Patent Assertion Entity Activity

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PATENT ASSERTION ENTITY ACTIVITY: AN FTC STUDY A REPORT OF THE FEDERAL TRADE COMMISSION EDITH RAMIREZ MAUREEN K. OHLHAUSEN TERRELL MCSWEENY Chairwoman Commissioner Commissioner Heather Hippsley David B. Robbins Deborah L. Feinstein Jessica L. Rich Ginger Zhe Jin David Shonka Randolph W. Tritell Jeanne Bumpus Tara Isa Koslov Justin Cole Donald S. Clark Andrew I. Gavil Martin S. Gaynor Francine Lafontaine Marina Lao Chief of Staff Executive Director Director, Bureau of Competition Director, Bureau of Consumer Protection Director, Bureau of Economics Acting General Counsel Director, Office of International Affairs Director, Office of Congressional Relations Acting Director, Office of Policy Planning Director, Office of Public Affairs Secretary of the Commission Former Director, Office of Policy Planning* Former Director, Bureau of Economics Former Director, Bureau of Economics Former Director, Office of Policy Planning Report Drafters and Contributors Suzanne Munck, Deputy Director, Office of Policy Planning & Chief Counsel for Intellectual Property Daniel S. Hosken, Deputy Assistant Director, Bureau of Economics John E. Dubiansky, Office of Policy Planning J. Elizabeth Callison, Bureau of Economics Julie A. Carlson, Bureau of Economics Jason O’Connor, Bureau of Economics Elizabeth A. Gillen, Office of Policy Planning Benjamin Chartock, Bureau of Economics Christopher Bryan, Office of Policy Planning Henry C. Su, Office of Chairwoman Edith Ramirez Inquiries concerning this report should be directed to: Suzanne Munck, smunck@ftc.gov * Mr. Gavil, Dr. Gaynor, Dr. Lafontaine, and Ms. Lao were directors during parts of the report period.
Table of Contents EXECUTIVE SUMMARY AND RECOMMENDATIONS ......................................................................1 Executive Summary.........................................................................................................................1 Key Findings....................................................................................................................................3 Recommendations for Legislative and Judicial Reform..................................................................8 Conclusion .....................................................................................................................................13 CHAPTER 1: INTRODUCTION AND BACKGROUND .......................................................................15 Definition of a Patent Assertion Entity..........................................................................................15 Legal Framework for PAE Activity...............................................................................................17 Prior Studies of PAE Activity and Other Literature ......................................................................20 Government Interest in and Response to PAE Activity.................................................................28 United States Patent and Trademark Office.......................................................................28 The White House ...............................................................................................................30 United States Congress ......................................................................................................31 United States Supreme Court.............................................................................................34 The History of the FTC’s PAE Study............................................................................................35 Study Scope and Methodology ......................................................................................................38 Organization of the Report.............................................................................................................41 CHAPTER 2: PAE ORGANIZATION AND STRUCTURE ...................................................................42 Introduction....................................................................................................................................42 Two Models of PAE Behavior: Portfolio PAEs and Litigation PAEs...........................................42 Portfolio PAEs ...................................................................................................................45 Litigation PAEs..................................................................................................................47 Some Litigation PAEs Comprised Multiple Affiliates ..................................................................50 Transparency Issues with Multi-Affiliate Structures.....................................................................52 CHAPTER 3: PATENT ASSERTION......................................................................................................54 i
Page 1: Patent Assertion Entity Activity AN
Page 5 and 6: Litigation Outcomes................
Page 7 and 8: Executive Summary and Recommendatio
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
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guaranteed revenue and zero risk. T
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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
Page 65 and 66:
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
Page 71 and 72:
Electronic Product Manufacturing”
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arely generated license agreements
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In addition, four Responding PAEs a
Page 77 and 78:
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
Page 95 and 96:
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
Page 103 and 104:
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
Page 111 and 112:
Chapter 4 first describes how Wirel
Page 113 and 114:
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
Page 121 and 122:
Wireless Respondents’ Licensing A
Page 123 and 124:
Table 4.2: Percentage of Wireless P
Page 125 and 126:
license with that entity, whereas P
Page 127 and 128:
Most Wireless Licensees Operated in
Page 129 and 130:
Conclusion The FTC’s goal in stud
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Patent assignments were frequently
Page 133 and 134:
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
Page 139 and 140:
categories were Other Electrical &
Page 141 and 142:
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
Page 157 and 158:
Appendix B: Methodology Introductio
Page 159 and 160:
contained more than 9,100 variants
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of the dispute as of the end of the
Page 163 and 164:
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
Page 203 and 204:
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
Page 241 and 242:
study questions and removed questio
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Some of the proposed requests for d
Page 245 and 246:
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
Page 267 and 268:
are two reasons why it is important
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Federal Trade Commission ftc.gov
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