On September 27, 2013, the Federal Trade Commission announced its intention to conduct a study of “patent assertion entities” (“PAEs”). The FTC’s press release is here, the Federal Register notice is here, and the online public comment form is here.

According to the FTC, “PAEs are firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technology.” The FTC distinguishes PAEs from other non-practicing entities “that primarily seek to develop and transfer technology, such as universities, research entities and design firms.”

The FTC proposes to question approximately 25 PAEs (not yet identified), using compulsory process orders to obtain responses, on the following subjects:

  • How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
  • What types of patents do PAEs hold, and how do they organize their holdings?
  • How do PAEs acquire patents, and how do they compensate prior patent owners?
  • How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
  • What does assertion activity cost PAEs?; and
  • What do PAEs earn through assertion activity?

The proposed study aims to augment existing literature and evidence about PAEs to “enhance the quality of the policy debate surrounding PAE activity.” The FTC has Congressional authority to collect nonpublic information (e.g., licensing agreement, patent acquisition information, and cost and revenue data), which the FTC hopes “will provide a more complete picture of PAE activity,” to “support informed policy decisions.”

All participants in the patent marketplace — inventors, patent owners, patent licensees, PAEs, and those targeted by PAEs, to name some — likely have information the FTC will find relevant. Comments are due within 60 days after the proposal’s publication in the Federal Register.