The influence of Patent Assertion Entities on Inventor Behavior

Abstract

Patent assertion entities (PAEs) are intermediaries that acquire patents from inventors and license them to firms that are using the intellectual property in products that they have already commercialized. We consider how PAE intermediation influences the behavior of inventors by reducing the costs to monetize their inventions. Using a proprietary dataset that tracks PAE lawsuits, we find that, as PAE intermediation for a given class of technologies increases, larger numbers of focused inventors (i.e., small firms, universities, and labs) that typically lack commercializing capabilities begin producing inventions in this class. Further, we find that, as compared to their larger counterparts, focused inventors are particularly responsive to increasing PAE intermediation by producing greater numbers of inventions, albeit inventions that are increasingly likely to be incremental advances.