The Analysis Of Litigation Strategy Of Patent Assertion Entity And Welfare

With the rapid development of science and technology,innovation has become crucial for enterprises to dominate the competition.More and more technology companies begin to increase their R&D investments and patents.Under this background,parent assertion entities(PAEs),a kind of organization that do not produce products but obtain many patents through acquisition,emerge as the times require.The profit model of PAEs is mainly to claim compensation or settlement fee from the possible infringing enterprises,especially the technology enterprises.According to the report of United patents,between 2014 and 2015,the litigation cases of PAEs have accounted for more than half of the patent litigation cases in the United States,and with Chinese enterprises gradually going abroad,Huawei,ZTE,Lenovo,Tencent and other enterprises have also encountered litigation of PAEs.After studying the litigation cases in RPX,it is found that PAEs mainly initiate multiple lawsuits around the same patent,and there are different priorities at the same time.It seems that once infringing enterprises are found,PAEs will inevitably initiate a lawsuit to obtain the license revenue,but it ignores that will cause the profits of these enterprises to be damaged due to the increase of costs,and then the license fee may be less than.This paper is to study how PAEs choose the litigation strategy and factors that affect its strategic litigation behavior by using industrial organization theory and mathematical model,and further discuss the impact of its litigation strategy on enterprises and social welfare.This paper assumes that there are two manufacturing enterprises in the market,both of which use the same technology in their production.Because this technology is similar to a patent held by a PAE,it becomes a possible litigation target.There are four litigation strategies:litigation for small enterprises only,litigation for large enterprises only,litigation for small enterprises first,litigation for large enterprises first.These four litigation strategies reflect the choice of litigation target and litigation priority,among which the success of litigation for large enterprises first will have a positive externality for the subsequent litigation.This paper mainly discusses two asymmetric manufacturing enterprises,describes the asymmetry from the perspective of cost difference and quality difference,studies the litigation game process between PAEs and production enterprises,and further discusses the impact of the optimal litigation strategy on social welfare.The research shows that the level of the unit license fee is the main determinant of PAEs litigation strategy choice,and license fee is related to the winning probability,cost and quality differences.This is because when the unit license fee is endogenous determined by PAEs,in order to ensure that the small enterprise will not be squeezed out of the market,PAEs should strictly control license fee.Therefore,further research finds that the existence of externality can not increase the advantage of PAEs in litigation because it intensifies the competition of enterprises and reduces license fee.In addition,for enterprises,the large enterprise loses a lot when facing the lawsuit of PAEs,which has a positive and negative impact on the small enterprise,while the output of the large enterprise has a greater impact on the social welfare,so the optimal litigation strategy of PAEs weakens the social welfare.There are few papers about PAEs and its strategy of litigation priority,so this paper has strong innovation.In addition,the research of this paper also provides new solutions to enterprises,especially the high-tech enterprises in the face of related litigation.And it also has a certain enlightenment to strengthen the legislation and law enforcement of intellectual property rights.The research shows that we should also pay attention to avoid the abuse of intellectual property rights,which has both theoretical and practical significance.However,this paper only studies part of the litigation strategy of PAEs.From information,we can see that the choice of litigation time and litigation place are also worthy of further study in the future.Finally,due to the pioneering nature of this paper,there are some defects in the research process,such as the lack of empirical test due to data limitations,in order to promote the conclusion smoothly,some aspects need to be improved by assuming highly abstract scenarios.