WORKING PAPER SERIES NO. 16014 WHO FEEDS THE TROLLS? PATENT TROLLS AND THE PATENT EXAMINATION PROCESS JOSH FENG HARVARD UNIVERSITY XAVIER JARAVEL STANFORD UNIVERSITY DECEMBER 1, 2016
Ho over Institution Working Gro up o n Intellectual Property, Innovation, and Prosper ity Stanfo rd U niv ersity
www.hooverip2.org
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Electronic copy available at: http://ssrn.com/abstract=2838017
Electronic copy available at: http://ssrn.com/abstract=2838017
Electronic copy available at: http://ssrn.com/abstract=2838017
Leave i
one
out Allowance Ratei =
P
k6=i,k2J(i)
GrantDecisionk
NJ(i)
1
J(i) i
NJ(i)
J(i)
i
Tijt = Xijt + aut + vijt vijt = µj + ✓jt + ✏ijt i
j
u
t
Xijt
aut µj ✓jt
✏ijt
vijt
ˆ✏2 = V ar(vijt v¯jt =
1 njt
Pnjt
i=1
v¯jt )
vijt
✓
t t+1 ˆµ2 = cov(¯ vjt , v¯j(t+1) ) njt
µj v¯jt
ˆ✓2 = V ar(vijt )
ˆµ2
ˆ✏2 v¯jt
µj
v¯j =
X
wjt v¯jt
t
hjt wjt = P t hjt
hjt =
1
ˆ✓2
+
ˆ✏2 njt
ExaminerEf f ectj = v¯j V ar(v¯j ) = ˆµ2 + (
P
t
hjt )
1
ˆµ2 V ar(v¯j )
µj
v¯j
ˆµ2
v¯j ExaminerEf f ectj µj
v¯j
ExaminerEf f ectj v¯j
v¯j
ˆµ
ˆµ
ˆµ
ˆµ
j
t
a
(njat , rjat )
r
p
p
p s Beta(↵, ) ↵
L(r|n, ↵, )
= = =
1
n
p=0
r
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n r n r
! !
!
pr (1
(↵ + ) (↵) ( )
p) ˆ
(↵ + ) ↵ p (↵) ( )
1
(1
p)
1
p)
1
dp
1
pr (1
p)p↵
1
(1
dp
p=0
(↵ + ) (r + ↵) (n r + ) (↵) ( ) (n + ↵ + )
↵ ˆ , ˆ) Beta(↵ ˆ +r, ˆ+n r ↵+r ˆ ↵+ ˆ ˆ+n
n
ˆj + ✏ij N P Eij = E i
✏ij
j
ˆ E
✏
ˆ103a E
N
N
N
N
N
X
µj ✓jt
ˆµ2 = cov(¯ vjt , v¯j(t+k) ) k k = 3, 5 k=1
ˆµ2 = cov(¯ vjt , v¯j(t+k) )
k = 3, 5
N
N
N
N
N
i j
k
NPE =
103(a) =
NPE =
103(a) =
N 1 X min(vj , vk ) N i=1 N 1 X max(vj , vk ) N i=1
N 1 X 2 1 min(vj , vj + vk ) N i=1 3 3 N 1 X 2 1 max(vj , vj + vk ) N i=1 3 3
1.50 ⇤ 10 1.19 ⇤ 10
6
6.15 ⇤ 10
6
6
Number of Words in First Independent Claim 128 128.5 129 129.5
Application's Number of Independent Claims 4.2 4.3 4.4 4.5
40 60 80 Leave-one-out Examiner Allowance Rate
20 100 20
40 60 80 Examiner Leave-one-out Allowance Rate 100 127.5
4.1
20 40 60 80 Leave-one-out Examiner Allowance Rate
20
.09
.0008
.0009
.001
Inventor's Number of Patents that Were Litigated in Previous Years .0011
Number of Patents of Inventor Purchased by NPE in Previous Years .1 .11 .12 .13 .14
Inventor's Numer of Granted Patents in Previous Years .73 .74 .75 .76 .77 .78
.0007
100 20
40 60 80 Leave-one-out Examiner Allowance Rate
40 60 80 Leave-one-out Examiner Allowance Rate
100
100
.0075 Inventor's Number of Patents Litigated in Previous Years .0055 .006 .0065 .007
.32 Inventor's Number of NPE Patents In Previous Years .26 .28 .3
1.9 Inventor's Number of Patents Granted in Previous Years 1.7 1.8
100
20
40 60 80 Leave-one-out Examiner Allowance Rate
100
20
40 60 80 Leave-one-out Examiner Allowance Rate
100
4.8
128.5
Number of Words in Patent's First Independent Claim 129 129.5 130
Patent's Number of Independent Claims 5 5.2 5.4
130.5
5.6
40 60 80 Leave-One-Out Examiner Allowance Rate
.005
.24
1.6
40 60 80 Leave-one-out Examiner Allowance Rate
100
20
40 60 80 Leave-one-out Examiner Allowance Rate
100
Number of Patents Granted to Inventor in Previous Years .9 .95
20
.85
20
20
40 60 80 Leave-one-out Examiner Allowance Rate (%)
100
Regression includes class-artunit-year fixed effects. Sample excludes continuations and repeated inventor-examiner pairs, and keeps accepted applications only. The allowance rate is adjusted for docket timing.
e
p
e
p
e
p
G P
L
P NP E
LN P E
I e
p 8 < 1 if g(e, p) > 0 G= : 0 else 8 < 1 if p(e, p) > 0 & G = 1 P = : 0 else
8 < 1 if l(e, p) > 0 & G = 1 L= : 0 else 8 < 1 if pN P E (e, p) > 0 & G = 1 P NP E = : 0 else LN P E
8 < 1 if lN P E (e, p) > 0 & G = 1 = : 0 else
8 < 1 if i(e, p) > 0 & L = 1 I= : 0 else
f (e, p) e
p
i(e, p) > 0
I e
p
e
p
H0 : Cov(i(e, p), pN P E (e, p)) > 0
I e
p
P NP E
J
T N
Aijt = µj + ✓jt + ✏it . i
j
t
Aijt
µj
✓jt
✏it µj ⇠ N (0,
"it ⇠ N (0,
2 ")
2 µ)
✓jt ⇠ N (0, µj
j
t
t t A¯j,t
1
=
1 (t 1)N
Pt
1 k=1
PN
i=1
Aijk
t ↵ ↵ = argminb E[(Aijt ↵ ˆ
µˆj = ↵ ˆ A¯j,t
aA¯j,t
1)
2
]
↵
1
E[2(Aijt A¯j,t
1
↵A¯j,t
¯
1 )Aj,t 1 ]
=0
Pt 1 Pt 1 PN E[(µj + ✓jt + ✏it ) · (µj + t 1 1 k=1 ✓jk + (t 11)N k=1 i=1 ✏ik )] E[Aijt A¯j,t 1 ] ↵= = Pt 1 Pt 1 PN E[(A¯j,t 1 )2 ] E[(µj + t 1 1 k=1 ✓jk + (t 11)N k=1 i=1 ✏ik )2 ]
2 ✓)
↵=
E[µ2j ] E[µ2j ]
+
1
2 t 1 E[✓jk ]
2
+
1 2 (t 1)N E[✏ik ]
=
2 µ
1
+
t 1
2 µ
↵ ↵ ˆ
µˆj =
2 ✓
⇣µ
2 ✓
+
2 ✏
N
2 ✏
⌘
µj
ˆ2 + µ
1 t 1
ˆ2 µ ⇣
ˆ2 + ✓
ˆ2 ✏
N
⌘ A¯j,t
1
t t
1 t A¯j,t
⇡(µj |A¯j,t f (A¯j,t
f (A¯j,t
1) =
1 |µj )
h(A¯j,t
(
µj
)
µ
1)
A¯j,t
1 |µj )
h(A¯j,t
µj A¯j,t
1
A¯j,t
1
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1 t 1
Pt
f (A¯j,t
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1 |µj )
+
1 (t 1)N
Pt
B A¯j,t 1 Br ⇣ @ 1 t 1
1)
PN
1 k=1
i=1 ✏ik
0
=
µj
1
µj 2 ✓
+
1
C C ⌘ A 2
✏
N
µ
max{µj }Jj=1 ⇧Jj=1 ⇡(µj |A¯j,t
/ ⇧j exp(
1)
2 0
6 B A¯j,t 1 B / ⇧j 6 ⇣ 4 @r 1 t 1
(A¯j,t ⇣ 1
t 1
µj ) 2 ⌘ 2 2+ ✏ ✓ N
1
µ2j 2 µ
µj 2 ✓
)
+
1
3
C µj 7 C ( )7 ⌘ A 5 2
✏
N
µ
(.)
1
j
µj A¯j,t ⇣
1
t 1
1 t 1
A¯ ⇣ j,t 2 ✓
2 ✓
1
+
⌘ =( 2
N
2 ✓
µˆj =
t 1
1 2 ✏
ˆ2 + µ
2 ✓
2 µ
⇣
2 ✓
1
ˆ2 µ ⇣
t 1
⇣
2 µ
2 1 µt 1
✏
N
t 1
j
+
µj
⌘
2 ✏
1
µj = 2 µ
µj
1
+
2 ✏
N
ˆ2 + ✓
+ ⇣
=0
2 ✏
N 2 ✓
+
⌘ A¯j,t
ˆ2 ✏
N
⌘
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✏
N
1
⌘ A¯j,t
1
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N ! 1 µˆj ! A¯j,t
1
X
⇢XY = p
cov(EX1 ,EY 2 ) cov(EX1 ,EX2 )·cov(EY 1 ,EY 2 )
Y
N
N
Tijat =
0
+
1 P atentedijat
P atentedijat = i
j
0
+
1 Zijat
a
+ Controls + ✏ijat
+ Controls + ⌘ijat t
Tijat = ↵0 + ↵1 Zijat + Controls + ⇣ijat
N
N
N
✓jt
Zijat =
ngrant jat
P atentedijat nappl jat
1
ngrant jat
j
P atented
T 1
↵1
1
1
Z ✓jt
a
t
nappl jat
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N R2
N R2
N
.7 .6 .5 .4
Non-NPE Litigation
.3 -.5
0
.5
Leave-one-out Non-NPE Examiner Effect
Sample restricted to patents that appear on the FDA Orange Book.
1
-.005 .5
1
-1
0 europe_grant
.5
1
0 europe_grant
.5
1
-.5
1
.5
1
.0005 -.5
0 europe_grant
.5
1
-1
-.5
.004 .0039 NPE_purchased .0037 .0038
20
40 reversed_rate
0 europe_grant
Sample restricted to NPE examiner effect < p50
.0036 .0035
.5
-.001 -1
Sample restricted to NPE examiner effect < p50
0
0 europe_grant
litigated_v2 -.0005 0
.002 nonnpe -.002 0 -.004 -.5
-.006
-1
Sample restricted to NPE examiner effect < p50
-1
Sample restricted to NPE examiner effect > p50
.004
.001 .0005 NPE_portfolio -.0005 0 -.001 -.0015
-.5
Sample restricted to NPE examiner effect > p50
.001
0 europe_grant
-.0015
-.5
-.001
-.0005
0
nonnpe
litigated_v2 0 .0005
.005
.001
.0015
.01
.003 .002 NPE_portfolio 0 .001 -.001 -.002 -1
Sample restricted to NPE examiner effect > p50
60
80