Buyers in the patent auction market: Opening the black box of patent acquisitions by non-practicing entities

In this paper we conduct an exploratory study on the activity of NPEs as buyers of patents in the auction marketplace. The analyses are based on a comprehensive dataset covering all patent auctions held by Ocean Tomo until the end of 2008, matched with information drawn from patent databases and the USPTO reassignment register. The results indicate that the probability that a traded patent is acquired by a NPE rather than a practicing entity increases in the presence of triadic family members and backward citations, while it decreases in the number of inventors and when the invention represents an extensive technological advance (proxied by the originality index). If we disaggregate the category of NPEs, we find that, with respect to manufacturing buyers, defensive aggregators purchase patents which have, on average, a narrower technological scope, a higher technical merit, a lower number of inventors and a longer residual life. Instead, the super-aggregator Intellectual Ventures (I.V.) assigns a higher value, with respect to practicing firms, to patents that are triadic, have a longer time to expiration, have a lower number of inventors and have a higher number of assignees. Patents purchased by both defensive aggregators and I.V. also report higher values of forward citations and residual life than patents acquired by other NPEs.