NPEs take advantage of broad patents and use strategies to force businesses to settle, picking on multiple at once

[Feng Chen, Yu Hou, Jiaping Qui, Gordon Richardson, Feng and Gordon are from the Rotman school of management, Yu is from the smith school of business, and Jiaping is from the Degroote school of business, April 2023, Science Direct, “Chilling effects of patent trolls,” , accessed: 7-11-24, ES]

We argue that NPEs tend to aggressively and sequentially pursue targets for the following reasons: (1) NPEs often take advantage of patents with “fuzzy boundaries”, especially in the IT sector; (2) defendants may settle what they consider frivolous suits with NPEs due to high cost of patent litigation; (3) the business model of NPEs rests solely on patent litigation; (4) NPEs strategically time the lawsuit and put maximum pressure on the alleged infringing firm for outsized damage awards; and (5) the non-manufacturing status of an NPE has a strategic advantage in that the target defendant cannot file counterclaims of patent infringement. Furthermore, instead of suing all potential target firms in a “one-time deal”, it is strategically more effective for NPEs to first target the most vulnerable defendant firms to increase the odds of winning (Hu, 2014; Love, 2014; Cohen et al., 2016, Cohen et al., 2019). As such, defendants' technology peers would expect a higher likelihood of being sequentially sued by NPEs after the litigation announcement, despite the fact that NPEs might select multiple firms to initiate litigations.