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Intellectual Property Law

: Two-Seventy-One Patent Blog

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

By Peter Zura

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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.

Full post as published by Two-Seventy-One Patent Blog on January 04, 2010 (boomark / email).