Crafting Intellectual Property Rights: Implications for Patent Assertion Entities, Litigation, and Innovation

We show that examiner-driven variation in patent rights leads to quantitatively large impacts on several patent outcomes, including patent value, citations, and litigation. Notably, Patent Assertion Entities (PAEs) overwhelmingly purchase patents granted by “lenient” examiners. These examiners issue patents that are more likely to be litigated by both PAEs and conventional companies, and that also have higher invalidity rates. PAEs leverage a specific friction in the patent system, which stems from lenient examiners and affects litigation more broadly. These patterns indicate that there is much at stake during patent examination, contradicting the influential “rational ignorance” view of the patent office.

Josh Feng and Xavier Jaravel

American Economic Journal

September 13, 2016

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