Do TPLF Disclosure Requirements Deter Patent Trolls?

Abstract

We study whether court mandates requiring the disclosure of third-party litigation financing (TPLF) influence the incidence and length of patent litigation filed by non-practicing entities, often called "patent trolls". Using recent disclosure requirements introduced in three federal district courts in the United States, we find that the incidence of NPE litigation, and the average length of cases, significantly decrease in courts that require disclosure of TPLF as compared to districts that do not have such disclosures. Further, we show that this reduction in patent troll litigation is concentrated in entities pursuing longer-term, rather than short-term, litigation strategies. Our evidence, which does not appear to be driven by overall trends in litigation, highlights the effects of TPLF disclosure requirements on patent troll litigation behavior, which ultimately influences the market for innovation in the United States. The authors gratefully acknowledge financial support from the George Mason University Law and Economics Center and the helpful comments from the participants at its Third Party Litigation Financing Research Roundtable. Berfeld gratefully acknowledges financial support from the Carroll School of Management at Boston College.