Patent ‘Trolls’: Rent-Seeking Parasites or Innovation-Facilitating Middlemen?

Abstract:     
Non-practicing entities (NPEs), a.k.a. patent "trolls", have been disparaged as wasteful rent-seekers who assert patents that are credible as litigation weapons but weak in innovative value. Others, however, view NPEs as beneficial middlemen between capital-constrained inventors and technology producers. In this paper I analyze the characteristics of NPE-litigated patents and NPE litigation opponents. I find evidence that supports both the negative and positive view of NPEs: NPEs do litigate broader patents in complex technologies consistent with the hold-up theory of NPE patent litigation. However, consistent with the view they are beneficial middlemen, NPEs are more likely than practicing firms to assert patents originally obtained by individuals or foreign inventors.

Number of Pages in PDF File: 18

Keywords: Patent, Litigation, NPE

JEL Classification: K41, O34

working papers series