T he patent assertion entity is a relatively new organizational form that neither invents nor commercializes products, but acts as a distributor of intellectual property rights between inventors and commercializing entities. We combine measurement and governance branches of transaction cost theory to compare the efficiency of market intermediation by patent assertion entities to that of bilateral licensing agreements, patent pools, and firm integration. We consider the level of complementarity between patents and the breadth of their commercial applications to develop four general intellectual property configurations that depict distinct relationships between patent supply and patent demand. The costs and benefits of the various governance alternatives are then weighed for each configuration to identify when each alternative is likely to be most efficient. Our analysis suggests that patent assertion entities are most efficient in allocating intellectual property rights when there is substantial patent complementarity such that value is created through patent bundling, and these bundles are applicable across a broad range of product lines such that the costs of measuring infringement and its damages are substantial. We consider how the imperfections of patents as contracts between inventors and society in conjunction with rapid technological evolution contribute to the growth of patent assertion entities. This analysis provides some guidance for managers on how to appropriate value from intellectual property.
Client capture is the process by which professionals become so dependent on certain clients that their professional judgment is compromised. We explore whether there are systematic differences across professionals in their likelihood of improperly biasing their judgment in the interests of clients on whom they highly depend. To do so, we examine the disclosure of prior art by patent lawyers when representing client patent applications submitted to the U.S. Patent and Trademark Office (USPTO). Lawyers are obligated professionally to disclose all relevant prior art of which they are aware even if, in doing so, their clients receive narrower intellectual property rights. We suggest that patent lawyers are generally more dependent on clients with whom they repeatedly engage and when they have numerous similar clients. We find, however, that the influence of such dependency on lawyers’ withholding prior art is greater when they have entered the legal profession through a regulatory employment revolving door. Specifically, regulatory experience as a USPTO patent examiner provides patent lawyers with unique insight that enables them to compromise their judgment on behalf of clients on whom they depend. Further, patent lawyers who are associates in their law firms are more inclined than are partners to withhold prior art on behalf of clients with whom they repeatedly engage. Because associates’ employment with their professional service firms is relatively insecure, compromising their professional judgment on behalf of clients with whom they repeatedly engage is more alluring in their efforts to enhance future employment prospects.
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