Are PAEs a Threat to Europe?

Patent Assertion Entities are often negatively portrayed as harmful “patent trolls” that engage in speculative and abusive patent litigation against manufacturing companies. Although mass PAE litigation has mainly been US phenomenon, a recent study indicated that PAEs are on the rise in Europe and a number of changes to the European patent and litigation system have been recommended. This paper provides a different perspective on PAEs. It will first show that not all PAEs engage in harmful activities and that most are in the legitimate business of patent licensing. Further, Europe has in place different patent and litigation incentives than the US, which effectively guard against any abusive patent litigation. Finally, the available evidence does not in fact show the presence of mass and harmful PAE litigation in Europe.

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Are PAEs a Threat to Europe?

Igor Nikolic

Abstract

Patent Assertion Entities, companies that monetise patents but do not practice them, have been over the years negatively portrayed as harmful “patent trolls” that engage in speculative and abusive patent litigation against manufacturing companies, threatening them with injunctions in order to extract settlements unrelated to the value of their technology. Although mass PAE litigation has mainly been US phenomenon, recent study indicated that PAEs are on the rise in Europe and a number of changes the European patent and litigation system have been recommended, in particular the denial of injunctive relief in case of finding of infringement of a valid patent.

This article provides a different perspective on PAEs. It will first show that it is incorrect to label all PAEs as “bad” actors. Generally, PAEs are in the business of patent licensing and serve a useful intermediary function in the market, facilitating licensing and technology transfer, while some may be engaging in aggressive monetisation practices. Whether there is abuse of litigation system would depend on the facts of the case, and not a priori whether plaintiff is PAE or not. Second, PAEs have mainly been US phenomenon and the incentives for abuse of European patent and litigation system are not present, or are not present to the same extent as in the US. A combination of factors, such as patent cases being decided by experienced judges, higher costs of patent enforcement, lower costs of defence, loser pays principle and generally higher quality of patents all disincentivise the emergence of opportunistic litigation practices. Finally, the available evidence shows that PAEs are actually responsible for very small number of patent litigation in the EU. The vast majority of litigation is between practicing entities and in majority of cases PAEs are actually defendants in invalidity suits initiated by practicing entities.

The evidence therefore suggests that European patent and litigation system is functioning well and that the fear about massive PAE litigation abuses is unfounded. European judges should continue in applying the relevant legal framework for granting legal remedies for infringement of IP rights, which already gives them the tools to guard against litigation abuses by any type of entity. * PhD researcher, University College London, Faculty of Law. I would ...

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