Who Feeds the Trolls ?

Leveraging random examiner assignment and detailed patent prosecution data, we nd that nonpracticing entities (NPEs) purchase patents granted by examiners that tend to issue incremental patents with vaguely-worded claims. In comparison, practicing entities purchase a very di erent set of patents, but assert patents similar to those purchased by NPEs. These results show that on average NPEs purchase and assert patents productive for litigation but lacking technological merit, thus adding to overall litigation fees without providing incentives for high-quality innovations. Their activities are in part the symptom of a broader problem with the issuance of ill-de ned intellectual property rights, which leads to (likely ine cient) litigation even among practicing entities. A cost-bene t calibration shows that investments in improving examination quality at the United States Patent O ce would have large social returns. ∗We thank Philippe Aghion, Joseph Bailey, Gary Chamberlain, Raj Chetty, Lauren Cohen, Ken Felter, Lee Fleming, Ed Glaeser, Stu Graham, Stephen Haber, Nathan Hendren, Bill Kerr, Robert Kimble, Scott Kominers, Mark Lemley, Josh Lerner, Guan-Cheng Li, Alan Marco, Filippo Mezzanotti, Richard Miller, Markus Mobius, Amanda Myers, Alexandra Roulet, Joshua Sarno , Asrat Tesfayesus and seminar participants at the NBER Productivity Lunch Seminar, USPTO Visiting Speaker Series, Harvard Labor Lunch, and Harvard IO Lunch for thoughtful discussions and comments. We are particularly grateful to Michael Frakes and Melissa Wasserman for sharing their data on examiners' blocking actions. In addition, we would like to thank RPX Corporation for providing data on IP litigations and non-practicing entities. Part of this research was conducted while Jaravel was visiting the United States Patent O ce. Jaravel gratefully acknowledges nancial support from the HBS doctoral o ce and the Kau man foundation.