Patent Trolls and Technology Diffusion

Patent assertion entities, sometimes known as ‘patent trolls,’ do not manufacture goods themselves but profit from licensing agreements that they often enforce via the threat of litigation. This paper explores empirically how litigation by one such patent troll affected the sales of medical imaging technology. It finds evidence that relative to similar products, made by the same firm, but not covered by the patent, imaging software sales declined by one-third. This was not due to a suppression in demand by hospitals but instead is linked to a lack of incremental product innovation during the period of litigation. ∗MIT Sloan School of Management, MIT, Cambridge, MA and NBER. I think Ajay Agrawal, Pierre Azoulay, Kenneth Flamm, Tim Simcoe and Ezra Zuckerman for helpful discussions.