Non-Practicing Entities and Innovation in Europe – NPEIE

During the last two decades, increased opportunities for patent monetization have resulted in the rise of institutions facilitating the sale of patents (Hagiu and Yoffie, 2013). New intermediaries, such as patent aggregators and, more generally, non-practicing entities (NPEs) have become quite influential and controversial in the industries they touch, sparking heated debates, especially in the US, about the economic role they play in the patent market and their effects on innovation dynamics. In part reflecting the debate on NPEs, the US Congress introduced several bills proposing to finely regulate the process of patent licensing and assertion.
Until now, scholars have considered NPEs as almost exclusively confined within US borders. Conventional wisdom holds that patent monetization is pursued less often in Europe, due to some combination of higher cost of enforcement and smaller damages awards. However, some recent papers have shown that NPEs are hardly a uniquely American phenomenon (Fusco, 2014). Indeed, recent figures demonstrate that the presence of NPEs in European courts is not negligible. In 2010, NPEs account for more than 10% of patent suits litigated in Germany and the UK (Love et al., 2015).
Moreover, most of the empirical studies investigating the NPE phenomenon are limited to NPEs’ patent litigation activity, thus leaving out enforcement activities settled out of court, underestimating their presence in the market for patents.
The aim of this project is to systematically map NPEs’ activity in Europe, precisely describe their strategies and behavior, and empirically investigate their impact on innovation dynamics. To quantify the presence of NPEs in Europe, we will follow an original strategy, which is based on the NPE’s patent acquisitions at the European Patent Office (EPO).
By relying on a pilot database on patent acquisition data that we build in the venue of submitting the present proposal (see Section 1.2.1), a preliminary evidence tells us that the NPEs’ activity is becoming increasingly relevant in Europe: transactions involving NPEs almost doubled between 2000 and 2010, and now represent more than the 0.4% of all EP patents. Moreover, the individuated NPE-owned patents appear to be, on average, constantly much more cited than non-NPEs’ ones and, similarly, more original.
This first evidence stresses a series of interesting questions that we will address in this project. Is the market for patent intermediation in Europe dominated by foreign NPEs? To which extent NPEs are active players on the market for technology, as both buyers and sellers? When NPEs buy, who they buy from, and which kind of technologies do they target? What are the impacts of NPEs on innovation dynamics and technology transfer? If negative, which are the possible solutions to remedy these inefficiencies?
To answer these questions, the NPEIE project aims to build a unique database of NPEs’ patenting history at the EPO. Different sources of information will be used to identify NPEs operating in Europe and different techniques will be implemented to overcome technical reefs (see WPs A-C). A survey of CEOs and IP managers of French SMEs will complement our information at the national level and will help in interpreting the quantitative results.
This project relies on the expertise of its members, who are experts on the issue of patenting and technology transfer. They are spread over five sites, but many of them have already collaborated in the past. New collaborations will also be undertaken, by matching, in this project, expertise on IP law, professional practices, applied micro-econometrics, and different data collection methods. The project should significantly contribute to building a strong European research base on NPEs, in connection with policy makers and practitioners.