What Can the FTC's 6(B) PAE Study Teach Us? A Practical Review of the Study's Methodology

Abstract

The Federal Trade Commission (FTC) is currently conducting a survey of patent assertion entities (PAEs), under authority of section 6(b) of the FTC Act. The study is meant to move past the limited information that can be gleaned from litigation records – given that around 90% of patent enforcement activity occurs outside the courtroom – by compiling and publishing nonpublic data on licensing agreements, patent acquisition practices, and related costs and revenues. As such, the study should provide a better understanding of how PAEs operate. The empirical approach the FTC is taking and the constraints that the chosen approach entails, however, will, as the FTC acknowledges, constrain the study’s utility. This article discusses these constraints. In particular, the small sample size used for the study means that it will provide a “case study” (in the FTC’s words), rather than robust statistical data that can be extrapolated to a broader population. Moreover, the survey covers licensor activities only, with no questions for licensees. Because of these and other limitations discussed herein, the FTC’s 6(b) PAE study should be informative, but will not be generalizable and hence it should not form the basis for any policy changes.