Research done by Catherine Tucker, associate professor of Management Science at MIT Sloan School of Management, shows clearly that excessive litigation brought by PAEs has slowed the rate of investment in innovation, especially in technology companies.
The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activity by Catherine Tucker :: SSRN
Catherine Tucker
Massachusetts Institute of Technology (MIT) - Management Science (MS)
June 22, 2014
This paper empirically investigates the statistical
relation between levels of patent litigation and venture capital ("VC")
investment in the U.S. We find that VC investment, a major funding
source for entrepreneurial activity, initially increases with the number
of litigated patents, but that there is a "tipping point" where further
increases in the number of patents litigated are associated with
decreased VC investment, which suggests an inverted U-shaped relation
between patent litigation and VC investment. This appears strongest for
technology patents, and negligible for products such as pharmaceuticals.
There is some evidence of a similar inverted U-shaped relation between
patent litigation and the creation of new small firms. Strikingly, we
find evidence that litigation by frequent patent litigators, a proxy for
PAE litigation, is directly associated with decreased VC investment
with no positive effects initially.
Number of Pages in PDF File: 42
Keywords: Intellectual Property, Patents, Patent Assertion Entities, Patent Litigation, Patent Trolls, Entrepreneurship, Venture Capital
JEL Classification: K41, M20
working papers series
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