Patent Infringement – Paul Hünermund, Ph.D.

Beware of Trolls (Part 2)

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 $\pi_P = \pi_S = \pi$ . But in their production process both firms risk to infringe a patent held by a troll with probability $\theta$ . Choi and Gerlach assume that when a troll files a law suit and actually wins in court, he can extract a licensing fee of $\pi/2$ , which results from bargaining with symmetric bargaining power (Nash solution). Continue reading Beware of Trolls (Part 2)

Beware of Trolls

Last week I was attending the MaCCI Annual Conference at our institute. There were a lot of bright ideas and interesting presentations. One of my personal highlights was Jay Pil Choi from Michigan presenting a model of patent trolls. There is no paper available yet but I found some slides online.*

Patent trolls are companies which acquire patents and which have the business model to sue other firms for patent infringement in order to make a profit on royalties or settlement payments. Continue reading Beware of Trolls