Patent Trolls: Evidence from Targeted Firms

Lauren Cohen (), Umit G. Gurun () and Scott Kominers
Additional contact information
Lauren Cohen: Harvard Business School, Boston, Massachusetts 02163; National Bureau of Economic Research, Boston, Massachusetts 02163
Umit G. Gurun: National Bureau of Economic Research, Boston, Massachusetts 02163; University of Texas at Dallas, Richardson, Texas 75080

Management Science, 2019, vol. 65, issue 12, 5461-5486

Abstract: We provide the first large-sample evidence on the behavior and impact of nonpracticing entities (NPEs) in the intellectual property space. We find that, on average, NPEs appear to behave as opportunistic “patent trolls.” NPEs sue cash-rich firms and target cash in business segments unrelated to alleged infringement at essentially the same frequency as they target cash in segments related to alleged infringement. By contrast, cash is neither a key driver of intellectual property lawsuits by practicing entities (e.g., IBM and Intel) nor of any other type of litigation against firms. We find further suggestive evidence of NPE opportunism: targeting of firms that have reduced ability to defend themselves, repeated assertions of lower-quality patents, increased assertion activity nearing patent expiration, and forum shopping. We find, moreover, that NPE litigation has a real negative impact on innovation at targeted firms: firms substantially reduce their innovative activity after settling with NPEs (or losing to them in court). Meanwhile, we neither find any markers of significant NPE pass-through to end innovators, nor of a positive impact of NPEs on innovation in the industries in which they are most prevalent.

Keywords: patent trolls; non-practicing entities; innovation; patent assertion entities; litigation; patents (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2018.3147 (application/pdf)

Related works:
Working Paper: Patent Trolls: Evidence from Targeted Firms (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:12:p:5461-5486

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().