Timo Fischer

Patent Trolls on Markets for Technology - An Empirical Analysis of Trolls' Patent Acquisitions

Patent trolls appropriate profits from innovation solely by enforcing patents against infringers. They are often characterized as relying on low-quality patents, an assessment that, if correct, would imply that eradicating such patents would effectively terminate the troll business. In this paper, we shed light on this issue by empirically analyzing trolls patent acquisitions. We draw on a unique dataset of 392 U.S. patents acquired by known patent trolls between 1997 and 2006, which we compare to three control groups of 784 U.S. patents each acquired by practicing firms. Our findings regarding patent characteristics support recent theoretical propositions about the troll business model. The probability that a traded patent is acquired by a troll rather than a practicing entity increases in the scope of the patent and in the patent density of its technology field. Remarkably, and contrary to common belief, we find that this probability also increases in the patent’s technological quality. On a descriptive level, we find that troll-acquired patents are of significantly higher quality than those in the control groups. This result implies that elevating minimum patent quality will not put an end to the patent troll business, and suggests that this business is sustainable in the long run. Furthermore, we discuss the fact that trolls are peculiar players on markets for technology insofar as they are solely interested in the exclusion right, not in the underlying knowledge. We posit that transactions involving patent trolls may only be the tip of the iceberg of “patent-only�? transactions, a conjecture with strong implications for the efficiency of markets for technologies. Managerial and policy implications are discussed.

Capturing Value From Innovation—Diverging Views of R&D and Marketing Managers

Profiting from technological innovation requires both the development of new products and the capture or appropriation of profits from them. For new product development, the interplay of marketing and R&D has been intensively researched. In contrast, for capturing value, this interplay has been largely neglected in the literature. To fill this gap, we study choices by marketing and R&D managers regarding activities aimed at appropriating profits from new products. We study, in detail, how managers perceive the effectiveness of product-related patents, overall patent portfolio size, marketing, sales and services quality, lead time, and contributions to open standards. We conducted discrete choice experiments with 143 managers working in R&D or marketing functions in upper and middle management in a leading communications equipment firm, and analyzed the resulting data by comparing marginal effects of rank-ordered mixed logit models between the two groups. We find that choices of R&D and marketing functions on how to capture the most value differ strongest on the mechanism that is perceived as most important by R&D managers, “lead time advantages.” Top management needs to consider and deal with these diverging perceptions when formulating business strategies on value capture.

Complements and Substitutes in Value Appropriation – A Choice Experimental Approach

The ability of firms to effectively use mechanisms that support them in appropriating value from innovation is key to outperforming competitors. Yet, such mechanisms have, for the most part, been studied in isolation, without accounting for interactions between them. We address this gap by studying interactions between product-related patents and three other appropriability mechanisms. To this end, we conduct and analyze a series of discrete choice experiments with 319 managers within a leading international communications equipment company. As a result, we find the number of product-related patents to be complementary to the overall size of the patent portfolio, complementary – with an interesting exception – to contributions to open standards, and substitutive to lead time advantages. Of particular theoretical interest is the existence of both complementarities and substitutabilities within the focal bundle of mechanisms. The complexity of the interactions perceived by managers supports the notion of an important and, because it involves activating complementarities and avoiding substitutabilities among mechanisms, challenging managerial task. Furthermore, accounting for interactions between patents and other appropriability mechanisms helps to explain the patent paradox. Theoretical and managerial implications are discussed.

Contingencies of Profiting from Innovation: Appropriability Mechanisms’ Non-Linearities

Empirical studies have analyzed the effectiveness of various appropriability mechanisms, and have carved out a number of contingency factors such as industry, country, technology, and commercialization strategy. This literature, however, neglects the strategic possibility that organizations invest to improve an appropriability mechanism contingent on their present position in the same mechanisms. If the respective appropriability mechanism is characterized by non-linearities then, depending on this position, the same investment may be highly effective or largely ineffective. We thus ask, how is the effectiveness of investments in appropriability contingent on the firm‘s current appropriability position? To answer this question, we conducted a choice-based conjoint analysis with 319 participants managing various appropriability mechanisms. We identify significant non-linearities in the effect of appropriability mechanisms, implying that the effect of an improvement in one mechanism is contingent on the innovator‘s current position in this mechanism. These non-linearities, in turn, depend on the innovator‘s competitive position with respect to value capture. Our findings add to explain puzzles resulting from macro-level studies and have implications for firms trying to maximize value appropriation from innovation.

Capturing Value from Innovation - Strategy Choices of R&D and Marketing Managers

Profiting from technological innovation requires both the development of new products and the capture or appropriation of profits from them. For new product development, the interplay of marketing and R&D has been intensively researched. In contrast, on the issue of capturing value it has been largely neglected. To fill this gap, we study choices by marketing and R&D managers regarding activities aimed at appropriating profits from new products. We study, in detail, how managers perceive the effectiveness of product-related patents, overall patent portfolio size, marketing, sales and services quality, lead time, and contributions to open standards. We conducted discrete choice experiments with 143 managers working in R&D or marketing functions in upper and middle management in a leading communication equipment firm, and analyzed the resulting data by comparing marginal effects of rank-ordered mixed logit models between the two groups. We find that choices of R&D and marketing functions on how to capture the most value differ strongest on the mechanism that is perceived as most important by R&D managers, “lead time advantages.” Top management needs to consider and deal with these diverging perceptions when formulating business strategies on value capture.