Changes

One important question is how the patents and the enforcement of patent rights vary between NPEs and regular firms. In empirical work Shrestha (2010) finds that "NPEs in fact hold high value patents and do not engage in frivolous litigation as has been alleged by their critics". Similar findings are reported in Miller (2011) who says, "I am surprised to find as much evidence as I have supporting those who argue that NPEs serve a useful role in the patent system and generally do not assert weaker patents then those asserted by other litigation claimants. The evidence suggests NPEs may in fact assist foreigners and individuals in collecting the rewards they are entitled to by current patent law." Though Miller (2011) also warns that NPEs seem to litigate patents with broad claims, business method patents, and patents on emerging technologies more frequently than their practicing counterparts. Risch (2011) is even more supportive of NPEs, saying "There is no uniform story about NPE patents or where they come from. While some are business methods patents, most are not. While some litigated patents come from failed start-ups, most did not. While some patents were initially assigned to licensing NPEs, most were not. Indeed, some extremely large companies - and even the federal government - have turned to the very same NPEs to enforce some patents. Some patents enforced by NPEs are invalid, while most are not. NPEs litigate patents with objective indicia that are similar to other litigated patents and appear to be invalidated about as often as other litigated patents, so long as they are not repeatedly asserted." He concludes by saying "There is one marked difference, however. Individuals may face a significant disadvantage in high-stakes patent litigation unless they allow NPEs to enforce their patents. This means that NPE litigation may be the best way for garage inventors to capitalize on their patents if infringers refuse to license." Fischer and Henkel (2009) suggest that NPE patents are actually of high quality and have a high likelihood of being held up in court. They hint at the endogenous selection of patents into an NPE’s portfolio, but are more concerned with potential inefficiencies that might arise by separating the market for patents from the market for technologies.  On the issue of settlements and royalties, Layne-Farrar and Schmidt (2009) claim that "there is no justification for the presumption that non-integrated patent holders always charge higher royalties than vertically integrated companies. Moreover, even when non-integrated patent holders charge ’higher’ royalties than their vertically integrated counterparts, it does not imply that the rates are ’excessive’ or that the firm is exhibiting troll-like behavior. Rather, non-integrated patent holders naturally require higher royalty earnings because they earn no profits downstream and receive no payments in kind in the form of cross-licenses." Likewise, Mazzeo et al. (2011) provides evidence that settlement to patent trolls might not be excessive. Using a sample of settlements that are not related to trolls (or at trolls aren’t identified), they report that "... it does not appear that a systematic or pervasive problem of excessive patent damage awards exists." They also note that "[o]ver 75 percent of the variation in observed patent award levels can be explained by the assembled information about the cases, litigants, and patents-at-issue. As a result, infringement awards can be said to be highly predictable. Large awards are not excessive outliers with respect to the empirical analysis in this study." Reitzig et al. (2006, 2007) use a more theoretical approach to argue that troll settlements are excessive.  Love (2011) finds that NPEs litigate at a much later point in a patent’s term than practicing entities, and suggests that shortening patent terms might be beneficial. Related papers include Allison et al. (2010) who consider litigation frequency (NPEs are frequently involved in litigation), and Lu (2011b) who consider royalty rates (NPEs charge royalty rates that are not different from practicing companies). Liang (2010) consider whether NPEs forum shop and finds evidence that they do.