Patent Assertion Entity Activity

assert them against companies that make and sell products, such as firms in the computer hardware
industry. 40
In a subsequent 2011 report entitled The Evolving IP Marketplace: Aligning Patent Notice and Remedies
with Competition, the Commission used the term “patent assertion entity,” or PAE, to distinguish patent
assertion firms from other types of NPEs, which include firms that primarily seek to develop and
transfer patented technology, even if they do not practice the patents themselves. 41 Examples of these
latter types of NPEs include universities and semiconductor design houses. 42 In contrast to such NPEs,
“[f]or the most part, PAEs purchase patents, and then sell or license them as assets whose values are
based on the amount of licensing fees that can be extracted from operating companies already using and
marketing the technology, or they facilitate others who make the assertions.” 43
The Commission’s definition of a PAE is integral to understanding the findings and conclusions
described in this report, and placing them in the context of prior studies, because other researchers have
tended to examine the impact of NPEs generally. For example, in one study, Sara Jeruss et al. focused
on “patent monetization entities,” which they define as “those entities whose primary focus is deriving
income from licensing and litigation, as opposed to making products.” 44 The authors tracked
universities in their study separately, however, reasoning that although universities do not make
products, “their core activity involves education and academic research, rather than monetization of
rights.” 45 In another study, John R. Allison et al. sorted patent infringement plaintiffs into 12 different
“entity classes,” including an entity class called “acquired patents.” 46 Eleven of the 12 entity classes
40
Id., ch.2, at 31 & ch. 3, at 39.
41
FTC EVOLVING IP MARKETPLACE REPORT, supra note 1, at 8 n.5, 50 n.2, 60.
42
Id.
43
Id. at 60; see also Colleen V. Chien, From Arms Race to Marketplace: The New Complex Patent Ecosystem and Its
Implications for the Patent System, 62 HASTINGS L.J. 297, 328 (2010) (defining patent assertion entities as entities that “are
focused on the enforcement, rather than the active development or commercialization of their patents”).
44
Jeruss et al., supra note 2, at 361.
45
Id. at 369.
46
John R. Allison et al., Extreme Value or Trolls on Top? The Characteristics of the Most-Litigated Patents, 158 U. PA. L.
REV. 1, 10 (2009).
16