Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2014/24: Patent Trolls, Litigation, and the Market for Innovation

Axel Haus () and Steffen Juranek ()
Additional contact information
Axel Haus: Dept. of Management and Microeconomics, Goethe University Frankfurt, Postal: Goethe University Frankfurt, Department of Management and Microeconomics, Grueneburgplatz 1, 60323 Frankfurt, Germany
Steffen Juranek: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: We examine the role of non-practicing entities (NPEs), often called patent trolls, in patent litigation. We present a theoretical model that predicts that cases with NPE patentees resolve faster. We test this prediction using a hand-collected data set of US patent litigation cases. We find that NPEs challenge larger and more technology intensive firms, and use more valuable patents from technology areas that have a less fragmented ownership base compared to the control group. Controlling for these factors, we find that NPE cases are indeed resolved faster. NPEs help to increase the speed of diffusion of technology into the economy; therefore, increasing the effectiveness of the market for innovation.

Keywords: Litigation; patents; patent trolls; technology diffusion

JEL-codes: K00; K41; O34

22 pages, June 11, 2014

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