Patent Assertion Entity Activity

entrepreneurship and related investments. 93 Third, an increase in litigation and licensing activity can
divert technical talent and other corporate resources away from developing new products and engaging
in research and development, a result that is socially wasteful and inconsistent with the fundamental
goals of the patent system. 94
93
See, e.g., Stephen Kiebzak et al., The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activity,
45 RES. POL’Y 218, 230 (2016) (“We find evidence that high levels of patent litigation have, in general, a statistically
negative relation with VC investment, while low levels of patent litigation have a statistically positive relation with VC
investment.… The concave relationship between patent litigation and venture capital funding appears to be particularly
pronounced for sectors such as IT, where there are patents with less clearly defined boundaries than other sectors such as
chemicals or pharmaceuticals.”); Robin Feldman & Evan Frondorf, Patent Demands and Initial Public Offerings, 19 STAN.
TECH. L. REV. 52, 89 (2015) (“Despite a limited sample, the evidence presented supports the existence of a strategy among
monetizers to pursue demands against companies during one of the most public and vulnerable periods of their
development—the completion and aftermath of their IPOs. These patent demands serve to extract settlements and licensing
fees knowing that companies have insufficient time, funds, and human capital to spend on a thoughtful examination of the
claims.”); Colleen V. Chien, Startups and Patent Trolls, 17 STAN. TECH. L. REV. 461, 472 (2014) (“The survival of
entrepreneurial companies depends on their focus and ability to execute against operational milestones. I found that this
makes them uniquely vulnerable to PAE demands, which can divert scarce money and founder time from the business,
incense management, and at times, force significant operational changes.”).
94
See, e.g., Lauren Cohen et al., The Growing Problem of Patent Trolling, 352 SCIENCE 521, 521–22 (2016) (finding that
after settling with NPEs, firms on average reduce their R&D investment by 25%; causes of reduction are not directly
identifiable); Feldman & Lemley, Do Patent Licensing Demands Mean Innovation?, supra note 92, at 176 (“Companies are
increasingly spending significant amounts of time, resources, and creative energy responding to ex post patent assertion both
inside and outside of litigation. Our results suggest that this vast amount of activity is largely unproductive, no matter who
initiates it—an NPE, a product company or a university. Ex post licensing may be promoting transactions, but not necessarily
economically efficient transactions.”); James Bessen & Michael J. Meurer, The Direct Costs from NPE Disputes,
99 CORNELL L. REV. 387, 423 (2014) (“These findings imply that the recent surge in NPE litigation is a significant social
problem associated with billions of dollars of socially wasteful expenditure each year, as well as reduced innovation
incentives for both small and large firms.”); Roger Smeets, Does Patent Litigation Reduce Corporate R&D? An Analysis of
U.S. Public Firms 28–29 (Apr. 28, 2014) (unpublished manuscript),
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2443048 (“Patent litigation involvement (as an alleged infringer) reduces
subsequent R&D intensity, but only in small firms (with less than 500 employees), and only following extensive lawsuits (in
which many legal documents are filed).… The estimated effects are substantial—ranging from 2.6–4.7%-point reductions in
R&D intensity—and relatively persistent—occurring during up to three years following the initiation of a patent lawsuit…
These results suggest that, in some cases, patent litigation creates social waste in terms of reduced innovation (R&D).”);
Catherine E. Tucker, Patent Trolls and Technology Diffusion: The Case of Medical Imaging 4, 22 (Apr. 14, 2014)
(unpublished manuscript), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1976593 (“This last result emphasizes that
even if patent-assertion entities do not prevail in the courtroom, their actions can have significantly negative consequences
for incremental innovation while litigation is ongoing.”); Allison et al., supra note 92, at 709 (“Society is spending a large
chunk of its patent law resources dealing with what are—for whatever reason—the weakest cases. And patent plaintiffs are
pursuing those cases despite the overwhelming odds against them.”); Bessen et al., supra note 92, at 26 (“We find that NPE
lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010.… To the extent that
this litigation represents an unavoidable business cost to technology developers, it reduces the profits that these firms make
on their technology investments. That is, these lawsuits substantially reduce their incentives to innovate.”). But see David L.
Schwartz & Jay P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 CORNELL L. REV. 425
(2014) (critiquing Bessen & Meurer, The Direct Costs from NPE Disputes); Ted M. Sichelman, Are Patent Trolls
“Opportunistic”? (San Diego Legal Studies Paper No. 14-175, 2014),
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2520125 (critiquing an earlier version of Lauren Cohen et al., Patent
Trolls: Evidence from Targeted Firms (Harv. Bus. Sch., Working Paper No. 15-002, 2016),
http://www.hbs.edu/faculty/Publication%20Files/15-002_1d86bb91-630b-43b9-949d-16cfa36a5f58.pdf)
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