On March 17, 2015, the Federal Trade Commission approved a final order barring a Patent Assertion Entity (PAE) from using deceptive tactics when asserting patent rights.1 While this marks the first time that the FTC has used its consumer protection authority against a PAE, the FTC has long sought to better understand PAEs—in fact, a two-year-long study on the PAE industry is slated to be completed by the end of this year.
PAEs, also referred to by many as “patent trolls,” are firms that aggregate patents but do not create products based on those patents. Instead, the PAE business model involves collecting license fees and pursuing patent infringement actions against alleged infringers in order to generate revenue. For some, PAEs are an efficient way in which certain non-practicing entities (NPEs)—universities, smaller innovators and the like—can exploit and protect legitimate patent rights.2 Others maintain that PAEs are intellectual-property extortionists that, through sham litigation, can stunt innovation and economic growth, which is contrary to the purposes of both U.S. antitrust and patent laws.
