Patent assertion entities and follow-on innovation. Evidence from patent acquisitions at the USPTO

Patent monetisation is an important source of revenues worldwide. This activity is increasingly carried out by patent assertion entities (PAE), which are at the origin of about 40% of infringement actions filed in the United States. This paper uses an original database of US patents reporting PAE patent acquisitions. We document two key empirical facts about the presence of PAEs in the market for patents. First, PAEs build large patent portfolios and contribute significantly to patent transfers in the US. Second, their impact on follow-on innovation is, on average, negative. With a series of dynamic diff-in-diffs analyses, we estimate a significant post-transfer drop in forward citations received by patents acquired by PAEs. This drop is not immediate but takes some years to materialise. Heterogeneity tests show that our results are driven by acquisitions of old and highly cited patents, as well as by patent acquisitions by large patent aggregators.