Defensive Patent Aggregators as Shields against Patent Assertion Entities? Theoretical and Empirical Analysis

Abstract

Defensive Patent Aggregators (DPA) are a new patent intermediary that aims to counter the threat of Patent Assertion Entities (PAEs) to technology practicing firms by preempting patents that can be utilized by PAEs. In this study, we investigate whether and to what extent DPAs are in competition with PAEs for patent aggregation.In our theoretical analysis, we develop a game theoretic model that illustrates the selection of patents for aggregation by DPAs and PAEs, and derive four testable hypotheses regarding differences between the DPAs and PAEs aggregated patents. The model shows that DPAs are unlikely to be in complete competition with PAEs for patent aggregation and there are systematic differences in the characteristics of patents acquired by PAEs and DPAs. Our empirical analysis using U.S. patents aggregated by large PAEs and DPAs from 2008 to 2014 presents corroborating evidence for our hypotheses. Our findings imply that DPAs' patent preemption business model alone may not be sufficient to mitigate the threat of PAEs for technology firms, and point to the important role of public policy intervention. We discuss implications for technology firms and policymakers who seek to establish state-run DPAs.