The Private and Social Costs of Patent Trolls
James E. Bessen
Boston University - School of Law; Research on Innovation
Jennifer Laurissa Ford
affiliation not provided to SSRN
Michael J. Meurer
Boston University - School of Law
January 9, 2012
Regulation, Vol. 34, No. 4, p. 26, Winter 2011-2012
The emergence of nonpracticing entities (NPEs) — firms that purchase and hold patent rights but neither innovate themselves nor use the patents in the production of goods — is supposed to incentivize innovation by providing a ready market for innovators. We test this idea empirically and find that NPEs produce little returns for innovators or for their own shareholders, but they place significant costs on productive firms that violate patents inadvertently. Indeed, it appears that NPEs — often disparagingly called “patent trolls” — discourage productive firms from innovating for fear that they will then be subject to a patent troll suit. Thus, NPEs may discourage innovation, resulting in a social loss.
Number of Pages in PDF File: 10
Date posted: January 10, 2012
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