The US Federal Trade Commission issues report on patent assertion entities

Posted by Social Science Research Network

The US Federal Trade Commission issues report on patent assertion entities

By Michael A. Carrier (Rutgers Law School)

Abstract:     In October 2016, the Federal Trade Commission (FTC) issued its long-awaited report on patent assertion entities (PAEs). Sometimes called “patent trolls,” these actors have elicited fierce debate, with critics lamenting their ability to demand ransom money and hold up an industry while proponents applaud their role in making markets more efficient and returning money to individual inventors. Pursuant to FTC Act Section 6(b), the agency issued subpoenas, seeking to obtain information not previously available on these questions. This brief article summarizes the report and then elaborates on the following five observations.

First, the report did not answer the $64,000 question about the effect PAEs have on inventors, as the agency could not “quantify the frequency or magnitude of revenue sharing with independent inventors” due to the “significant differences in how [the] PAEs maintained their data.”

Second, and more successfully, the report uncovered useful information on PAEs’ patents, in particular the timing of enforcement and number of citations.

Third, the FTC gained crucial insights on PAE enforcement, distinguishing between “Litigation PAEs” (which settle after filing suit, enter into licenses less than litigation costs, and pose transparency challenges for defendants) and

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