Working Paper: NBER ID: w21678
Authors: Fiona Scott Morton; Carl Shapiro
Abstract: The 2011 America Invents Act was the most significant reform to the United States patent system in over fifty years. However, the AIA did not address a number of major problems associated with patent litigation in the United States. In this paper, we provide an economic analysis of post-AIA developments relating to Patent Assertion Entities (PAEs) and Standard-Essential Patents (SEPs). For PAEs and SEPs, we examine the alignment, or lack of alignment, between the rewards provided to patent holders and their social contributions. Our report is mixed. Regarding PAEs, we see significantly improved alignment between rewards and contributions, largely due to a series of rulings by the Supreme Court. Legislation currently under consideration in Congress would further limit certain litigation tactics used by PAEs that generate rewards unrelated to contribution. We also see some notable developments relating to SEPs, especially with the recent reform to the patent policies of the IEEE, a leading Standard-Setting Organization (SSO) and with several recent court decisions clarifying what constitutes a Fair, Reasonable and Non-Discriminatory (FRAND) royalty rate. However, other steps that could better align rewards with contributions on the SEP front have largely stalled out, particularly because other major SSOs do not seem poised to follow the lead of the IEEE. Antitrust enforcement in this area could further improve the alignment of rewards and contributions.
Keywords: patent litigation; patent assertion entities; standard-essential patents; America Invents Act; antitrust enforcement
JEL Codes: K21; L00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AIA (L85) | alignment of rewards to contributions for PAEs (M52) |
| Supreme Court rulings (K10) | litigation tactics employed by PAEs (K41) |
| litigation tactics employed by PAEs (K41) | alignment of rewards to contributions for PAEs (M52) |
| legislative proposals (K16) | litigation tactics employed by PAEs (K41) |
| recent reforms in IEEE patent policies (O34) | alignment of rewards with contributions for SEPs (M52) |
| lack of action from SSOs (L39) | effectiveness of FRAND commitments (L15) |