Patent Assertion Entity Activity

Table A.1: Categories of PAEs in FTC Study 5
Litigation PAEs Portfolio PAEs
Both Business
Models
Responding PAEs 18 4 22
Affiliates 297 30 327
Study PAEs 315 34 349
We examined the practices of each of these respondents across an almost six-year period between
January 2009 and mid-September 2014. Of the related entities, 327 engaged in active assertion behavior,
namely, sending demands, suing for patent infringement, or licensing patents, during the study period. In
the wireless chipset case study, the FTC compared the behavior of PAEs active in the wireless chipset
sector with eight manufacturers and five NPEs that asserted patents in this sector. This report describes
our major findings from the study and makes recommendations for future reform.
Key Findings
The FTC observed two distinct PAE business models: Portfolio PAEs and Litigation PAEs. From
the information and data collected from the PAE respondents, we observed two distinct PAE business
models for generating revenue through patent assertion: Portfolio PAEs and Litigation PAEs. Within
each business model, Study PAE behavior was relatively homogeneous.
Portfolio PAEs: Portfolio PAEs negotiated licenses covering large portfolios, often containing
hundreds or thousands of patents, frequently without first suing the alleged infringer. The value
of these licenses was typically in the millions of dollars. Although Portfolio PAEs accounted for
only 9% of the reported licenses in the study, they generated 80% of the reported revenue, or
approximately $3.2 billion. Portfolio PAEs typically funded their initial patent acquisitions
through capital raised from investors, including institutional investors or manufacturing firms.
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See Appendix A: Glossary of Frequently Used Terms. “Study PAE” means any PAE for which this study presents patent
assertion data. The group of “Study PAEs” includes all “Responding PAEs and “Affiliates.” “Responding PAE” means one
of the 22 PAEs that received the PAE Special Order and submitted information used in this study. “Affiliates” means entities
identified as affiliates by a Responding PAE, including “wholly or partially owned subsidiaries” and “other person(s) over
which the firm exercises or has exercised supervision or control,” that sent demands, sued for patent infringement, or licensed
patents within the study period. See Appendix C: PAE Special Order, Specification B.2.
The FTC also observed entities that held, but did not assert, patents during the study period. We use the term “Holding
Entity” to describe this category. See infra Figure 1.1 and accompanying text. There were 2,189 Holding Entities in the study.
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