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Patent Thickets, Trolls and Unproductive Entrepreneurship

John L. Turner

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

August 15, 2015

I introduce and analyze an equilibrium model of discovery, innovation, patenting and inadvertent infringement. Profitable use of innovations requires adaptation to complementary technologies. This adaptation carries a direct cost if and only if the required technology has not been discovered by another firm, and may lead to inadvertent infringements that carry a dispute cost. The main analysis considers whether and when it is optimal to have some firms discover and patent only --- that is, behave as non-practicing entities. I find that non-practicing entities are desirable only if the relative cost of technology adaptation is higher than the dispute cost. And in that case, if royalties are "too high," then "too many" firms choose to be non-practicing entities instead of innovate, and welfare would be higher without non-practicing entities. I identify optimal patent fees and royalties for all cases.

Number of Pages in PDF File: 38

Keywords: discovery, innovation, litigation, non-practicing entities, patents, patent assertion entities, thickets, trolls

JEL Classification: K2, L2, O3

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Date posted: August 25, 2011 ; Last revised: August 16, 2015

Suggested Citation

Turner, John L., Patent Thickets, Trolls and Unproductive Entrepreneurship (August 15, 2015). Available at SSRN: http://ssrn.com/abstract=1916798 or http://dx.doi.org/10.2139/ssrn.1916798

Contact Information

John L. Turner (Contact Author)
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )
Athens, GA 30602-6254
United States
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