2018
DOI: 10.1111/iere.12330
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A Model of Patent Trolls

Abstract: This article develops a model of patent trolls to understand various litigation strategies employed by nonpracticing entities (NPEs). When an NPE faces multiple potential infringers who use related technologies, it can gain a credible threat to litigate even when it has no such credibility vis‐à‐vis any single potential infringer in isolation. This is due to an information externality generated by an early litigation outcome for subsequent litigation. Successful litigation creates an option value against futur… Show more

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Cited by 24 publications
(13 citation statements)
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“…However, if we consider multiple PEs, the NPE may have higher incentives to acquire the patent portfolio due to a free-rider problem among PEs. See Choi and Gerlach (2015) for more details.…”
Section: A the Market Expansion Effectmentioning
confidence: 99%
See 1 more Smart Citation
“…However, if we consider multiple PEs, the NPE may have higher incentives to acquire the patent portfolio due to a free-rider problem among PEs. See Choi and Gerlach (2015) for more details.…”
Section: A the Market Expansion Effectmentioning
confidence: 99%
“…In ex ante settlement negotiations with equal bargaining powers, the PE agrees to pay α j D to the NPE, anticipating court outcomes and subsequent bargaining on ex post licensing fees. Let Π i XY denote firm i 's expected payoffs when firm i is in state X 7 See also Choi and Gerlach (2015) for an analysis of various NPE business models in the presence of multiple PEs.…”
mentioning
confidence: 99%
“…Scott Morton and Shapiro () also present a model of PAE intermediation in which an individual inventor cannot enforce its patent, whereas the PAE can acquire the patent from the inventor and enforce it. Choi and Gerlach () study the litigation incentives of a PAE that faces a sequence of potential infringers, as does Hovenkamp (), in a model of reputation. In Turner (), firms discover and patent complementary innovations and decide whether to produce or act as nonpracticing entities.…”
Section: Literature Reviewmentioning
confidence: 99%
“…More recent works have aimed to capture the interaction of these conflicts in contexts like SSOs analyzing the litigation between producers and Non-Practicing Entities (NPEs). This is the case, for example, of Choi and Gerlach (2015a) that studies the information externalities that arise when a NPE sequentially litigates against several producers.…”
Section: Literature Reviewmentioning
confidence: 99%