Patent transfers to NPEs are good – they create more efficient innovation by providing revenue to startups, collaboration and follow on innovation and a better division of labor
Cecilia Maronero and Annika Bichlmayr, 2024 - *Postdoctoral Researcher at the Department of Economics and Statistics “Cognetti de Martiis” of the University of Turin and an Affiliate Researcher at the Bordeaux School of Economics and **Annika Bichlmayr studied Management & Technology at the Technical University of Munich with a focus on IP. She currently works as an IPR Manager at a measurement technology and telecommunications company. “Flipping the paradigm of weak patent rights: from theories to evidence” Journal of Intellectual Property Law & Practice, 2024, Vol. 19, No. 3 online at Oxford Academic, Accessed via University of Michigan //DH
PAE = Patent Assertion Entities, commonly called patent trolls because they buy patents and then sue to assert rights, NPEs = Non Practicing Entities, another word for trolls
Moreover, the recent development of the markets for technology has been associated with an increase of patent litigation,148 frequently attributed to a category of NPEs, the so-called PAEs accused of acquiring patents to pursue nuisance litigation and strategic patent monetization.149 However, empirical research provides a more nuanced picture of this phenomenon: while patents acquired by PAEs are of similar quality compared to litigated patents owned by operating companies,150 the business models of PAEs vary significantly.151 In fact, under this umbrella term, there is a wide array of entities with different approaches to patent licensing and implications for technology diffusion.152
Nevertheless, despite the many criticisms, patent transfers have proved to yield many benefits. First, patent transfers level the playing field by allowing smaller entities to enter markets traditionally dominated by large companies. For smaller firms—whose innovations are critical assets to overcome their limited capacity of large- scale development and commercialization—the ability to transfer and licence patents is a key source of revenue.153 Second, patent transfers facilitate collaborations between companies (as well as between industry and academia), thus enabling technology recombination and eventually spurring further innovation.154 Third, patent transfers enable freedom-to-operate, which translates to a better deployment of both time and resources.155 Finally, patent transfers enable an efficient division of labour among upstream technology specialists and downstream manufacturing companies.156