Patent Assertion Entity Activity

Other researchers and commentators, however, have devoted their attention to three categories of
potential benefits of NPEs and PAEs. First, a common justification of the NPE or PAE business model
is that it enables individual inventors and small patent holders to enforce their property rights more
effectively and efficiently against accused infringers that otherwise might ignore their demands for
adequate compensation. 95 Second, NPEs and PAEs are sometimes characterized as intermediaries or
brokers that are better able to present an inventor’s patented technology to those best positioned to
implement and derive commercial value from it. 96 Third, NPEs and PAEs may help to create a stable
95
See, e.g., Ron D. Katznelson, The $83 Billion Patent Litigation Policy, REGULATION, Spring 2016, at 14, 16,
http://www.cato.org/regulation/spring-2016/83-billion-patent-litigation-fallacy (“A significant portion of that $4 trillion
increase—$667 billion per year—must be attributable to the appreciating value of patent rights as a result of successful
efforts to protect those rights during that period, including efforts by NPEs.”); Ryan T. Holte, Trolls or Great Inventors: Case
Studies of Patent Assertion Entities, 59 ST. LOUIS U. L.J. 1, 43 (2014) (arguing that cases “support[] the countervailing view
of PAEs representing the interests of ‘Horatio Alger Inventors’ who tirelessly labor to build bridges of innovation and who
seek only their fair share”); Anne Layne-Farrar, The Brothers Grimm Book of Business Models: A Survey of Literature and
Developments in Patent Acquisition and Litigation, 9 J.L. ECON. & POL’Y 29, 56 (2012) (“Patent litigation may indeed have
social costs, as Bessen et al. argue, but it is difficult to see how we might reduce those costs without killing the many benefits
associated with enforceable patent rights.”); Michael Risch, Patent Troll Myths, 42 SETON HALL L. REV. 457, 498 (2012)
(“Individuals may face a significant disadvantage in high-stakes patent litigation unless they allow NPEs to enforce their
patents. This means that NPE litigation may be the best way for garage inventors to capitalize on their patents if infringers
refuse to license.”); Bruce L. Beron & Jason E. Kinsella, David v. Goliath Patent Cases: A Search for the Most Practical
Mechanism of Third Party Litigation Financing for Small Plaintiffs, 38 N. KY. L. REV. 605, 620–21 (2011) (“However, these
costs and the consequential disparity in access to the justice system are magnified when looked at through the lens of the
small private entity or individual inventor seeking to protect their patent from a larger adversary, owing to the particularly
complex nature of intellectual property claims.”); Gwendolyn G. Ball & Jay P. Kesan, Transaction Costs and Trolls:
Strategic Behavior by Individual Inventors, Small Firms and Entrepreneurs in Patent Litigation 3 (Ill. Pub. Law & Legal
Theory Paper Series No. 08-21, 2009), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337166 (“Thus, the transaction
costs associated with litigation may have a major impact on the ability of start-ups, entrepreneurs and individual inventors to
defend their property rights.”). But see Lemley & Feldman, Patent Licensing, Technology Transfer, and Innovation, supra
note 92, at 189 (“In short, there is little evidence that NPEs contribute either directly or indirectly to the creation of products
anywhere in the system.”).
96
See, e.g., Kristen Osenga, Formerly Manufacturing Entities: Piercing the “Patent Troll” Rhetoric, 47 CONN. L. REV. 435,
466 (2014) (“[T]hrough their earlier manufacturing or retail business models, companies in the formerly manufacturing entity
category gained valuable knowledge about the nature, value, and commercialization of patented innovation. . . . These
characteristics suggest that formerly manufacturing entities uniquely have positive effects on core patent policies:
incentivizing invention and commercialization—a very important insight that is buried underneath the unclear and
inflammatory “patent troll” rhetoric.”); Andrei Hagiu & David B. Yoffie, The New Patent Intermediaries: Platforms,
Defensive Aggregators, and Super-Aggregators, 27 J. ECON. PERSP. 45, 61 (2013) (“Given the organizational complexity of
the new patent intermediaries and the multiplicity of channels through which they affect participants in the patent market, it is
very difficult to draw clear conclusions about whether they generate net benefits or costs for society. Nevertheless, it is useful
to point out that intermediation mechanisms that move the imperfect patent system in the direction of enhancing rewards for
innovation are more likely to be a positive, while mechanisms that move the system in the direction.”); Michael J. Mazzeo et
al., Do NPEs Matter? Non-Practicing Entities and Patent Litigation Outcomes, 9 J. COMPETITION L. & ECON. 879, 902
(2013) (“Accordingly, PAEs may have fewer reasons to bear the high costs and risks of patent litigation, and may be more
likely to approach patent litigation as a means to obtain returns on their patent acquisitions. Settlement may be a more
rational decision for such PAEs, even when they hold valid and infringed (and valuable) patent rights.”); Julien Pénin,
26