Patent Assertion Entity Activity: An FTC Study

Transcription

1 Patent Assertion Entity Activity: An FTC Study Suzanne Munck Chief Counsel for Intellectual Property Deputy Director, Office of Policy Planning U.S. Federal Trade Commission PLI 11th Annual Patent Law Institute

2 Introduction Patent assertion entities (PAEs) Acquire patents from third parties Target firms that are already on the market Do not practice their patents Do not produce, manufacture, or sell goods Significant government interest in PAE activity

3 Background Patent Assertion Entity Activity: An FTC Study Unanimous Commission Report Issued October 6,

4 Background Study Period: January 2009 to September 2014 Respondents 22 PAEs, >300 asserting affiliates, and >2000 entities that held patents but did not assert Wireless Case Study: adds 8 manufacturers (~90% of worldwide market) and 5 NPEs Observed Estimated 75% of US PAE patent holdings Between 14% and 46% of PAE patent infringement litigation initiated during the study period

5 Two Business Models Litigation PAEs Typically litigated before licensing (93% of licenses followed suit) and settled litigation quickly (66% within one year) 77% of licenses valued at less than the estimated cost of defending a patent lawsuit through discovery ($300K) Set up separate affiliates for each patent portfolio acquired 18 Litigation PAEs associated with 327 Affiliates that asserted patents Generated about 20% of study revenues (~$800K)

6 Two Business Models Portfolio PAEs Highly capitalized Typically negotiated patent licenses without first filing a patent infringement suit Licenses often include more than 1000 patents License agreements typically generated royalties of millions of dollars 4 Portfolio PAEs accounted for about 80% of study revenues (approximately 3.2 billion dollars)

7

8

9 Wireless Case Study Litigation PAEs and Wireless Manufacturers litigated differently Litigation PAEs almost always sued before licensing, while Manufacturers almost never sued before licensing Litigation PAEs and Wireless Manufacturers licensed differently Manufacturer licenses included field of use restrictions, cross-licenses and complicated payment terms Litigation PAE licenses involved simple lump-sum payments with few, if any, restrictions

10 Patent Holdings Observed >37,000 patents 88% related to Computers & Communications or other Electrical & Electronics >75% software-related patents Estimated 75% of all patents held by PAEs (2013) ICT patents asserted against a broad range of industries 10% of defendants and 13% of licensees operated in Retail Trade

11

12 Other Key Findings FTC did not observe demand letter campaigns that, on their own, generated low-revenue licenses A small number of entities were frequent targets of Study PAE activity Computer & Electronic Product Manufacturing firms accounted for more than half of the top 25 assertion targets Top 25 firms that paid the highest amount of royalties accounted for 69% of observed royalties Study PAE data did not allow FTC to report how much revenue PAEs shared with others, or costs of PAE activity

13 Recommendations Patent infringement suits played a key role in the Litigation PAE model 93% of reported Litigation PAE licenses followed a lawsuit 77% valued at less than the lower bound of the estimated cost of defending a patent lawsuit through end of discovery When licenses followed litigation, they tended to settle early Infringement litigation plays an important role in protecting patent rights Nuisance litigation, however, can tax judicial resources and divert attention away from productive business behavior

14 Recommendations Propose reforms directed towards: Addressing discovery cost imbalances between PAE plaintiffs and defendants Providing courts and defendants with more information about the plaintiffs that have filed infringement lawsuits Streamlining multiple cases brought against defendants on the same theories of infringement Providing sufficient notice of these infringement theories as courts continue to develop heightened pleading requirements for patent cases.

15 THANK YOU