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A Comparative Analysis of Patent Assertion Entities in Markets for Intellectual Property Rights

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  • H. Kevin Steensma

    (Foster School of Business, University of Washington, Seattle, Washington 98195)

  • Mukund Chari

    (Foster School of Business, University of Washington, Seattle, Washington 98195)

  • Ralph Heidl

    (Lundquist College of Business, University of Oregon, Eugene, Oregon 97403)

Abstract

The patent assertion entity is a relatively new organizational form that neither invents nor commercializes products, but acts as a distributor of intellectual property rights between inventors and commercializing entities. We combine measurement and governance branches of transaction cost theory to compare the efficiency of market intermediation by patent assertion entities to that of bilateral licensing agreements, patent pools, and firm integration. We consider the level of complementarity between patents and the breadth of their commercial applications to develop four general intellectual property configurations that depict distinct relationships between patent supply and patent demand. The costs and benefits of the various governance alternatives are then weighed for each configuration to identify when each alternative is likely to be most efficient. Our analysis suggests that patent assertion entities are most efficient in allocating intellectual property rights when there is substantial patent complementarity such that value is created through patent bundling, and these bundles are applicable across a broad range of product lines such that the costs of measuring infringement and its damages are substantial. We consider how the imperfections of patents as contracts between inventors and society in conjunction with rapid technological evolution contribute to the growth of patent assertion entities. This analysis provides some guidance for managers on how to appropriate value from intellectual property.

Suggested Citation

  • H. Kevin Steensma & Mukund Chari & Ralph Heidl, 2016. "A Comparative Analysis of Patent Assertion Entities in Markets for Intellectual Property Rights," Organization Science, INFORMS, vol. 27(1), pages 2-17, February.
  • Handle: RePEc:inm:ororsc:v:27:y:2016:i:1:p:2-17
    DOI: 10.1287/orsc.2015.1021
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    Cited by:

    1. Sterzi, Valerio & Rameshkoumar, Jean-Paul & Van Der Pol, Johannes, 2021. "Non-practicing entities and transparency of patent ownership in Europe: the case of UK dormant companies," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    2. Adrien HERVOUET & Emmanuel LORENZON & Cesare RIGHI & Valerio STERZI, 2023. "Patent Privateering," Bordeaux Economics Working Papers 2023-10, Bordeaux School of Economics (BSE).
    3. Valerio Sterzi & Cecilia Maronero & Gianluca Orsatti & Andrea Vezzulli, 2024. "Non-practicing entities in Europe: an empirical analysis of patent acquisitions at the European Patent Office," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(5), pages 1271-1297.
    4. Mukund Chari & H. Kevin Steensma & Charles Connaughton & Ralph Heidl, 2022. "The influence of patent assertion entities on inventor behavior," Strategic Management Journal, Wiley Blackwell, vol. 43(8), pages 1666-1690, August.
    5. Sterzi, Valerio & Maronero, Cecilia & Orsatti, Gianluca & Vezzulli, Andrea, 2023. "Non-Practicing Entities and their patent acquisition activity in Europe," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 202306, University of Turin.
    6. Meschnig, Annika & Dubiel, Anna, 2023. "From formation to performance outcomes: A review and agenda for licensing research," Journal of Business Research, Elsevier, vol. 167(C).
    7. Valerio STERZI & Jean-Paul RAMESHKOUMAR & Johannes VAN DER POL, 2020. "Non-practicing entities and transparency in patent ownership in Europe," Bordeaux Economics Working Papers 2020-10, Bordeaux School of Economics (BSE).
    8. Mike W Peng & David Ahlstrom & Shawn M Carraher & Weilei (Stone) Shi, 2017. "An institution-based view of global IPR history," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(7), pages 893-907, September.

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