Patent assertion entities, or PAEs, have earned the ire of many tech companies, along with a derisive nickname —“patent trolls.” PAEs claim to improve the market for ideas by helping inventors more efficiently assert their rights. By contrast, many contend that PAEs exacerbate the costs of “patent hold-up,” and thereby undermine innovation.
A Presidential Report blamed PAEs for 60 percent of all patent lawsuits in the U.S. and asserted that PAEs “act to significantly retard innovation in the United States and result in economic ‘dead weight loss’ in the form of reduced innovation, income, and jobs.” It is, therefore, unsurprising that Congress and the FTC are investigating, and potentially considering action against, PAEs. Indeed, both State AGs and the FTC have acted (or are considering acting against) PAEs for bringing assertions without sufficient investigation, such as in MPHJ Tech. Inv. v. FTC (MPHJ filed a preemptive complaint against the FTC after receiving a subpoena in July 2013) and the similar In re MPHJ Tech. Inv. LLC (setting out guidelines for future patent assertion conduct by MPHJ).