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Patent Assertion Entities in Europe Their Impact on Innovation and Knowledge Transfer in ICT Markets

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Patent Assertion Entities in Europe Their Impact on Innovation and Knowledge Transfer in ICT Markets Patent Assertion Entities in Europe Their impact on innovation and knowledge transfer in ICT markets Europe Economics Editors: Nikolaus Thumm, Garry Gabison (Joint Research Centre) 2016 EUR 28145 EN This publication is a Science for Policy report by the Joint Research Centre (JRC), the European Commission’s science and knowledge service. It aims to provide evidence-based scientific support to the European policy- making process. The scientific output expressed does not imply a policy position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this publication. Contact information European Commission, Joint Research Centre Address: Edificio Expo. c/Inca Garcilaso, 3. 41092 Seville (Spain) E-mail: [email protected] Tel.: +34 954488211 JRC Science Hub https://ec.europa.eu/jrc JRC103321 EUR 28145 EN PDF ISBN 978-92-79-62903-7 ISSN 1831-9424 doi:10.2791/134702 Print ISBN 978-92-79-62902-0 ISSN 1018-5593 doi:10.2791/039681 Luxembourg: Publications Office of the European Union, 2016 © European Union, 2016 Reproduction is authorised provided the source is acknowledged. How to cite: European Economics; Patent Assertion Entities in Europe; Eds: Nikolaus Thumm, Garry Gabison (Joint Research Centre), EUR 28145 EN; doi:10.2791/134702 All images © European Union 2016 Title Patent Assertion Entities in Europe Abstract Patent assertion has become a common practice in shaping the balance between technology creation and technology dissemination in the Information and Communication Industry (ICT). The importance of this practice for the functioning of ICT markets has given rise to new entities that enforce patents but do not utilise the patented technology, commonly referred to as patent assertion entities (PAEs). This study provides an overview of patent assertion practices and of PAEs in Europe, taking into consideration their impact on innovation and technology transfer in European ICT markets. Printed in Spain Table of contents Abstract ............................................................................................................... 1 Preface ................................................................................................................ 2 Acknowledgements ................................................................................................ 3 Executive summary ............................................................................................ 4 1. Introduction .......................................................................................... 11 2. Methodology ......................................................................................... 13 3. What are PAEs? ..................................................................................... 15 4. Key dimensions of PAEs ........................................................................ 18 4.1 Sources of funding ............................................................................... 18 4.2 Characteristics of patent portfolios ......................................................... 19 4.3 R&D activity ........................................................................................ 24 4.4 Assertion strategies .............................................................................. 24 4.5 Revenue structure ................................................................................ 28 5. Interactions of PAEs with practicing firms ............................................ 30 5.1 The role of PAEs in counter-balancing hold-out problems .......................... 30 5.2 The role of PAEs as a monetisation tool .................................................. 31 5.3 The role of PAEs as IP consultants .......................................................... 32 6. PAEs` impact on innovation .................................................................. 33 6.1 The impact of PAEs’ activities on ICT patenting costs ................................ 33 6.2 Impact of PAEs’ activities on ICT market participants’ incentives ................ 34 6.3 Impact of PAEs on mature and declining markets ..................................... 35 6.4 Overall assessment of impact on innovation ............................................ 36 7. Differences between the US and Europe ............................................... 39 7.1 Institutional and legal frameworks in the US and Europe ........................... 39 7.2 The advent of the UPC and the UP .......................................................... 42 7.3 Factors likely to affect the patent assertion activity in the US and Europe in the near future .................................................................................... 43 8. Key findings .......................................................................................... 45 8.1 How do PAEs operate and make profit? ................................................... 45 8.2 Which organizations assign patents to PAEs and why? .............................. 47 8.3 Which ICT sectors and firms are most affected by PAEs activity? ................ 49 8.4 The characteristics of the patents asserted .............................................. 52 8.5 Differences between the US and Europe.................................................. 53 8.7 Recent and future institutional changes and the potential evolution of patent assertion in Europe. ............................................................................. 54 8.8 Conclusion .......................................................................................... 55 References ....................................................................................................... 57 List of abbreviations and definitions ................................................................ 60 List of figures ................................................................................................... 61 APPENDIX 1: QUESTIONNAIRES ...................................................................... 62 Questionnaire for PAEs ................................................................................... 62 Questionnaire for clients of PAEs ..................................................................... 66 Questionnaire for entities affected by PAEs ....................................................... 70 APPENDIX 2: SUMMARY NOTES OF CASE STUDY INTERVIEWS ...................... 73 Expert Interview 1 — Head of Standardisation and IPR Management in EU-based international telecommunications company ....................................................... 73 Expert Interview 2 — IP consultant .................................................................. 75 Expert Interview 3 — Former senior patent judge .............................................. 78 Expert Interview 4 — Former CEO of Intellectual Property & Standards division of a large European technology company. ............................................................... 80 Expert Interview 5 — Competition expert. ........................................................ 83 APPENDIX 3: CASE STUDIES .......................................................................... 86 Case Study 1 — EU-based patent licensing company .......................................... 86 Case Study 2 — US-based patent licensing company .......................................... 91 Case Study 3 — EU-based patent licensing and monetisation company................. 96 Case Study 4 — EU-based IPR management and promotion company .................. 98 Case Study 5 — Government space agency ..................................................... 103 Case Study 6 — US-based commercial research and engineering organization..... 104 Case Study 7 — France-based software development company ......................... 106 Case Study 8 — Trade association ................................................................. 108 Case Study 9 — US-based international patent brokerage company ................... 112 Case Study 10 — EU-based international telecommunications company .............. 116 Case Study 11 — EU-based data networking and telecommunications equipment company .................................................................................................... 123 Case Study 12 — Central European semiconductor manufacturer ...................... 126 APPENDIX 4: BUSINESS MODEL ANALYSIS ................................................. 130 Introduction ................................................................................................ 130 Focused assertion entities ............................................................................. 130 Serial assertion entities ................................................................................ 131 Strategic assertion entities............................................................................ 132 Patent monetisation entities .......................................................................... 132 License facilitating entities ............................................................................ 132 Defensive patent aggregators........................................................................ 133 Classification of identified PAEs ..................................................................... 134 Market analysis of the identified PAEs ............................................................ 141 Abstract Patent assertion has become a common practice in shaping
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