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- Title
Patent privateering, litigation, and R&D incentives.
- Authors
Lemus, Jorge; Temnyalov, Emil
- Abstract
We model 'patent privateering'-whereby producing firms sell patents to Patent Assertion Entities (PAEs), which then license them under the threat of litigation-in a bargaining game. PAEs can negotiate higher licensing fees than producing firms because they cannot be countersued for infringement. Privateering produces two countervailing effects: it increases the offensive value of patents, whereas it decreases their defensive value and lowers the aggregate surplus of producing firms. Embedding the bargaining game into a Research and Development (R&D) contest for multiple complementary technologies, we find that privateering may increase R&D investments, even as it induces more litigation threats and reduces industry profits.
- Subjects
PATENTS; NONPRACTICING entities (Patent law); RESEARCH &; development; NEW product development; PATENT infringement
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2017, Vol 48, Issue 4, p1004
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12211