The New Patent Intermediaries: Platforms, Defensive Aggregators and Super-Aggregators

The patent market consists mainly of privately negotiated, bilateral transactions, either sales or cross-licenses, between large companies. There is no eBay, Amazon, New York Stock Exchange, or Kelley's Blue Book equivalent for patents, and when buyers and sellers do manage to find each other, they usually negotiate under enormous uncertainty: prices of similar patents vary widely from transaction to transaction, and the terms of the transactions (including prices) are often secret and confidential. Inefficient and illiquid markets, such as the one for patents, generally create profit opportunities for intermediaries. We begin with an overview of the problems that arise in patent markets, and how traditional institutions like patent brokers, patent pools, and standard-setting organizations have sought to address them. During the last decade, a variety of novel patent intermediaries have emerged. We discuss how several online platforms have started services for buying and selling patents but have failed to gain meaningful traction. And new intermediaries that we call defensive patent aggregators and super-aggregators have become quite influential and controversial in the technology industries they touch. The goal of this paper is to shed light on the role and efficiency tradeoffs of these new patent intermediaries. Finally, we offer a provisional assessment of how the new patent intermediary institutions affect economic welfare.