Abstract
I introduce and analyze an equilibrium model of invention, patenting and infringement under monopolistic competition. Profitable use of inventions requires adaptation to complementary technologies. With patents, a thicket of conflicting rights emerges and costly infringements occur. This taxes invention and lowers welfare. When an inventor may be a “troll”—patent without inventing—the rate of invention falls further. Intuitively, some trolls would invent if it were impossible to be a troll. More technology is patented with trolls, so the thicket grows and welfare falls. Being a troll is unprofitable unless a critical mass of inventions, made by other firms, exists.
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