The business models of the patent market: an empirical analysis of IP business model characteristics

Abstract

This thesis surveys previous academic literature and performs an empirical analysis to reach two main objectives. The first objective is to build a broader and more detailed picture of the different IP specialized business models present in the US business environment. Additionally, the thesis studies their effects on the economy and the patent system efficiency. The second objective is to build an econometric model of the IP business model strategy and empirically test the hypothesis that IP specialized companies' aggressiveness and transparency are negatively correlated.

The thesis utilizes the business model categorization introduced by Millien & Laurie (2007) in their paper, "A summary of established & emerging IP business models", and further groups the patent transaction specialized models into four main categories: IP development entities, patent licensing and enforcement companies (PLECs), IP monetization intermediaries, and IP aggregators. It concludes that these four business model categories differ from each other in two dimensions: the origin of their patent assets and their patent monetization strategies.

The key findings of the qualitative business model assessment suggest that there is a relationship between a company's aggressiveness and transparency: the business models that generate benefits from the patent system and increase innovation are non-aggressive and transparent. The IP development entities are an example of these types of companies. On the other hand, the harmful business models that increase the costs of the patent system and divert investments away from innovation are aggressive and non-transparent. The PLEC business model fits this description. The IP intermediaries and aggregators fall between these two extremes.

To empirically test the correlation between the IP specialized company's aggressiveness and transparency, the thesis uses data collected for this purpose on 75 sample companies. Based on the ordered logistic regression analysis, the relationships between the two measures cannot be completely confirmed. Instead, the regression concludes that the companies' aggressiveness is correlated with their foundation year, origin, and industry. The multinomial regression further suggests that the IP business models differ from each other in terms of aggressiveness, transparency, and the number of employees. More specifically, the results show that the PLECs are the most aggressive business model. The IP development entities, on the other hand, are found less transparent and less aggressive than the IP monetization intermediaries and IP aggregators.