FTC/DOJ Workshop Shines Spotlight On Competitive Harms and Benefits of Patent Assertion Entities

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On Monday, December 10, 2012, the Federal Trade Commission and the Antitrust Division of the Department of Justice held a joint workshop (Agenda) on the activities of patent assertion entities (“PAEs”). PAEs, sometimes referred to as “patent trolls,” do not produce or sell products rather they acquire and assert patents for profits. PAEs range from small firms seeking to monetize single patents to huge corporations holding portfolios containing tens of thousands of patents. As PAE enforcement activities increase, many have expressed concern that PAEs harm competition and innovation, views the FTC expressed in its 2011 report on The Evolving IP Marketplace. Building on the 2011 report, the PAE workshop brought together industry participants, academics, and antitrust experts to explore the scope, potential benefits, and potential competitive harms of PAEs. Workshop participants expressed several notable themes:

PAE Activity Is Increasing -

Participants presented statistics describing the dramatic recent increase in PAE litigation. In 2012 alone, PAEs accounted for 61% of all patent lawsuits and targeted 1,788 unique defendants. This represented a 400% increase in the number of PAE suits and an 80% increase in unique defendants since 2006. Researchers also estimate that for every suit filed, PAEs send out anywhere from 25 to over 300 demand letters. One company, a cloud computing firm, claimed that defending against PAEs accounted for 90% of its defensive legal spend.

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