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Elves or Trolls? The Role of Non-Practicing Patent Owners in the Innovation Economy

25 Pages Posted: 23 May 2008  

Damien Geradin

Tilburg Law & Economics Center (TILEC); University College London - Faculty of Laws

Anne Layne-Farrar

Charles River Associates; Northwestern University

Jorge Padilla

Compass Lexecon

Date Written: May 2008


Firm structure and the degree of vertical integration lie at the core of a key intellectual property concern currently under debate: "patent trolls." While court opinions and competition agency decisions have focused on "non-practicing" patent holders as the source of anticompetitive exclusion and hold up problems, this view of upstream specialists is far too narrow. In fact, patents in the hands of non-practicing entities can increase competition, lower downstream prices, and enhance consumer choice. We explain why and argue for more business-model-neutral policy when it comes to patent licensing. Clearly, patents are a complex subject that cannot be portrayed as either all good or all bad; tradeoffs will always be involved. Without a better understanding of the many complicated effects of patents in high technology markets, we run the very real risk of misguided policy decisions.

Suggested Citation

Geradin, Damien and Layne-Farrar, Anne and Padilla, Jorge, Elves or Trolls? The Role of Non-Practicing Patent Owners in the Innovation Economy (May 2008). TILEC Discussion Paper No. 2008-018. Available at SSRN:

Damien Geradin (Contact Author)

Tilburg Law & Economics Center (TILEC)

Tilburg, 5000 LE

University College London - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Anne Layne-Farrar

Charles River Associates ( email )

1 South Wacker Drive
Suite 3400
Chicago, IL 60606
United States
312-377-9238 (Phone)


Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046

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