A MODEL OF PATENT TROLLS

Jay Choi and Heiko Gerlach

International Economic Review, 2018, vol. 59, issue 4, 2075-2106

Abstract: This article develops a model of patent trolls to understand various litigation strategies employed by nonpracticing entities (NPEs). When an NPE faces multiple potential infringers who use related technologies, it can gain a credible threat to litigate even when it has no such credibility vis‐à‐vis any single potential infringer in isolation. This is due to an information externality generated by an early litigation outcome for subsequent litigation. Successful litigation creates an option value against future potential infringers through Bayesian updating. We discuss policy implications including legal fee shifting and the use of injunctive relief.

Date: 2018
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https://doi.org/10.1111/iere.12330

Related works:
Working Paper: A Model of Patent Trolls (2015)
Working Paper: A model of patent trolls (2015)
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