Elves or Trolls? The Role of Non-Practicing Patent Owners in the Innovation Economy

Posted by D. Daniel Sokol

Damien Geradin, Howrey LLP, Tilburg University - Tilburg Law and Economics Center (TILEC), Anne Layne-Farrar, LECG and A. Jorge Padilla, LECG, have a new and interesting paper Elves or Trolls? The Role of Non-Practicing Patent Owners in the Innovation Economy.

ABSTRACT: Firm structure and the degree of vertical integration lie at the core of a key intellectual property concern currently under debate: "patent trolls." While court opinions and competition agency decisions have focused on "non-practicing" patent holders as the source of anticompetitive exclusion and hold up problems, this view of upstream specialists is far too narrow. In fact, patents in the hands of non-practicing entities can increase competition, lower downstream prices, and enhance consumer choice. We explain why and argue for more business-model-neutral policy when it comes to patent licensing. Clearly, patents are a complex subject that cannot be portrayed as either all good or all bad; tradeoffs will always be involved. Without a better understanding of the many complicated effects of patents in high technology markets, we run the very real risk of misguided policy decisions.