Patent Licensing, Non‐Practising Entities, and Investment in R&D*

Abstract

This paper studies the impact of Non‐Practising Entities (NPE's) on investment in innovation. The issue is considered in an environment with strategic investment behavior and licensing. Patent strength turns out to be central in determining the impact of an NPE on innovation. A patenting scheme which assigns rights only to incremental innovation improvement (relative to the innovations of competitors) raises aggregate investment relative to a ‘winner‐takes‐all’ scheme. In a ‘winner‐takes‐all’ scheme the most successful/encompassing innovation obtains all the intellectual property rights, and less successful innovators none, and in this environment the presence of an NPE negatively impacts aggregate investment.

An Invalidity Strategy against Patent Barriers: Evidence from Chinese Enterprises

“…The majority of research treat NPEs as patent mice, patent trolls (Fischer & Henkel, 2012;Bubela et al, 2015) and de ne them as opportunistic rms whose business model is focused on enforcing patents against infringers in order to receive damages (Lemley, 2016). In recent years, however, some research consider that NPEs, who produce, acquire, sell, license, and enforce patents, do contribute to the formation of patent market (Cheng et al, 2017;Lee et al, 2019;Bergin, 2022), and give a descriptive with nonjudgmental de nition: deriving the majority of income from the enforcement of patent right. Nevertheless, despite the controversies, a common view is that NPEs indeed frequently participate in litigation (Lee et al, 2019;Bergin, 2022) and invalidity (Bubela et al, 2015) activities.…”

“…In recent years, however, some research consider that NPEs, who produce, acquire, sell, license, and enforce patents, do contribute to the formation of patent market (Cheng et al, 2017;Lee et al, 2019;Bergin, 2022), and give a descriptive with nonjudgmental de nition: deriving the majority of income from the enforcement of patent right. Nevertheless, despite the controversies, a common view is that NPEs indeed frequently participate in litigation (Lee et al, 2019;Bergin, 2022) and invalidity (Bubela et al, 2015) activities. As a coin has two sides, NPEs' distinctive invalidity experience can be used as an effective weapon to challenge the invalidity of infringed patents.…”