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Unpacking Patent Assertion Entities (PAEs)

By Christopher A. Cotropia, Jay P. Kesan, & David L. Schwartz. Full text here.

There is tremendous interest in a certain type of patent litigant—the often-called patent assertion entity (PAE), non-practicing entity (NPE), patent monetization entity (PME), or simply patent troll. These PAEs are the subject of a recent Government Accountability Office report, a possible Federal Trade Commission investigation, pending legislation before Congress, and even comments from the President of the United States. All of this commentary and activity centers on whether PAE participation in patent litigation, and the patent system in general, is detrimental or beneficial to society. But the fundamental barrier to understanding the current debate is the lack of granular and transparent data on PAE litigation behavior.

Accordingly, we personally hand-coded all patent holder litigants from calendar years 2010 and 2012, and we are releasing this data to the public. In our coding, we drill down and finely classify the nature of the litigants beyond the simple PAE or non-PAE definitions. This data unpacks the definition of PAE, and releasing it to the public can provide better illumination to policy makers, researchers, and others interested in the patent litigation system.

The data reveal a much lower percentage of litigation brought by patent holding companies than other studies, finding no explosion in PAE litigation between 2010 and 2012. Instead, we find that most differences between the years—an increase in the number of patent holding companies and individual inventor suits—is likely explained by a change in the joinder rules adopted in 2011 as part of the America Invents Act. In other words, the “explosion” in PAE litigation is simply a mirage.