What Can the FTC's Section 6(b) PAE Study Teach Us? A Practical Review of the Study's Methodology, Results, and Policy Recommendations

On October 6, 2016, the Federal Trade Commission (FTC) released its survey of patent assertion entities (PAEs) and certain licensing and manufacturing firms. The study, conducted under authority of Section 6(b) of the FTC Act, aimed to move past the limited information that can be gleaned from litigation records—an important goal given that over 90 percent of patent enforcement activity occurs outside the courtroom. By compiling and publishing nonpublic data on licensing agreements and patent acquisition practices from 2009 through 2013, the study provides new insight into how certain PAEs operate. The empirical approach the FTC took, however, does impose constraints on the study's reported results. And importantly, the report presents case studies that cannot be generalized, calling into question the policy recommendations that would apply to all patent infringement suits. This article summarizes the key findings reported by the FTC and explains how the study's methodology limits its conclusions and is disconnected from its policy recommendations. The study provides interesting case studies of certain PAE practices, particularly in terms of litigation. In regards to licensing practices, the study's design restricts its ability to provide definitive information, but does offer some intriguing hints at different types of PAEs and should inspire additional empirical research. The study results, however, do not provide empirical support for the stated policy proposals, and moreover the proposals would impact more than PAEs.