I've published a couple of posts on the FTC's study on patent assertion entities, including one on the study itself and one on Wright and Ginsburg's response to it, as well as a post earlier this week on the JRC's study for the European Commission. Here are some additional papers on PAEs, the first two responding to the FTC study:
1. Michael Carrier has posted a paper on ssrn titled The US Federal Trade Commission Issues Report on Patent Assertion Entities, e-Competitions (Dec. 2016). Here is a link to the paper, and here is the 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 “Portfolio PAEs” (which are more likely to resemble manufacturing firms in obtaining complex licenses without filing suit).
Fourth, the FTC offered four policy recommendations relating to discovery, transparency, litigation management, and notice. Although they make sense, the proposals do not directly follow from the report, which was “descriptive and limited to the observed sample,” rather than being “generalizable to the universe of all PAE activity.”
Fifth, the report was silent on the appropriate antitrust assessment of PAEs. Despite its robust detail, the report’s findings are not likely to affect antitrust analysis. As I have previously written (http://ssrn.com/abstract=2209521), the antitrust agencies can challenge PAE conduct based on the individual facts of cases, scrutinizing the evasion of standards-based promises through transfer, challenging mergers reflecting an ability and incentive to harm competition, and bringing Section 1 claims against collusive agreements.
In short, the FTC report sheds needed light on a phenomenon that has been shrouded in secrecy and controversy. Though it does not answer the question of the contribution PAEs offer in the innovation ecosystem and its proposals do not bear direct support from its findings, the report sheds invaluable light on PAEs’ patents and enforcement behavior, offering benefits that policymakers should consider in the years ahead.
2. Anne Layne-Farrar has posted a paper on ssrn titled What Can the FTC's §6(B) Pae Study Teach Us? A Practical Review of the Study's Methodology, Results, and Policy Recommendations. Like Wright & Ginsburg, Dr. Layne-Farrar is somewhat more critical of the study than is Carrier. Here is a link to the paper, and here is the abstract:
On October 6, 2016, the Federal Trade Commission (FTC) released its survey of patent assertion entities (PAEs) and certain licensing and manufacturing firms. The study, conducted under authority of section 6(b) of the FTC Act, aimed to move past the limited information that can be gleaned from litigation records – an important goal given that over 90% of patent enforcement activity occurs outside the courtroom. By compiling and publishing nonpublic data on licensing agreements and patent acquisition practices from 2009 through 2013 the study provides new insight into how certain PAEs operate. The empirical approach the FTC took, however, does impose constraints on the study’s reported results. And importantly, the report presents case studies that cannot be generalized, calling into question the policy recommendations that would apply to all patent infringement suits. This article summarizes the key findings reported by the FTC and explains how the study’s methodology limits its conclusions and is disconnected from its policy recommendations. The study provides interesting case studies of certain PAE practices, particularly in terms of litigation. In regards to licensing practices, the study’s design restricts its ability to provide definitive information, but does offer some intriguing hints at different types of PAEs and should inspire additional empirical research. The study results, however, do not provide empirical support for the stated policy proposals, and moreover the proposals would impact more than PAEs.
3. W. Keith Robinson has published an essay titled Awarding Attorney Fees and Deterring "Patent Trolls," 20 Lewis & Clark L. Rev. 281 (2016). Here is a link to the article, and here is the abstract:
A court may award attorney fees to a prevailing party in a patent trial under exceptional circumstances. Since 2005, courts had applied a rigid formula to determine whether a case was exceptional. In the summer of 2014, the Supreme Court rejected this rigid test. Instead, the Court held that an exceptional case is “simply one that stands out from others.” Finding a case exceptional, the Court said, was at the discretion of the district court and only reviewable on appeal for an abuse of discretion.
A year and a half later, one interesting question is: How do district courts now determine what cases are exceptional in the absence of a more formulaic approach? The analysis of several cases decided soon after the Supreme Court’s decision reveals that district courts primarily analyze a party’s litigation position and litigation conduct to determine whether—in its discretion—to award attorney fees. To a lesser degree, district courts have also awarded attorney fees to deter infringement and unsavory litigation practices.
However, the deterrence rationale has the potential to be problematic: its purpose is to deter litigation practices, but given the current legal climate it could be used to unfairly penalize litigants that might be classified as “patent trolls.” The existing literature on the award of attorney fees in patent cases sheds very little light on the problems district courts’ reliance on the deterrence rationale could present. This Essay addresses these problems and offers practical insights as to when courts should rely on the deterrence rationale to award attorney fees. The Essay points out that what makes a case exceptional should have little to do with the identity of the parties. In addition, this Essay prescribes that district courts should not take into account the business model of the parties to justify deterrence as a rationale for awarding attorney fees.
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