Key Takeaways

  • Patent assertion involves patent owners enforcing their rights against alleged infringers, either through direct communication or litigation.
  • Patent Assertion Entities (PAEs) or "patent trolls" use patents primarily for litigation and licensing fees, rather than innovation.
  • Patent assertion litigation is costly and can pressure companies to settle even dubious claims.
  • Defensive strategies include building strong patent portfolios, joining defensive patent networks, and conducting freedom-to-operate analyses.
  • License negotiations and settlements can be structured to avoid prolonged litigation, including lump-sum or royalty-based agreements.
  • Companies with high-revenue products are at greater risk and should conduct pre-launch IP due diligence.
  • Handling multiple infringers may require coordinated litigation or licensing strategies to maximize recovery.

Patent assertion takes place when a patent owner believes that another party has infringed on his patent and he makes a declaration of the infringement.

What Is Patent Assertion?

Even though patents are granted by the United States Patent and Trademark Office (USPTO), they are not enforced by that office. If you own a patent, it is your responsibility to make sure that no one infringes on that patent. If you find an issue of infringement, you must assert or declare that it has happened and take legal action in order to right the wrong.

A patent owner's goal in patent assertion is to be paid for the use of their invention. Patent assertion doesn't demand the full hammer of the justice system or send anyone to jail; it simply requires appropriate attribution and payment for the use of someone else's intellectual property (IP).

If an individual or company wishes to legally use or somehow benefit from a patented invention, they must acquire a patent license. This way, the patent owner is paid for the use of their invention throughout the duration of the use.

If a patent owner forces an infringer to enter into a patent license agreement in order to rectify the infringement, it is called stick licensing.

Understanding Patent Assertion Entities (PAEs)

Patent Assertion Entities (PAEs), also known as "patent trolls" or Non-Practicing Entities (NPEs), are organizations that acquire patents not to manufacture or sell products, but solely to enforce patents against alleged infringers and extract licensing fees or settlements. PAEs typically send demand letters or initiate lawsuits targeting companies with valuable products or services. While some view them as protecting patent rights, others criticize PAEs for burdening innovation with costly litigation and questionable claims.

Taking Patent Assertion to Court

Criminal cases require the prosecution to prove guilt, but civil cases require the plaintiff to prove guilt. This is called the burden of proof.

The burden of proof in an infringement case under patent law lies with the patent owner. Once the issue is taken to court, the party asserting the patent must be able to prove that the accused party actually infringed on the patent.

In order to prove infringement, someone asserting a patent will likely bring experts into court to act as witnesses to the fact that the infringer would have had to violate the patent in order to create or market whatever he did.

Strategies for Mitigating Patent Assertion Risks

Defending against patent assertion can be expensive and disruptive. Companies can proactively reduce risks by implementing strategies such as:

  • Conducting freedom-to-operate (FTO) analyses before launching new products.
  • Maintaining a robust internal patent portfolio to deter assertions or enable countersuits.
  • Joining defensive patent networks or licensing pools to access shared patents for protection.
  • Regularly monitoring competitors and PAEs for newly acquired patents targeting their industry.
  • Using early invalidity challenges (e.g., inter partes review) to contest weak or dubious patents.

How Patent Assertion Can Payoff

If a patent owner can successfully prove that his patent was violated, it can be very beneficial. This will take a lot of work and effort, but being rightfully paid for your IP is an important matter.

When an infringer is found guilty, they are forced to pay for a licensing to use the patent and pay for any use that took place before they were caught. This can come in the form of a large settlement, sometimes as much as $100,000.

There are a handful of cases where patent assertion led to settlements of millions of dollars.

Risks and Consequences of Patent Assertion

Patent assertion, while potentially profitable for patent holders, carries risks:

  • Litigation costs can exceed settlement amounts, especially when facing well-funded defendants.
  • Negative publicity may arise if assertions are perceived as abusive or frivolous.
  • In industries with high-profile products, damage awards and settlements are typically larger due to sales-based damage calculations.
  • Courts may invalidate patents or rule them unenforceable, weakening future assertion attempts.
    Even for companies defending

Common Patent Assertion Settlements

Settlements for patent assertion are usually quite uneventful. If the violation is proven, the infringer is forced to become licensed for use of the patent and they settle for an amount of money that appropriately covers their past and future use.

Under a patent license agreement, the licensed party can pay the patent owner two different ways:

  • Each year for their profits made through the use of the patent
  • Once per quarter for profits made through the use of the patent

The licensee will be required to pay the patent owner royalties throughout the lifetime of the patent. Larger companies will sometimes pay the patent owner a larger sum of money at one time instead of keeping up with regular payments. This amount is determined by estimating how much the company will profit from the use of the patent and taking a percentage of that number depending on the determined royalty rate.

Licensing and Settlement Strategies

When resolving patent assertion disputes, settlements may include:

  • Lump-sum payments covering past and future use of the patent.
  • Royalty-based payments structured annually or quarterly for ongoing use.
  • Cross-licensing agreements allowing both parties access to each other’s patent portfolios.
  • Agreements to drop litigation in exchange for non-exclusive licenses.
    Many settlements are reached before trial to avoid protracted legal expenses, especially when the patent’s validity is uncertain.

How to Handle Multiple Patent Infringers

In some cases, a patent owner will find that more than one individual or company is infringing on his patent. This can make the process of patent assertion more complicated, but if the owner can prove the infringement, it will be well worth his while.

Such cases can lead to multiple settlements.

Coordinating Actions Against Multiple Infringers

When multiple parties infringe the same patent, patent owners face strategic decisions:

  • Individual lawsuits allow tailored settlements but increase legal costs.
  • Consolidated litigation can achieve efficiencies but may reduce negotiating leverage.
  • Patent owners may prioritize enforcement against larger infringers first to set a precedent or obtain funding for further actions.
  • Settlement agreements can include “most favored licensee” clauses to ensure later settlements don’t undercut earlier ones.

What to Watch Out for With Patent Assertions

There are a few things to keep in mind when deciding whether or not to go through with patent assertion. First, you'll want to be careful to get the help of a patent attorney before entering into discussions with those you believe have committed infringement.

Patent assertion can also cost quite a bit of money, so a patent owner will need to make sure he is prepared for the costs.

Navigating Legal and Strategic Pitfalls

Patent owners considering assertion should:

  • Seek legal counsel early to evaluate patent validity and enforceability.
  • Assess whether assertion aligns with business goals or risks alienating partners.
  • Weigh the cost-benefit of settlement versus litigation outcomes.
  • Avoid asserting weak or overly broad patents to minimize risk of invalidation.
  • Consider potential countersuits or antitrust challenges, particularly if asserting patents in highly competitive markets.

Frequently Asked Questions

  1. What is a Patent Assertion Entity (PAE)?
    A PAE is an entity that acquires patents mainly to enforce them against alleged infringers to seek licensing fees, rather than using the patents to make products.
  2. How can companies defend against patent assertions?
    Defense strategies include conducting freedom-to-operate analyses, joining defensive patent networks, and filing challenges to invalidate weak patents.
  3. Are patent assertion settlements common?
    Yes, many disputes settle before trial, often involving lump-sum payments or royalty agreements to avoid litigation costs.
  4. What industries are most at risk for patent assertions?
    High-revenue industries, like tech and pharmaceuticals, are more likely targets because damage awards are based partly on product sales.
  5. Can multiple infringers be sued together?
    Sometimes. Patent owners can pursue individual or consolidated actions depending on strategic and legal considerations.

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