Download this Paper Open PDF in Browser

Patent Trolls as Financial Intermediaries? Experimental Evidence

14 Pages Posted: 21 Jan 2015 Last revised: 4 Dec 2016

Stephen Haber

Stanford University - Hoover Institution and Political Science

Seth H. Werfel

Stanford University, Department of Political Science, Students

Date Written: September 21, 2016

Abstract

Recent work suggests that Patent Assertion Entities (PAEs) — or “patent trolls” — are a new form of financial intermediary. According to this view, individual patent holders are unable to contract with large manufacturers because they lack the financial resources necessary to litigate against infringement. Since individual patent holders are heterogeneous in their constraints and preferences, the market function of PAEs should depend on their specific demands. We conducted an experiment in which subjects from a population of interest were each assigned patents that were infringed by large manufacturers in a hypothetical scenario. We relaxed the financial constraints of some patent holders and evaluated whether this randomized intervention subsequently reduced the demand for PAEs relative to costly litigation. Our results indicate that PAEs served an intermediary function for two groups in our sample: subjects who identified as inventors rather than entrepreneurs, and subjects who were relatively more sensitive to financial losses.

Keywords: Patent trolls, financial intermediation, inventors, experiments

JEL Classification: O34, O32, G23

Suggested Citation

Haber, Stephen and Werfel, Seth H., Patent Trolls as Financial Intermediaries? Experimental Evidence (September 21, 2016). Economics Letters 149: 64-66, 2016. Available at SSRN: https://ssrn.com/abstract=2552734 or http://dx.doi.org/10.2139/ssrn.2552734

Stephen H. Haber (Contact Author)

Stanford University - Hoover Institution and Political Science ( email )

Stanford, CA 94305
United States

Seth H. Werfel

Stanford University, Department of Political Science, Students ( email )

Stanford, CA 94305
United States

HOME PAGE: http://www.sethwerfel.net

Paper statistics

Downloads
645
Rank
32,642
Abstract Views
4,210