A MODEL OF PATENT TROLLS

Jay Pil Choi, Heiko Gerlach

Research output: Contribution to journalArticle

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 future potential infringers through Bayesian updating. We discuss policy implications including legal fee shifting and the use of injunctive relief.

Original languageEnglish
Pages (from-to)2075-2106
Number of pages32
JournalInternational Economic Review
Volume59
Issue number4
DOIs
Publication statusPublished - 2018 Nov

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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