Author

Contributions

  • Gurun, Umit G., author - Contributor
  • Kominers, Scott Duke, author - Contributor
  • Harvard Business School - Contributor

Publication

2014 - Harvard Business School, Boston, Massachusetts

Language

English

Word Count

8,000 words, Guess

Page Count

32 pages

Identifiers

Description

We provide theoretical and empirical evidence on the evolution and impact of non-practicing entities (NPEs) in the intellectual property space. Heterogeneity in innovation, given a cost of commercialization, results in NPEs that choose to act as "patent trolls" that chase operating firms' innovations even if those innovations are not clearly infringing on the NPEs' patents. We support these predictions using a novel, large dataset of patents targeted by NPEs. We show that NPEs on average target firms that are flush with cash (or have just had large positive cash shocks). Furthermore, NPEs target firm profits arising from exogenous cash shocks unrelated to the allegedly infringing patents. We next show that NPEs target firms irrespective of the closeness of those firms' patents to the NPEs', and that NPEs typically target firms that are busy with other (non-IP related) lawsuits or are likely to settle. Lastly, we show that NPE litigation has a negative real impact on the future innovative activity of targeted firms.

Subjects

Series Statement

  • Working paper / Harvard Business School -- 15-002

Other Editions

  • Patent trollsHarvard Business School2014-01-01

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