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Publications
  • 2018
  • Working Paper
  • HBS Working Paper Series

Patent Trolls: Evidence from Targeted Firms

By: Lauren Cohen, Umit G. Gurun and Scott Duke Kominers
  • Format:Print
  • | Language:English
  • | Pages:86
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Abstract

We provide the first large-sample evidence on the behavior and impact of non-practicing entities (NPEs) in the intellectual property space. We find that on average, NPEs appear to behave as opportunistic “patent trolls.” NPEs sue cash-rich firms—and target cash in business segments unrelated to alleged infringement at essentially the same frequency as they target cash in segments related to alleged infringement. By contrast, cash is neither a key driver of intellectual property lawsuits by practicing entities (e.g., IBM and Intel) nor of any other type of litigation against firms. We find further suggestive evidence of NPE opportunism: targeting of firms that have reduced ability to defend themselves, repeated assertions of lower-quality patents, increased assertion activity nearing patent expiration, and forum shopping. We find moreover that NPE litigation has a real negative impact on innovation at targeted firms: firms substantially reduce their innovative activity after settling with NPEs (or losing to them in court). Meanwhile, we neither find any markers of significant NPE pass-through to end innovators nor of a positive impact of NPEs on innovation in the industries in which they are most prevalent.

Keywords

Patent Trolls; NPEs; PAEs; Innovation; Patents; Ethics; Lawsuits and Litigation; Innovation and Invention; Corporate Finance

Citation

Cohen, Lauren, Umit G. Gurun, and Scott Duke Kominers. "Patent Trolls: Evidence from Targeted Firms." Harvard Business School Working Paper, No. 15-002, July 2014. (Revised June 2018.)
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About The Authors

Lauren H. Cohen

Finance
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Scott Duke Kominers

Entrepreneurial Management
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Related Work

    • 2018
    • Faculty Research

    Patent Trolls: Evidence from Targeted Firms

    By: Lauren Cohen, Umit G. Gurun and Scott Duke Kominers
Related Work
  • Patent Trolls: Evidence from Targeted Firms By: Lauren Cohen, Umit G. Gurun and Scott Duke Kominers
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