NOT SORRY: Federal Trade Commission Report on Patent Holding Companies

In this fourth article in my patent assertion series, I partially summarize the 2016 Federal Trade Commission [hereinafter FTC] comprehensive study of patent holding companies after the Blackberry settlement.[1]  Readers may be surprised by the findings and conclusions.

To begin, the FTC explicitly discourages use of the term ‘patent troll’ because it is judgmental and prejudicial.[2] Furthermore, such a prejudicial term falls far short of accurately depicting the actual situations, and is not consistent with the report’s findings. For example, the FTC found two distinct groups of patent holding entities and designated them as (i) portfolio entities and (ii) litigation entities with respect to patent assertion towards alleged infringers.[3]  Portfolio entities own hundreds or even thousands of patents and may own patent applications as well.  They also negotiate licenses for these patents and frequently achieve licenses without initially suing a target business or company.  Portfolio owning companies typically fund their initial patent acquisitions with investors which include institutions and/or manufacturing firms.[4]

In contrast, litigation entities began with little or no working capital and instead relied upon revenue sharing agreements with the former patent owners for funding. Portfolio entities generated much more revenue than litigation entities through licensing.[5] Contrary to popular opinion, most licenses followed an actual patent infringement suit[6] and 88% were for computer related and software related patents.[7] For both categories of patent holding companies, the FTC did NOT observe that demand letter campaigns in and of themselves generate revenue from licensing. [8] Furthermore, the patent owning companies in this study asserted patents against a relatively small number of companies. Only a small number of companies were frequent targets of litigation, and most targets experienced only a single encounter with a patent owning company in this report.[9]

Another article summarizing other key points of this report is forthcoming. In the meantime, one should consider that a significant portion of patent owning entities are the only viable recourse for independent inventors, to protect their investments. These patent owning companies are also better able to access compensation for independent inventors as well as providing an efficient patent marketplace.

©2021 Adrienne B. Naumann, Esq. all rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.


[1] “Patent Assertion Entity Activity: an FTC study, October 2016. at

https://www.ftc.gov/system/files/documents/reports/patent_assertion_entity_activity_ftc_study/p131203_patent_assertion_entity_activity_an_ftc_study_0.pdf.  For a discussion of the Blackberry settlement and its consequences please refer to the author’s earlier articles on patent holding companies at adriennebnaumann.wordpress.com.

[2] Id. at 17.

[3] Id. at 42-43.

[4] Id. at 42.

[5] Id. at 43.

[6] Id. at 5 and 101.The FTC recognized that infringement litigation is an important part of protecting patent rights. Id. at 9.

[7] Id. at 124.

[8] Id. at 5.

[9] Id. at 6. Most researchers and commentators did not view patent holding companies as categorically harmful or beneficial. Id. at 27.

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