A Theoretical Framework for Empirical Research on PAEs and Privateers

Patent Assertion Entities – firms that acquire patents from others and then deploy them for licensing or damages revenues rather than for practice within their own products or services – have been a frequent subject of debate over the last several years. More recently, focus has centered on a new species of PAE, “privateers” or “hybrid PAEs”. These are entities that obtain patent enforcement rights from practicing entities, assert those patents in litigation, and then share the damages earnings with the original patent holder. This paper provides a theoretical assessment of how hybrid PAEs may alter the litigation landscape. The framework developed here can provide an important aid to guide empirical work.