Erik Hovenkamp (USC Gould School of Law), Jorge Lemus (University Of Illinois Urbana Champaign), & John L. Turner (University of Georgia – C. Herman and Mary Virginia Terry College of Business – Department of Economics) have posted Product Development with Lurking Patentees on SSRN. Here is the abstract:
We analyze technology investment and adoption by a product developer who faces uncertainty over whether any existing patent covers a new technology. If there is a patent, the (non-producing) patentee may choose to “lurk”—i.e., to strategically delay enforcement—hoping that the developer will adopt the patented technology and unwittingly accumulate infringement liability. Lurking incentives are pervasive and strongest at intermediate levels of patent strength and damages. We identify when there is inefficiency relating to adoption or investment and find that lurking does not usually deter developers from efficient technology adoption. Ignoring the impact of lurking on the developer’s strategic choices about technology adoption and investment can misguide economic predictions and policy conclusions.