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This paper delves into the proliferation of non-practicing entities (NPEs), a hot topic in academia and public policy, especially in the United States. The common belief is that Europe is less exposed to NPEs due to a robust patent system, higher enforcement costs, and smaller damage awards. Yet, using a new database of NPE patent applications at the European Patent Office (EPO), the study uncovers that NPEs activity in Europe is arising: they own nearly 20,000 EPO patents, primarily in Electrical Engineering. Moreover, we contribute the literature investigating the heterogeneity of the NPE business model and its relationship with the characteristics and use of the patents they target. Our econometric analysis provides threefold original evidence. First, NPEs with higher propensity for litigation (i.e. "Litigation" NPEs) acquire patents with higher infringement risk but similar technological quality than practicing entities. Second, patent aggregators (i.e. "Portfolio" NPEs) and technology companies (i.e. "Technology" NPEs) acquire higher-quality patents compared to those acquired by practicing entities. Third, patent acquisitions by "Litigation" NPEs and "Portfolio" NPEs reduce the subsequent use of protected technologies. [ABSTRACT FROM AUTHOR]

I study the effect of patent-infringement claims by patent trolls on acquisitions of small firms. Exploiting staggered adoption of state anti-patent troll laws, I find that the laws have two effects. First, the number of acquisitions of small firms declines after these laws are adopted. Second, the anti-troll laws increase the acquisition price for acquirers. The market reflects the increased cost of acquisition as measured by lower acquisition announcement returns. Large firms increase R&D after the adoption of state laws, replacing external innovation. Using a sample of acquisitions that are plausibly unaffected by the laws, I disentangle alternative explanations. [ABSTRACT FROM AUTHOR]

Research Summary: Non‐practicing entities (NPEs) are firms that accumulate and acquire patents but do not further develop or implement the patented inventions (known as patent trolling). NPEs seek to receive royalties or profits through out‐of‐court settlements in patent infringement cases. We examine how firms targeted by NPEs in NPE‐initiated litigations (i.e., target firms) shift their innovation strategies and trajectories in response to heightened litigation risks. We theorize and show that after the initial lawsuit, target firms draw more upon their in‐house technologies to reduce the legal ground for further lawsuits. Furthermore, nontarget firms in related technology areas shift their innovation activities away from those of target firms under high NPE litigation risks. These effects are more pronounced with higher innovation costs and under more competitive product markets. Managerial Summary: Non‐practicing entities (NPEs) are known as patent trolls that accumulate and acquire patents but do not further develop or implement these patented inventions. These patent trolls aim to obtain royalties or profits through out‐of‐court settlements in patent infringement cases. We investigate how firms targeted by patent trolls in litigations (i.e., target firms) change their innovation strategies and trajectories to deal with increased NPE litigation risks. After the initial lawsuit, we find that these target firms use their in‐house technologies more to reduce the legal ground for future lawsuits. Moreover, nontarget firms in related technology areas move their innovation activities away from those of target firms under high litigation risks. These effects are stronger when innovation costs are higher and under more competitive product markets. View Video S1 [ABSTRACT FROM AUTHOR]

Patent monetisation is an important source of revenues worldwide. This activity is increasingly carried out by patent assertion entities (PAE), which are at the origin of about 40% of infringement actions filed in the United States. This paper uses an original database of US patents reporting PAE patent acquisitions. We document two key empirical facts about the presence of PAEs in the market for patents. First, PAEs build large patent portfolios and contribute significantly to patent transfers in the US. Second, their impact on follow-on innovation is, on average, negative. With a series of dynamic diff-in-diffs analyses, we estimate a significant post-transfer drop in forward citations received by patents acquired by PAEs. This drop is not immediate but takes some years to materialise. Heterogeneity tests show that our results are driven by acquisitions of old and highly cited patents, as well as by patent acquisitions by large patent aggregators. [ABSTRACT FROM AUTHOR]

The United States patent system is designed to be a balance: in exchange for the inventor disclosing their invention to the public, patentees are granted exclusive rights to that invention for a period of time. This ensures that patentees are adequately compensated for their innovation and society at large benefits from the patent's disclosure. This balance is now broken. Over recent years, patentees -- particularly non-practicing entities -- have been permitted to seek and recover unreasonable damages that stretch far beyond the value of the technology they invented. This has had serious and negative consequences: excessive patent damages discourage innovation, increase risk and cost of production, and, in turn, increase the cost of products to consumers. Patent law has a solution to this broken balance: apportionment. This principle, which dates back to the nineteenth century, holds that damages must be limited to the value of just the patented invention and cannot capture the value of other features or technology. When applied as intended, apportionment ensures the patent balance -- patentees recover the value of what they invented but no more. But therein lies the problem: in recent years, many courts have been backsliding from the principle of apportionment. First, some courts have permitted plaintiffs to rely on "built-in apportionment" to bypass apportionment entirely. Second, some courts have failed to properly apply Daubert and Federal Rule of Evidence 702 to exclude unreliable apportionment theories, particularly where experts purport to use regressions or conjoint survey analysis. The Federal Circuit and district courts should take action to correct the skewed balance caused by improper application of apportionment law. The Federal Circuit should end the "built-in apportionment" exception to apportionment and district courts should do the hard work at the Daubert stage of ensuring that apportionment is effective and reliable. Inventors, businesses, and the balance upon which the patent system was built depend on it. [ABSTRACT FROM AUTHOR]

This Article describes how the original understanding of properly granted patents, from Renaissance Italy to the Patent Act of 1836, generally required tangible proof of the thing to be patented's immediate commercializability and its benefits to society at large, along with ready access to courts or other means to challenge improperly-granted patents (under ordinary standards of proof), as such improperly-granted patents were understood to constitute unjust monopolies that deterred, rather than facilitated, desired innovation. That original understanding is then contrasted throughout to the patent litigation system as it exists in America today in which challengers of improperlygranted patents are effectively denied access to court, while "patent trolls" can come to own vaguely-worded or overly-broad patents that should never have been granted and, without ever producing anything themselves, assert those patents in court under a "presumption of validity" to extort resources from productive enterprises that, unlike the trolls, are making products people want. The situation now--in which the original understanding of the purpose of the patent laws is so diametrically opposed to patent law's operation today--invites reform by supporters of the patent law's original design. [ABSTRACT FROM AUTHOR]

This article discusses the obligations of physicians under the Physicians Act and the Medical Care Act. First, the emergency treatment obligations of physicians are applicable only when they are performing their business, and not when they are not in practice. As for the emergency medical care behavior of the physicians in the nonpracticing state, it should be qualified by applying the provisions of the Emergency Medical Services Act. In addition, the physicians in the performance of business, if the breach of emergency obligations, it has created the risk of the law does not allow, in accordance with the current scholars' insights, will constitutes a negligence crime. [ABSTRACT FROM AUTHOR]

We explain why competing firms form collective entities to buy patents from other entities, particularly from non-practicing entities (NPEs), and follow a catch and release patent strategy. We show why having competitors bid as a single unit is better than having competitors bid against each other. More important, we show that collusive bidding on patents held by NPEs, even when the patents are not essential for a standard (SEPs), may increase consumer surplus, particularly when technological innovation is drastic, and improve social welfare. This provides a theoretical foundation that explains why competition authorities often allow collusive bidding for patents and why courts employ the "rule of reason" to analyze agreements under competition law. We also show that a cartel of incumbents will always outbid a potential entrant, or a patent assertion entity, over a technology that can destroy the value of the incumbents' existing assets. [ABSTRACT FROM AUTHOR]

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The paper investigates the relationship between demand, innovation and research intensity (R&D to output and patents per millions of hours worked) in different groups of industries. These relationships were investigated using disaggregate industry-level data from EU KLEMS, ANBERD and USPTO, in a sample that comprises 12 industries in 18 countries over 1977–2006. The results reported in the paper indicate that demand exerts a positive and significant impact on innovation, measured by R&D expenditure and patents. Moreover, this impact is stronger in high-tech industries than in low-tech ones. The paper also provides evidence that demand does not impact research intensity, despite its impact on innovation. This finding holds both for low-tech and high-tech industries, using both R&D to value added and patents per millions of hours worked as measures of research intensity. This suggests that research intensity is not influenced by demand growth, but most likely depends on the quality of each country's National Innovation System. [ABSTRACT FROM AUTHOR]

Importantly, if that company had dissolved after Henry Ford ended his employment there, all the firm's assets may have been liquidated to pay for its closing expenses.[72] Selden could not sue a company that no longer existed, nor could he sue Henry Ford or Ford Motor Company for a patent reassigned to a bankrupt firm that had dissolved its business ties. By coalescing behind the Selden automobile patent, all vehicles manufactured by Winton's firm had to be marked with signage that stated the date and patent number from the information presented on the Selden automobile patent certificate. In 1895, George Baldwin Selden patented an American automobile that utilized an updated Brayton-style engine. According to the Ford Motor Company and C. A. Duerr's response to the EVC bill of complaint with the US Circuit Court of the Southern District of New York, the original Selden automobile patent changed in many different ways as the sublicensees expanded on the design specifications of their "honest" vehicles.[52] For example, during the Selden case, the Rochester-Selden - the first vehicle based on Selden's patent specifications - was constructed by Henry R. and George B. Selden Jr.[53] Subsequent vehicles were redesigned and manufactured differently from the original Selden prototype. [Extracted from the article]

To what extent and with what effect do owners of standard-essential patents (SEPs) "hold-up" companies that produce standard-compliant products? To explore this question, we construct measures of opportunistic patent licensing behaviors using detailed information collected from the dockets of U.S. patent cases filed (2010–2019) to enforce SEPs and a matched sample of non-SEPs. Overall, we find evidence of at least one opportunistic behavior by the patent enforcer in approximately 77% of SEP and 65% of non-SEP assertions in court. However, these figures mask important heterogeneity across types of conduct. There is significantly more opportunistic conduct that tends to increase a potential licensee's loss if the patent enforcer prevails in court: 35% of SEP assertions versus 10% of non-SEP assertions. In contrast, conduct that tends to increase a potential licensee's litigation costs is less common, and the difference between SEP assertions (8%) and non-SEP assertions (6%) is small. We also show that opportunistic behavior is associated with case settlement, with the direction and strength of the correlation depending on the type of opportunistic behavior. Behavior that increases a potential licensee's litigation costs is associated with an increase in the probability of settlement, while behavior that increases a potential licensee's loss if the patent enforcer prevails in court is negatively associated with settlement. [ABSTRACT FROM AUTHOR]

This study experimentally captures the effects of reforming intellectual property (IP) and measures whether abolishing IP after a vote can reduce the creativity of the most talented innovators. The subjects start in a baseline setting with IP and then move to a second unannounced phase in which IP has or has not been abolished. First, we manipulate exogenously the presence or absence of the possibility to vote for or against IP. Second, we manipulate the information given to the subjects after the first phase. In the information treatment, we inform the subjects right before the vote that a previous experiment that used the same design (Brüggemann et al., 2016) showed that the no IP regime significantly increased players' gains. Contrary to preregistered expectations, the results show that undergoing a vote does not reduce overall creativity. Actually, the most talented innovators do not vote in favor of IP. Rather, the subjects who vote in favor of IP are those who benefit relatively more from royalties. Surprisingly, no correlation is found between these two populations: the IP in our experiment seems to not reward the best players, but the players who choose an 'IP-driven' strategy of focusing on more extensible words while simultaneously relying on their own creations forego cross-fertilization with other players. These are relatively low-skilled players who choose a rent-seeking strategy that maximizes gains from the IP system itself. There are plausible arguments that this result is at least partly valid in the real world, especially for complex and highly sequential innovations where it has been proven that patent trolls and anti-competitive strategies are important. [ABSTRACT FROM AUTHOR]

This Article draws on a newly constructed multilayered relational dataset of patent infringement cases to assess hypotheses about different types of patent asserters and what happens in appeals of those cases. We situate this Article within the ongoing debates around companies that acquire patents but do not themselves practice the claimed technologies, particularly patent assertion entities (PAEs). We find that for some aspects of appeals, such as whether there was an appeal in a patent infringement case, cases brought by PAEs look similar on appeal to cases brought by product companies. But we also observe some substantial differences among litigant types--in particular, whether cases filed by PAEs are appealed more often and who is filing the appeals in those cases. We also observe that, regardless of the patent asserter type, most appeals are filed by patent owners, not accused infringers. Furthermore, even accounting for this difference, accused infringers are more successful on appeal than patent asserters--again, regardless of the type of patent asserter. [ABSTRACT FROM AUTHOR]

We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). We study the effect that a patent-specific defensive insurance product, offered by a leading litigation insurer, had on the litigation behavior of insured patents' owners, all of which are NPEs. We first model the impact of defensive litigation insurance on the behavior of patent enforcers and accused infringers. We show that the availability of defensive litigation insurance can have an effect on how often patent enforcers will assert their patents. We confirm this result empirically showing that the insurance policy had a large, negative effect on the likelihood that a patent included in the policy was subsequently asserted relative to other patents held by the same NPEs and relative to patents held by other NPEs with portfolios that were entirely excluded from the insurance product. Our findings suggest that market-based mechanisms can deter so-called "patent trolling." (JEL: G22, K41, O34) [ABSTRACT FROM AUTHOR]

We study how innovative firms manage their innovation portfolios after filing for Chapter 11 reorganization using three decades of data. We find that they sell off core (i.e., technologically critical and valuable), rather than peripheral, patents in bankruptcy. The selling pattern is driven almost entirely by firms with greater use of secured debt, and the mechanism is secured creditors exercising their control rights on collateralized patents. Creditor-driven patent sales in bankruptcy have implications for technology diffusion—the sold patents diffuse more slowly under new ownership and are more likely to be purchased by patent trolls. This paper was accepted by Gustavo Manso, finance. [ABSTRACT FROM AUTHOR]

Research summary: Patent assertion entities (PAEs) are intermediaries that acquire patents from inventors and license them to firms that use the intellectual property to develop products. We consider how PAE intermediation influences inventor behavior by reducing the costs to monetize their inventions. Using a proprietary dataset that tracks PAE lawsuits, we find that, as PAE intermediation for a given class of technologies increases, larger numbers of focused inventors (i.e., small firms, universities, and labs) that typically lack commercializing capabilities begin to produce inventions in this class. Further, we find that, compared to their larger counterparts, focused inventors are particularly responsive to increasing PAE intermediation by producing greater numbers of inventions, albeit inventions that likely advance the state of the art only incrementally. Managerial summary: Patent assertion entities (PAEs) serve as brokers of intellectual property by purchasing patents from inventors and licensing these patents to firms that develop products based on them. We investigate how PAE brokerage activities influence inventors. We find that as PAEs become more active in a particular class of patents, inventors who lack commercialization capabilities (e.g., small firms, universities, and research labs) are particularly prone to both begin patenting and increase their rate of producing patented inventions in this patent class. We also find, however, that as PAEs become more active in a given patent class, patented inventions produced by inventors lacking commercialization capabilities are increasingly incremental in nature as compared to patented inventions produced by larger firms that commercialize products. [ABSTRACT FROM AUTHOR]

The article reports that expansion of artificial intelligence (AI) has outpaced regulation requiring a new system for ethical use with copyleft licensing and the patent troll model to enforce ethics and manage intellectual property rights. Topics include uses of AI with problems such as discrimination, inappropriate application, and lack of community engagement; and proposal of Copyleft AI with Trusted Enforcement aims to promote self-reporting and monitoring mechanisms for ethical issues.

The article considers whether the U.S. might benefit from a strict pleading standard for direct infringement by comparing its pleading standard to that of the United Kingdom. It mentions discrepancy in the prevalence of patent trolls between the two countries might indicate that a stricter pleading standard like that in the United Kingdom might help the U.S. in its fight against patent trolls.

The EPO and the Unified Patent Court will ultimately determine the balance between the strength of patent rights and patent quality in the new system. In 2012, the EU voted in favor of a process that contains a European patent with unitary effect, a language regime, and a single patent jurisdiction, the Unified Patent Court. More than a decade after its approval, a new patent system came into effect last month, which some European Union (EU) countries already have signed on to. [Extracted from the article]