Elves or Trolls?

Firm structure and the degree of vertical integration lie at the core of a key intellectual property concern currently under debate: the existence of "patent trolls" (those patent holders that prey upon manufacturers and other downstream firms by charging "supracompetitive" rates for their patents). In a recent TILEC discussion paper Damien Geradin (TILEC) and co-authors Anne Layne-Farrar and Jorge Padilla (both with LECG) argue that while court opinions and competition agency decisions have focused on "non-practicing" patent holders as the source of anticompetitive exclusion and hold-up problems, this view of upstream specialists is far too
narrow. In fact, patents in the hands of non-practicing entities can increase competition, lower downstream prices, and enhance consumer choice. The authors explain why and argue for more business-model-neutral policy when it comes to patent licensing. Clearly, patents are a complex subject that cannot be portrayed as either all good or all bad; tradeoffs will always be involved. Without a better understanding of the many complicated effects of patents in high technology markets, policy-makers run the very real risk of misguided decisions.