Read the first part of this post, with an introduction into the business model of patent trolls, here!
Let’s get into the economics. Think of two companies, call them “Pear” and “Samson”, who are both active in the smart phone business and each making a profit of . But in their production process both firms risk to infringe a patent held by a troll with probability . Choi and Gerlach assume that when a troll files a law suit and actually wins in court, he can extract a licensing fee of , which results from bargaining with symmetric bargaining power (Nash solution). Continue reading Beware of Trolls (Part 2)