Patent Assertion Entity Activity

the Alice decision to measure directly its impact on PAE activity. Following this decision, however,
PAEs may avoid asserting software patents if they expect that: (1) the patents likely would be found
invalid under the Alice analysis; or that (2) courts may dispose of the case in the early stages of
litigation, under the Alice analysis. In addition, because more than 75% of the patents in the FTC’s
sample likely include software-related claims, and because the FTC estimates that Study PAEs held
more than 75% of all U.S. patents held by PAEs at the end of 2013, any change in PAE behavior with
respect to software patents that results from Alice will likely have a significant impact on both the
overall volume of PAE assertion and the types of technologies that PAEs assert.
Fewer Than 1% of Study Patents Were Identified as Encumbered
by a FRAND Commitment to a SSO
The FTC’s study examined the extent to which PAEs have acquired patents declared “essential” to
practice a technical standard adopted by a standard setting organization (SSO). 321 These patents are
often referred to as “standard-essential patents” or “SEPs.” Some commentators have suggested that
owners of SEPs could attempt to evade FRAND or other commitments, while exploiting the SEPs’
importance to a standard, by transferring encumbered SEPs to a PAE. 322 To measure the extent of this
activity in practice, the FTC required Responding PAEs to identify whether any patent it or its Affiliates
or Holding Entities held since 2009 had ever been the subject of a licensing commitment made to any
SSO. 323
Responding PAEs did not identify patents encumbered by a licensing commitment to an SSO as a large
portion of their patent holdings. 324 Only four of the 22 Responding PAEs identified that they, or their
321
For a summary of five “well-known cases in which PAEs have asserted SEPs,” see Jorge L. Contreras, Assertion of
Standards-Essential Patents by Non-Practicing Entities, in PATENT ASSERTION ENTITIES AND COMPETITION POLICY (D.
Daniel Sokol ed., forthcoming Nov. 2016), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700117.
322
See, e.g., Scott Morton & Shapiro, supra note 2; Ram Menon & Kevin Spivak, Trends in Mobile and Consumer
Electronics, 48 LES NOUVELLES 238, 239 (2013).
323
See Appendix C: PAE Special Order, Specification D.
324
The FTC’s question focused on whether the PAE knew that it held an encumbered patents because the Commission was
interested in whether the PAE would use this information in licensing negotiations. SSO commitments would be
underreported if Study PAEs and Holding Entities held patents that they did not know, or had not yet determined, were
136