The Effect of Patent Litigation Insurance: Theory and Evidence from NPEs

Abstract We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). study effect that a patent-specific product, offered leading insurer, had on behavior of insured patents’ owners, all are NPEs. first model impact enforcers and accused infringers. show availability can have an how often will assert their patents. confirm this result empirically showing policy large, negative likelihood included in was subsequently asserted relative other patents held same NPEs with portfolios were entirely excluded from product. Our findings suggest market-based mechanisms deter so-called “patent trolling.” (JEL: G22, K41, O34)