In a patent privateering strategy, firms sell patents to a non-practicing entity (NPE) with the expectation that the NPE sues the seller’s rivals for patent infringement. We examine whether firms under competitive pressure and facing barriers to direct litigation engage in privateering. We find that firms facing technological competition and retaliation risk sell more patents to NPEs, and that these patents are disproportionately asserted against the original owner’s competitors. Privateering sales are especially pronounced among firms in technology areas characterized by frequent litigation or extensive collaboration. Contrary to the view that small firms use NPEs to enforce patent rights, privateering-motivated sales are concentrated among well-resourced firms. Following privateering sales, peers reduce both their patenting activity and participation in the technology space, suggesting that privateering reshapes the competitive landscape. Our findings highlight an overlooked player in the policy debate over patent trolls: the firms that “feed” the trolls in the first place.
