Empirical Evidence on the Behavior and Impact of Patent Trolls: A Survey

Lauren  Cohen; Umit  Gurun; Scott Duke Kominers

Chapter | Patent Assertion Entities and Competition Policy | 2017

Empirical Evidence on the Behavior and Impact of Patent Trolls: A Survey

by Lauren Cohen, Umit Gurun and Scott Duke Kominers

Abstract

We survey the empirical literature on non-practicing entity (NPE) litigation behavior and its consequences. We document both aggregate trends and cross-sectional differences amongst various types of NPEs. Survey evidence illustrates a number of ways in which NPEs can potentially act opportunistically and indicates at least some instances and consequences of observed NPE opportunism. Large-sample empirical work has recently begun corroborating and amplifying the findings from survey evidence. NPEs on average behave as "patent trolls." Indeed, NPEs hold and frequently litigate patents that are likely to be at least partially invalidated; moreover, NPEs target cash irrespective of its relation to alleged infringement. Cash-targeting is neither the main driver of practicing entity (PE) intellectual property (IP) litigation, nor of non-IP litigation against publicly traded firms. The empirical evidence suggests, however, that not all NPEs exhibit trolling behavior—the cash-targeting observed in the data is primarily the behavior of large patent aggregators, rather than small inventors. NPE patent trolling has a real negative impact on targeted firms, without any increase in innovation, technology transfer, or other counterbalancing benefits measured thus far.

Keywords: Patent trolls; NPEs; PAEs; innovation; patents; Patents; Lawsuits and Litigation; Innovation and Invention;

Format: Print

Find at Harvard

Citation:

Cohen, Lauren, Umit Gurun, and Scott Duke Kominers. "Empirical Evidence on the Behavior and Impact of Patent Trolls: A Survey." In Patent Assertion Entities and Competition Policy, edited by D. Daniel Sokol. Cambridge University Press, 2017.

In many-to-many matching with contracts, the way in which contracts are specified can affect the set of stable equilibrium outcomes. Consequently, agents may be incentivized to modify the set of contracts upfront. We consider one simple way in which agents may do so: unilateral bundling, in which a single agent links multiple contracts with the same counterparty together. We show that essentially no stable matching mechanism eliminates incentives for unilateral bundling. Moreover, we find that unilateral bundling can sometimes lead to Pareto improvement—and other times produces market power that makes one agent better off at the expense of others.

Late in 2017, CEO Ryan Williams and his team debated whether Cadre should become not only a technology-enabled investment manager, but also an online trading exchange providing high levels of liquidity for CRE equity investors. Cadre was a pioneering New York City-based startup, offering investors equity in individual commercial real estate properties that its investment team had sourced and vetted. Traditional private equity (PE) funds required investors in CRE equity to accept an entire portfolio of properties, while imposing high fees and holding periods of up to 10 years. Cadre allowed investors both deal-by-deal selectivity and managed accounts of Cadre properties, at fee levels substantially lower those charged by PE funds.

Connecting life insurance policyholders with potential investors (called Life Settlement Providers), Ashar Group plays a pivotal role in the industry. Its current position is, however, increasingly being challenged by consumer-direct models, led by major providers seeking to shortcut brokers. Ashar faces a strategic dilemma in cooperating—but also in competing—with these providers. Maintaining a mutually beneficial dynamic with policyholders, downstream intermediaries, and other actors thus constitutes a balancing act. The context of this case is an underdeveloped market whose reputation has suffered from broker misconduct. In light of the market’s legacy issues and competing business models, this case study explores strategies Ashar may pursue to secure and enhance its market position. Discussions emerging from this case study have the potential to illuminate directions for market transformation.

Faculty & Research

Empirical Evidence on the Behavior and Impact of Patent Trolls: A Survey

Abstract

Citation:

About the Authors

More from these Authors