Sunday, January 20, 2008

Article Looks at Effects of NPE Patents on Innovation

Different entities use the patent system in different ways, depending on their respective business models. A recent paper, titled "Don’t Feed The Trolls?", written by economists John Johnson, Gregory K. Leonard, Christine Meyer and Ken Serwin, acknowledged this dynamic briefly and looked at the propriety of reforming the patent system to combat "trolling" or promoting other goals.

At the outset, the authors acknowledge that much of the discussion regarding patent reform has been couched in terms of "patent trolls asserting bad patents." Regarding the term "patent troll," the paper maintains that the definition of "troll" remains elusive:

The patent-holding company, the university, and the sole inventor are not the type of entities generally contemplated by those using the phrase “patent troll” in a derogatory manner. However, practically-speaking, it is quite difficult to craft a definition of “troll” that does not sweep other types of entities into its net.
On the "bad patents" part:
Definitions that focus on reliance on suspect patents as a critical trait of the patent troll, such as the definition proffered by the Congressional sub-committee, are also problematic. Determining the validity of a patent generally requires lengthy and expensive litigation. The patents of several so-called trolls have survived invalidity challenges relatively unscathed. Conversely, patents held by entities that produce a product that embodies a patented technology have been found to be invalid. On an ex ante basis, therefore,it is difficult to identify a patent troll. Even ex post, patent validity does not seem to be a good way of discerning trolls from “legitimate” holders of IP assets, since even firms who manufacture products embodying patented technology sometimes discover in litigation that their patents are invalid.
At least in one sense, non-practicing entities (NPE's) behavior has appeared to have increased the value of patents qua patents:
[P]atent trolls come in a variety of configurations. In most configurations, their behavior tends to increase the value of patents. The increase in value results, primarily, from increased liquidity in the market for the transfer of patent rights. The result of increased patent value is an increase in patenting activity.
Assets freely traded in liquid markets are worth more than identical assets traded in illiquid markets. Illiquidity increases the risk of holding the asset and buyers require a discount to compensate for that additional risk. The activities and behavior of patent trolls has led to increases in the frequency, visibility, and competitiveness of transfers of patent rights.
However, it is clear that, while patent trolls arguably have the effect of increasing inventive activity, their effect on development and commercialization activity are not so favorable.

Read more from the NERA economic consulting website, and view/download a copy of the paper here (link)

2 Comentários:

step back said...

There is something refreshing about a pack of pseudo-academicians donning onto their hunched backs the capes of the crusading Slime and Grime Fairy Tailers and engaging in the pretense of detached economic analysis. But who are these lone range name callers who label their opponents as "trolls" and position themselves as the rational spinners of children's tales about gruff goats and under the bridge trolls?

The NERA website proclaims itself to be "an international firm of economists who understand how markets work."

Oh really? And that's why your world model is populated by strange mysterious "trolls" whose forms you can barely make out let alone define?

The NERA website proclaims "NERA provides practical economic advice related to highly complex business and legal issues arising from competition, regulation, public policy, strategy, finance, and litigation."

Oh really? And by competition you mean engaging in school yard bully tactics by "framing" an undefinable shadow enemy as "trolls"? This form of scholastic debate is truly refreshing. Tell us more tales Pinocchio. We're starting to get your point.

Anonymous said...

I wonder how much M$ paid to commission this report.
Probably a FRACTION of what their patent infringement and anti-trust legal bills are.

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