Clogs the court

To others, PAEs hold the assets of failed businesses that got lucky with a broad patent. They clog the courts to extort value from companies that actually make things, serve customers, and create jobs. They spend and risk nothing while taxing and sometimes even endangering the survival of small companies –55% of unique defendants make $10M or less in revenue – of whom they demand nuisance value settlements – or else.

PAEs are in the business of patent hold-up.

Which account is right? And what should, what can we do about it? These important questions are exceedingly hard to answer because like their fairy-tale counterparts, patent “trolls” hide – not behind bridges, but behind unusual corporate structures and non-disclosure agreements. Yet it is only with a good understanding of the various PAE models that we can know how they function, and what interventions will best preserve the benefits and curb the abuses.

That’s why I join others in welcoming examination of the PAE business model by antitrust authorities. But I may depart from them by advocating a different type of inquiry. In addition to focusing on antitrust concerns, I think the FTC should position itself as the eyes and ears of others directly affected by PAEs:

Companies, that are footing the estimated $29B yearly bill associated with NPE suits, who want to know who is behind these suits, and how to avoid paying money for invalid patents;

Courts, 62% of whose patent docket is now comprised of PAE suits who want to fairly and efficiently resolve disputes while discouraging frivolous litigation;

Patent agencies across the system, who want to know whether or not the interventions they are contemplating would work and leave the rest of the system intact.

Companies, courts, and the patent agencies are repeat players in the thick of the patent ecosystem. They have the most to lose if the harms and benefits of PAEs are not appropriately balanced, and therefore the most incentive to use the levers at their disposal to get it right. But they need guidance on how to do so. The FTC can provide this guidance, if it keeps in mind a few basic principles.