Patent Assertion Entity Activity

$300,000 and $2.5 million. By these estimates, 77% of Litigation PAEs settlements were valued below
an approximate benchmark representing the nuisance value of litigation, while 78% of Portfolio PAE
licenses were equal to or greater than the nuisance value of litigation benchmark.
Royalties Paid by Different Licensees for Licenses to Identical Patents Varied Widely
Study PAEs reported receiving widely differing royalties from different licensees for the same set of
patents. There are many potential explanations for why the royalties paid for identical patents varied
across licensees. Some licensees may have had much higher demand for the patents than other licensees.
A licensee with much higher sales of potentially infringing products would have been expected to pay
more in a patent license than one with lower sales volumes. Because the majority of licenses reported
lump-sum payments without breaking out the royalty rate and the base, it is possible that licensees paid
similar royalty rates, but very different lump sums. Licensees may also have differed in bargaining
sophistication: some licensees may have been more successful in obtaining a license at a lower royalty.
In addition, licensees operating in different industries may have a different willingness to pay for
identical patents.
To measure how royalties paid by licensees to Study PAEs varied, the FTC analyzed the variation in
royalties where a Study PAE licensed identical patents to a number of licensees. The FTC limited its
analysis to instances in which at least ten licensees paid a non-zero royalty to a Study PAE for identical
patents in order to have a reasonable sample size to measure dispersion for each unique collection of
licensed patents. Moreover, to maintain the anonymity of the licensees and Study PAEs, the FTC scaled
each royalty payment by the mean royalty paid for a license for that set of patents. 254 We then plotted the
th th th th th 255
10 , 25 , 50 (median), 75 , and 90 percentiles of the scaled royalty distribution separately for each
unique set of licensed patents. The royalties paid by different licensees to license identical sets of patents
varied dramatically, often by more than a factor of 20. For this reason, we plotted the data using a logscale
for the y-axis; specifically, the unit distance between any two points on the y-axis corresponds to a
254
For example, if the licensee “Intrepid Manufacturing” paid $500,000 to license patents A, B and C from PAE 1, and if the
mean price paid for a license to Patents A, B, and C was $1,000,000, then the FTC would scale “Intrepid Manufacturing’s”
license fee to be 0.5.
255
A percentile is defined as the number in a distribution that causes that percentage of observations to fall below that
number. For example, if 10 is the 50 th percentile of a distribution, then 50% of the numbers in that distribution are less than
10.
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