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Understanding Patent “Privateering”: A Quantitative Assessment

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In this work, we explore three interesting questions: (1) what patent characteristics predict a patent’s acquisition by a hybrid PAE? (2) do hybrid PAEs acquire patents that are more likely to be litigated? and (3) does reassignment to a hybrid PAE affect the time when a patent is first asserted in litigation? We find that hybrid PAEs tend to acquire patents in Information Technology and Surgery & Medical Instrument fields more often than patents in other technology areas. Hybrid PAEs also obtain relatively higher quality patents than average, but objective quality metrics generally are on par when compared to patents litigated by firms with other business models. Our analysis also suggests that hybrid PAEs prefer patents with a broader scope of protection. Reassigning a patent to a hybrid PAE is generally associated with higher odds that the patents will be litigated. And finally, patents held by hybrid PAEs at some point in their lifespan experience their first litigation later than those never held by a hybrid PAE. In short, our analysis suggests that patent privateers appear to be focused on improving the possibility of successful patent monetization by focusing on acquiring higher quality patents with a broader scope of protection. This research is consistent with the law and economics theory that hybrid PAEs acquire valuable patents and not the extortion theory that they acquire weak patents.