. This effect generates a moderation force in the royalty that unconstrained large patent holders will charge that may overturn some of the standard predictions in the literature. Interestingly, though, this effect can be less relevant when all patent portfolios are weak making royalty stacking more important.

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A Model of Patent Trolls

Cited by 24 publications

References 19 publications

A Theory of Patent Portfolios

A Theory of Patent Portfolios

Patent privateering, litigation, and R&D incentives

The Inverse Cournot Effect in Royalty Negotiations with Complementary Patents

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