FTC's PAE Study Report Doesn't Support 'Patent Troll Caricature,' TPI Says

An FTC study of business practices of patent assertion entities “does not, for the most part, support the patent troll caricature and, for better or worse depending on one's point of view, diminishes the utility of PAEs as a poster child for reform,” said Technology Policy Institute Senior Fellow Thomas Lenard in a blog post Monday. The commission in early October proposed changes aimed at mitigating what it called “nuisance infringement litigation” brought by a subset of PAEs. The study identified two distinct categories of PAEs -- “litigation” PAEs that relied largely on the use of revenue sharing arrangements to acquire patents and “portfolio” PAEs that bought patents outright. The more problematic PAE subset -- “litigation PAEs” -- were more common among the 22 entities included in the review and were responsible for the vast majority of nuisance litigation (see 1610060045). The study “found no evidence of large-scale demand letter campaigns for low-revenue licenses, one of the elements of the patent troll narrative,” Lenard said. “The FTC also found no evidence that PAE patents are low quality as evidenced by their receiving more citations than the average patent.” The report "acknowledges that its results are not generalizable since the lack of data on the universe of PAEs makes it impossible to draw a statistical sample," Lenard said. "To the extent the data are descriptive of PAEs generally, they do not lead to unambiguous policy recommendations, although the report makes several.” The FTC’s recommendations “do not follow from the rest of report,” Lenard said. “More importantly, we do not know if the proposed reforms would be beneficial because they have not been subject to any sort of benefit-cost analysis. This is especially important because the reforms would appear to apply to all patent litigation (not just PAEs) and perhaps even other types of litigation.”