Patent Assertion Entity Activity

litigations tended to settle early; of the cases that settled, 34% did so within six months of filing, 66%
within one year, and 83% within 18 months. Although Litigation PAEs generated a minority of the
reported PAE licensing revenues in the study, they accounted for the vast majority of total lawsuits
filed.
The FTC recognizes that infringement litigation plays an important role in protecting patent rights, and
that a robust judicial system promotes respect for the patent laws. Nuisance infringement litigation,
however, can tax judicial resources and divert attention away from productive business behavior. With
this balance in mind, the FTC proposes reforms to: 1) address discovery burden and cost asymmetries in
PAE litigation; 2) provide the courts and defendants with more information about the plaintiffs that have
filed infringement lawsuits; 3) streamline multiple cases brought against defendants on the same theories
of infringement; and 4) provide sufficient notice of these infringement theories as courts continue to
develop heightened pleading requirements for patent cases.
Develop rules and case management practices to address discovery burden and cost asymmetries
in PAE litigation. In civil lawsuits, plaintiffs and defendants exchange information relevant to the
litigation through disclosures and responses to discovery requests. The Federal Judicial Center notes
that discovery in patent litigation “can be exhaustive and exhausting for a variety of reasons,” including
broad claims and defenses which require inquiry into product development and financial records, special
issues that arise with willfulness and inequitable conduct claims, and “potentially consequential but
unpredictable outcome[s]” that can lead to extensive discovery requests and lack of compromise. 15
Because PAEs do not invent, develop, or manufacture products incorporating their patented technology,
they generally have less discoverable information than the party accused of infringement 16 They also
are not subject to countersuit for patent infringement, and therefore do not face potential discovery
15
PETER S. MENELL ET AL., FED. JUDICIAL CTR., PATENT CASE MANAGEMENT JUDICIAL GUIDE 4-1 (3d ed. 2016),
http://www.fjc.gov/public/pdf.nsf/lookup/Patent-Case-Management-Judicial-Guide-3d-ed-2016.pdf/$file/Patent-Case­
Management-Judicial-Guide-3d-ed-2016.pdf.
16
Any firm that uses a litigation strategy to generate license revenues, however, may have more documents that are subject to
a preservation duty. See, e.g., Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1324–25 (Fed. Cir. 2011) (affirming the
district court’s finding that Eon-Net and its principal failed to observe their duty to preserve evidence during the ongoing
lawsuits); Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1325 (Fed. Cir. 2011) (affirming the district court’s finding that
litigation became reasonably foreseeable, and a preservation duty therefore arose, when Rambus’s vice-president of
intellectual property “articulated a time-frame and a motive for implementation of the Rambus litigation strategy”).
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