Patent Assertion Entity Activity

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PAE Patent Licenses with Zero Reported Revenue...................................................................B - 6 Identifying Subject Firms’ Industries ........................................................................................B - 6 Counting PAE Acquisitions Recorded at the USPTO ...............................................................B - 9 Methodology to Select Study Subjects: Additional Information.............................................B - 10 Methods to Validate Study Responses.....................................................................................B - 15 APPENDIX C: PAE SPECIAL ORDER...............................................................................................C - 1 APPENDIX D: WIRELESS CASE STUDY SPECIAL ORDER........................................................ D - 1 APPENDIX E: SUPPORTING STATEMENT FOR A PAPERWORK REDUCTION ACT SUBMISSION TO OMB, FTC STUDY OF PATENT ASSERTION ENTITES, PART A ....E - 1 APPENDIX F: SUPPORTING STATEMENT FOR A PAPERWORK REDUCTION ACT SUBMISSION TO OMB, FTC STUDY OF PATENT ASSERTION ENTITES, PART B.....F - 1 iv
Executive Summary and Recommendations Executive Summary Patent assertion entities (PAEs) are businesses that acquire patents from third parties and seek to generate revenue by asserting them against alleged infringers. PAEs monetize their patents primarily through licensing negotiations with alleged infringers, infringement litigation, or both. In other words, PAEs do not rely on producing, manufacturing, or selling goods. When negotiating, a PAE’s objective is to enter into a royalty-bearing or lump-sum license. When litigating, to generate any revenue, a PAE must either settle with the defendant or ultimately prevail in litigation and obtain relief from the court. In acquiring and then asserting patents, PAEs target individuals and businesses that already use (at least allegedly) the patented technology. PAE activity therefore results in what often are referred to as ex post patent transactions because any patent license or settlement occurs after someone has developed or marketed the product at issue. This contrasts with ex ante patent transactions in which the technology and related patent rights transfer from an inventor to a manufacturer before the product is developed and marketed. 1 The fact that PAE activity facilitates ex post, as opposed to ex ante, patent transactions has raised policy questions about the role of PAEs in promoting innovation and economic growth. To begin answering these questions, researchers at several government agencies and academic institutions have studied PAE business models to evaluate the specific impact on patent litigation. 2 1 See, e.g., FED. TRADE COMM’N, THE EVOLVING IP MARKETPLACE: ALIGNING PATENT NOTICE AND REMEDIES WITH COMPETITION 7–8 (2011), https://www.ftc.gov/sites/default/files/documents/reports/evolving-ip-marketplace-aligning-patentnotice-and-remedies-competition-report-federal-trade/110307patentreport.pdf [hereinafter FTC EVOLVING IP MARKETPLACE REPORT]. 2 See U.S. GOV’T ACCOUNTABILITY OFF., GAO-13-465, INTELLECTUAL PROPERTY: ASSESSING FACTORS THAT AFFECT PATENT INFRINGEMENT LITIGATION COULD HELP IMPROVE PATENT QUALITY (2013), http://www.gao.gov/products/GAO-13 465 [hereinafter 2013 GAO REPORT]; EXEC. OFFICE OF THE PRESIDENT, PATENT ASSERTION AND U.S. INNOVATION 1–3 (2013), http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf [hereinafter EOP PATENT ASSERTION AND U.S. INNOVATION REPORT]; EXEC. OFFICE OF THE PRESIDENT, MARCH 2016 ADDENDUM (2016), https://www.whitehouse.gov/sites/default/files/microsites/ostp/PatentReportAddendumMarch2016.pdf [hereinafter EOP REPORT ADDENDUM]; CHRYSSOULA PENTHEROUDAKIS, JOINT RESEARCH CTR., EUR. COMM’N, JRC96728, INNOVATION IN THE EUROPEAN DIGITAL SINGLE MARKET: THE ROLE OF PATENTS 8, 52–53 (Nikolaus Thumm ed., 2015), http://publications.jrc.ec.europa.eu/repository/bitstream/JRC96728/jrc96728.pdf; STEFANO COMINO & FABIO MARIA MANENTI, JOINT RESEARCH CTR., EUR. COMM’N, JRC97451, INTELLECTUAL PROPERTY AND INNOVATION IN INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) 3, 26–27 (Nikolaus Thumm ed., 2015), 1
Page 1 and 2: Patent Assertion Entity Activity AN
Page 3 and 4: Table of Contents EXECUTIVE SUMMARY
Page 5: Litigation Outcomes................
Page 9 and 10: Table A.1: Categories of PAEs in FT
Page 11 and 12: generated royalties of less than $3
Page 13 and 14: most frequently by Study PAEs, or (
Page 15 and 16: litigations tended to settle early;
Page 17 and 18: in a timely manner would help allev
Page 19 and 20: In December 2015, however, an amend
Page 21 and 22: Chapter 1: Introduction and Backgro
Page 23 and 24: corresponded to various types of NP
Page 25 and 26: PAE’s enforcement of that patent
Page 27 and 28: In one of the earliest studies, Jam
Page 29 and 30: defendants that will arise in the l
Page 31 and 32: entrepreneurship and related invest
Page 33 and 34: and efficient marketplace for paten
Page 35 and 36: The FTC and the DOJ supported USPTO
Page 37 and 38: the brief observed that the share o
Page 39 and 40: Greater transparency of patent owne
Page 41 and 42: only egregious misconduct, as Justi
Page 43 and 44: In September 2013, the Commission b
Page 45 and 46: were intended to generate a sample
Page 47 and 48: The FTC’s study has two parts. Th
Page 49 and 50: Litigation PAEs: Litigation PAEs ty
Page 51 and 52: licenses. There was little overlap
Page 53 and 54: guaranteed revenue and zero risk. T
Page 55 and 56: agreements exclusively. These agree
Page 57 and 58:
Larger Litigation PAEs also used th
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determine whether it has already li
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epresented as unique docket numbers
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Prior to initiating the study, the
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FTC examined the frequency with whi
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Study PAEs sent demands to relative
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from related PAEs may help them neg
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Electronic Product Manufacturing”
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arely generated license agreements
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In addition, four Responding PAEs a
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Litigation PAEs and Portfolio PAEs
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Table 3.1 provides the distribution
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Figure 3.5a: Technology Category of
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PAE cases and 44% of Litigation PAE
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Figure 3.6: Frequency Distribution
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Figure 3.7: Proportion of Study PAE
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portfolios of patents, which typica
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manner and extent to which Respondi
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as quickly as possible. For Portfol
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Study PAEs Generated Approximately
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likely seeks to avoid the possibili
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factor of 10. This analysis include
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Figure 3.10a could be the result of
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Figure 3.11: Number of Licenses Inv
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granted licenses to firms operating
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Turning to specific assertion behav
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The preceding considerations have l
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Chapter 4 first describes how Wirel
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A Small Number of Targets Received
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These percentages suggest that both
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worldwide wireless chipset sales du
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with 75% of their settlements occur
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Wireless Respondents’ Licensing A
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Table 4.2: Percentage of Wireless P
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license with that entity, whereas P
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Most Wireless Licensees Operated in
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Conclusion The FTC’s goal in stud
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Patent assignments were frequently
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Figure 5.1: Size of Patent Holdings
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Classification. 309 As of the time
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while USPTO economists estimate tha
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categories were Other Electrical &
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More Than 75% of Study Patents Incl
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Affiliates and Holding Entities, he
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Figure 5.5: Age Distribution of Stu
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eceive more citations than other ca
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1.5 and the median was 0.6, meaning
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Table 5.1: Percentage of Acquired P
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Appendix A: Glossary of Frequently
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“PAE Special Order” means the i
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Appendix B: Methodology Introductio
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contained more than 9,100 variants
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of the dispute as of the end of the
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Affiliates to a single industry. 37
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industry called “Management of Co
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the selected firms meet the FTC’s
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owning 10% or more of its stock.”
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Delaware avoided disclosing any inf
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SPECIFICATIONS A. Identification of
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(2) identify, from the following li
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(2) identify, from the following li
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(a) state the total amount paid in
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(3) did the Firm grant an exclusive
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H. Patent Assertion Information 1.
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Do not report revenue reported for
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f. Does the License relate to a Wir
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(e) provide a narrative response st
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1. Separately, for each year since
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APPENDIX A A. General Instructions
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“Patent” means a United States
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For district court and bankruptcy c
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Number Ending Reference Number Cust
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(i) (ii) (iii) (iv) For productions
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APPENDIX B Certification This Speci
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SPECIFICATIONS A. Identification of
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(1) state the jurisdiction; and (2)
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e. Identify, from the following lis
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(1) state the total revenue the Fir
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(1) identify the geographic restric
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F. Aggregate Cost Information 1. Se
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3. Produce, and provide a narrative
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Microsoft Word and PDF versions. Fo
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U.S. Patent numbers shall be provid
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(ii) Submit emails in image format
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Filename with extension Production
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(v) (vi) For each document withheld
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APPENDIX E: SUPPORTING STATEMENT FO
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“strongly urge[s] the FTC to foll
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The proposed case studies will prov
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What strategies do PAEs employ to a
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competition, innovation, and intell
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proposed requests “are a rational
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study questions and removed questio
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Some of the proposed requests for d
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Response: The Commission has narrow
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increase are not well understood.
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equests include interactions betwee
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In contrast, several commenters bel
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average burden for each of the appr
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enefits), and 320 research assistan
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PART B - COLLECTION OF INFORMATION
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stratum. The FTC will sum the two s
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Freedom and RPX use public sources
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The FTC will send one set of inform
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will have one entry for each acquis
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are two reasons why it is important
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Federal Trade Commission ftc.gov
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