Monday, January 04, 2010

One Reason Why Improving Patent Quality Won't Solve the "Troll Problem"

From Timo Fisher and Joachim Henkel's paper, titled "Patent Trolls on Markets for Technology - An Empirical Analysis of Trolls' Patent Acquisition":
Patent trolls appropriate profits from innovation solely by enforcing patents against infringers. They are often characterized as relying on low-quality patents, an assessment that, if correct, would imply that eradicating such patents would effectively terminate the troll business. In this paper, we shed light on this issue by empirically analyzing trolls’ patent acquisitions. We draw on a unique dataset of 565 patents acquired by known patent trolls between 1997 and 2007, which we compare to 1,130 patents acquired by practicing firms. Our findings regarding patent characteristics support recent theoretical propositions about the troll business model. Trolls focus on patents that have a broad scope and that lie in patent thickets. Surprisingly, and contrary to common belief, we find that troll patents are of significantly higher quality than those in the control group. This result implies that elevating minimum patent quality will not put an end to the patent troll business, and suggests that it is sustainable in the long run.
Other findings:

- The higher the patent density of a technology field, the more likely a patent in this field will be acquired by a NPE rather than by a practicing firm.

- NPEs tend to acquire patents that have, on average, more non-patent literature backward references.  Conversely, NPE patents tend to have fewer backward references to other patents.

- NPEs tend to acquire more patents that are still in examination in relation to practicing entities.

- Interestingly, the patent crowdedness of the technology field, measured by the number of patent applications in the patent’s technology field, has no significant influence on NPEs’ acquisitions. This finding underlines that it is not the crowdedness of a technology field, but rather the density of overlapping patent rights that makes an acquisition favorable for a NPE.

Read/download a copy of the draft paper here.

5 Comentários:

Anonymous said...

Can anybody explain where the "common belief" came from, that troll-owned patents are of poor quality. When one contemplates prize-fighting as a living, one looks for a sword that's trusty and a purse that's big. So how could anybody be surprised that troll-owned patents are likely to be:

i) in IPC classes G or H

ii) infringed (or likely to be), and

iii) displaying capability to withstand validity attacks.

I suggest that the assertion of a "common belief" is just a spurious excuse for a research project. What is there in this Paper that's interesting? Is a single event, namely acquisition of the Bosch GSM portfolio by IPCom, enough to deliver statistical significance?

Who paid for it? The taxpayer, I suppose. Come to think of it, perhaps the taxpayer also paid for the earlier Paper, the one that announced the "common belief", that was the excuse for this further study from Munich?

Anonymous said...

What I find interesting is this whole notion of "trolls". The use of a demeaning term employed by those who do not like an action or methodology that is completely legal and, in actuality is a good thing.

First, the legality of the inventor to do what she wants to with the intellectual PROPERTY that she has earned (there is no loss ininnovation here), according to well established and well regulated property and contract laws should not even be in question.

Second, and quite the opposite of what the user's of the troll word suggest, the activity of "troll's" who can brandish patents without the mutual-assured-destruction-worry works to break up patent thickets. The big guys who can afford to buy tons of patents lose the power of their arsenal. This is a good thing.

Anonymous said...

ps - to the first point, the "troll" rightfully purchases the patent in question from someone. If there is no sale, there is no "troll". Yet, oddly you never hear a disparaging word about the inventor selling his property, which she has a perfect legal right to do.

Anonymous said...

There is always a lot of talk about poor patent quality and then trolls.

But rarely, if at all, do we hear the reverse. What happens to good patents when they are presented to infringing companies.

Do they welcome the inventor with open arms and warm hearts and say congratulations we love your invention and would be delighted to license.

I think not. More likely they promise to use their corporate might and deep benched legal departments to bury you with declaratory judgements and injunctions.

Gena777 said...

Patent trolls are indeed a scourge. Whether their patent acquisitions tend to be of high or low quality seems to me to be beside the point. Patent trolls are a menace because their predatory tactics (though technically legal) lead to massive economic inefficiency. Thankfully, some are devising novel solutions (such as member patent pools), to deal with the problem. If Congress won't address the issue, the only recourse may be self-help.

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