The Myths and Facts of Patent Troll and Excessive Payment: Have Nonpracticing Entities (NPEs) Been Overcompensated&quest

Jiaqing “Jack” Lu

Business Economics, 2012, vol. 47, issue 4, 234-249

Abstract: “Nonpracticing entities” (NPEs) own patents but do not practice the patented technologies. They are sometimes referred to as “patent trolls,” who hold up practicing companies to seek exorbitant payments. This paper conducts a review of the theoretical literature, which is inconclusive on whether NPEs have been systematically overcompensated. This study offers the first empirical study in license royalty rates, and its econometric analysis demonstrates that NPEs have not been overcompensated in license markets, regardless of whether other relevant variables are controlled. This conclusion is then put back into the larger context of NPE economics to lay out topics for further research through cross-examining other major conclusions in this field.

Date: 2012
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