“A new Federal Trade Commission report spotlights the business practices of patent assertion entities (PAEs), firms that acquire patents from third parties and then try to make money by licensing or suing accused infringers.  The report includes several recommendations for patent litigation reforms. “This report is a big step forward in enhancing our understanding of PAEs and provides an empirical foundation for ongoing policy discussions,” said FTC Chairwoman Edith Ramirez. “The recommendations we are proposing are designed to balance the needs of patent holders with the goal of reducing nuisance litigation.” The report, Patent Assertion Entity Activity: An FTC Study, examines non-public information and data covering the period 2009 to 2014 from 22 PAEs, 327 PAE affiliates, and more than 2100 holding entities (those entities that did not assert patents) obtained through compulsory process orders (subpoenas) using the agency’s authority under Section 6(b) of the FTC Act. The report found two types of PAEs that use distinctly different business models. One type, referred to in the report as Portfolio PAEs, were strongly capitalized and purchased patents outright. They negotiated broad licenses, covering large patent portfolios, frequently worth more than $1 million. The second, more common, type, referred to in the report as Litigation PAEs, frequently relied on revenue sharing agreements to acquire patents. They overwhelmingly filed infringement lawsuits before securing licenses, which covered a small number of patents and were generally less valuable.”