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 language | English |
|---|---|
| Pages (from-to) | 2075-2106 |
| Number of pages | 32 |
| Journal | International Economic Review |
| Volume | 59 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 2018 Nov |
Bibliographical note
Publisher Copyright:© (2018) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
All Science Journal Classification (ASJC) codes
- Economics and Econometrics