The growing problem of patent trolling

Abstract

Cash-hungry patent trolls are squelching innovation—and should be screened out The last decade has seen a sharp rise in patent litigation in the United States; 2015 has one of the highest patent lawsuit counts on record ( 1 ). In theory, this could reflect growth in commercialization of technology and innovation—lawsuits increase as more firms turn to intellectual property (IP) protection to safeguard their competitive advantages. However, the majority of recent patent litigation is driven by nonpracticing entities (NPEs), firms that generate no products but amass patent portfolios for the sake of “enforcing” IP rights ( 2 ). We discuss new, large-sample evidence adding to a growing literature ( 3 – 7 ) that suggests that NPEs—in particular, large patent aggregators—on average, act as “patent trolls,” suing cash-rich firms seemingly irrespective of actual patent infringement. This has a negative impact on innovation activity at targeted firms. These results suggest a need to change U.S. IP policy, particularly to screen out trolling early in the litigation process.