Patent trolls
Subtitle: evidence from targeted firms
By: Lauren Cohen, Umit G. Gurun, Scott Duke Kominers
Contributors: Gurun, Umit G., author; Kominers, Scott Duke, author; Harvard Business School
Edition: Revised edition
Series: Working paper / Harvard Business School -- 15-002; Working paper (Harvard Business School) -- 15-002.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 31
Description: We provide theoretical and empirical evidence on the evolution and impact of non-practicing entities (NPEs) in the intellectual property space. Heterogeneity in innovation, given a cost of commercialization, results in NPEs that choose to act as "patent trolls" that chase operating firms' innovations even if those innovations are not clearly infringing on the NPEs' patents. We support these predictions using a novel, large dataset of patents targeted by NPEs. We show that NPEs on average target firms that are flush with cash (or have just had large positive cash shocks). Furthermore, NPEs target firm profits arising from exogenous cash shocks unrelated to the allegedly infringing patents. We next show that NPEs target firms irrespective of the closeness of those firms' patents to the NPEs', and that NPEs typically target firms that are busy with other (non-IP related) lawsuits or are likely to settle. Lastly, we show that NPE litigation has a negative real impact on the future innovative activity of targeted firms.
Notes: July 2014. (Revised August 2014.) -- Publisher's website.

Includes bibliographical references (pages 27-31).