The Effect of Patent Litigation Insurance: Theory and Evidence from NPEs

Abstract

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The Effect of Patent Litigation Insurance: Theory and Evidence from NPEs

“…Private information about the success of litigation (as in this paper) is one way of introducing frictions in the settlement negotiations that result in litigation as an equilibrium phenomenon. In Ganglmair et al (2018), we take a different approach. We have symmetric information about the NPE's success probability, but assume that the firm's insurance decision is not observed by the NPE.…”

Using machine learning to predict patent lawsuits

“…Being better able to understand the risk helps solving the inherent adverse selection problem and allows better pricing. While patent litigation insurance has traditionally been a niche product, it experienced a surge in demand in the recent past (Ganglmair et al, 2018). Furthermore, we believe a patent litigation prediction model is beneficial for a large user group beyond these three examples as it provides information to everyone maneuvering in the technological space.…”

The Effect of Patent Litigation Insurance: Theory and Evidence from NPEs

“…Private information about the success of litigation (as in this paper) is one way of introducing frictions in the settlement negotiations that result in litigation as an equilibrium phenomenon. InGanglmair et al (2018), we take a different approach. We have symmetric information about the NPE's success probability, but assume that the firm's insurance decision is not observed by the NPE.25Bebchuk (1984) explicitly assumes that litigation has a positive expected value even for the lowest value of p. Given our assumption of Cp = 0, this condition is always satisfied because A = pW ≥ 0.…”