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💡intro to intellectual property review

Patent Assertion Entity

Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025

Definition

A patent assertion entity (PAE) is a type of organization that acquires patents, often from other companies or inventors, with the primary goal of asserting those patents against alleged infringers in order to extract licensing fees or settlements, rather than using the patents to produce or develop new products.

5 Must Know Facts For Your Next Test

  1. PAEs typically do not manufacture or sell products, but rather generate revenue by licensing or enforcing their patent portfolio against companies that are actively producing goods or services.
  2. The rise of PAEs has been a source of controversy, with critics arguing that they stifle innovation and impose a 'tax' on productive companies, while supporters argue that they help small inventors and startups monetize their inventions.
  3. Efforts to thwart PAEs have included legislative proposals to reform the patent system, such as fee-shifting provisions to make it riskier for PAEs to pursue frivolous lawsuits, and judicial decisions that have made it more difficult for PAEs to obtain injunctions or win damages.
  4. PAEs are often criticized for engaging in 'patent trolling' behavior, such as sending demand letters to companies threatening litigation unless they pay licensing fees, even when the validity or applicability of the patents is questionable.
  5. The impact of PAEs on innovation and economic growth is a subject of ongoing debate, with some studies suggesting that PAEs have a negative effect, while others argue that they can play a role in facilitating technology transfer and monetization.

Review Questions

  • Explain the primary business model of a patent assertion entity (PAE) and how it differs from a traditional patent holder.
    • The primary business model of a PAE is to acquire patents, often from other companies or inventors, and then assert those patents against alleged infringers in order to extract licensing fees or settlements, rather than using the patents to produce or develop new products. This differs from a traditional patent holder, who may use the patent to protect their own products or services, or license the patent to others for the purpose of promoting innovation and commercialization.
  • Describe the controversies surrounding the rise of patent assertion entities and the efforts to thwart their activities.
    • The rise of PAEs has been a source of controversy, with critics arguing that they stifle innovation and impose a 'tax' on productive companies, while supporters argue that they help small inventors and startups monetize their inventions. Efforts to thwart PAEs have included legislative proposals to reform the patent system, such as fee-shifting provisions to make it riskier for PAEs to pursue frivolous lawsuits, and judicial decisions that have made it more difficult for PAEs to obtain injunctions or win damages. These efforts aim to address the perceived negative impact of PAEs on innovation and economic growth.
  • Evaluate the role of patent assertion entities in the broader context of the patent system and their potential impact on innovation and economic development.
    • The impact of PAEs on innovation and economic growth is a subject of ongoing debate. Some studies suggest that PAEs have a negative effect, as their activities can stifle innovation and impose a financial burden on productive companies. However, others argue that PAEs can play a role in facilitating technology transfer and monetization, particularly for small inventors and startups. Ultimately, the evaluation of PAEs' role in the patent system requires a nuanced understanding of their complex and multifaceted impact, taking into account the potential benefits and drawbacks for different stakeholders in the innovation ecosystem.