Boğaziçi University, Department of Economics Seminars

16/02/2018 15:00

Seminar by Gökhan Öz, University of Pennsylvania


This paper analyzes how alternative patent enforcement regimes affect inventors in the market. How does a change in enforcement costs influence the inventors' decision to keep, sell to an intermediary, or enforce their patents through litigation? How much do inventors earn out of patent enforcement and trade under alternative cost structures? I combine publicly available litigation data with data on intermediaries to (i) document the impact of enforcement costs on patent sale prices and incentives, (ii) estimate a dynamic game, (iii) simulate counterfactual outcomes under different patent enforcement systems to quantify benefits on inventors. Reduced form analysis of the data shows that small firms operating in high-risk litigation sectors are more likely to sell their patents after an exogenous increase in enforcement costs. 
Moreover, such an increase in enforcement costs decreases the price that inventors receive from the patent sale. Empirical facts suggest that changes in enforcement costs have a significant impact on the income that inventors generate out of their assets. In order to capture the impact of alternative regimes on inventors, I develop and estimate a dynamic game played between an inventor, an intermediary and a licensee building on Abrams, Akcigit, Oz (2017). In the model, inventors have the option to keep, litigate or sell their assets to an intermediary. The patent value follows a Markov distribution á la Pakes (1986). An intermediary negotiates a price with inventors and chases licensees, picks the optimal time to enforce, and makes a take-it-or-leave-it offer to the licensee. 
The key point of this model is the difference between enforcement technologies of inventors and intermediaries in generating returns from enforcement. Intermediaries can enforce patents at a lower cost and share the surplus with inventors. The quantitative experiments suggest that in equilibrium, the average litigation fees paid increases by 7.46 (no-intermediary world), 2.5 (British Rule), and 3.5 (intermediary-pays-all rule) percent. Additionally, the average earnings of inventors decrease by 15.23 (no-intermediary world), 2 (British Rule), 2.5 (intermediary-pays-all rule) percent. The findings of this paper can help to inform future policy change on patent enforcement.

16.02.2018, 15:00, Murat Sertel Lounge, Natuk Birkan Building