On The Regulation Of PAEs

Patent Assertion Entity (PAE) indicates those who make profits by buying and then asserting patents. PAE is a sub-concept of Non-practicing Entity and as a business model has significant differences from the later. The prevalence of PAEs is based on a strong sense of legal and economical reasonableness. Its legal reasonableness is manifested through its maximizing the "bugs" of current patent law. Then a business model of "economy of scale" is developed through its economical reasonableness. The core of this business model relies on the asymmetry of costs and information between the PAEs and its targets.The reason why PAE is paid attention by researchers and policy makers is its negative impact on innovation. Although PAEs play a role in activating the patent market, accelerating the market liquidity and offering a way for the monetization of patents of star ups and individuals, its business model is not based on making the market more efficient or reducing transacting costs. Further the PAE itself is targeted by regulations for its negative effect on innovation. For now, the scientific institutes and enterprisers in china have been involved in the business model of PAEs. It is easy for these entities to be suppliers of patents because the way to monetize their patents is limited in china. At the same time, the Chinese enterprises have also been targets of PAEs in the process of international competence. Now china is amending its Patent law, and focus on improving the protection and application of patents. With this change, it may also be suitable for PAEs to appear in china. That is why we should learn how the foreigner countries handle this problem in making a balance between protecting patents and eliminating the bad effects of PAEs. This paper shed a light on this problem in four chapters.Chapter one mainly gives the definition of PAEs, its substance and its differences from NPEs and claims its substance as a business model. Besides, this chapter also tries to make a classification of PAEs and describe its characteristics.Chapter two studies the legitimacy of regulating PAEs which is about its general effects on innovation. This chapter claims that PAEs make the best use of "bugs" in current patent law system, which is against the intention of that system and makes it a target of regulations.Chapter three focus on the study and review of the regulation in the US. The regulations in the US can be concluded in the aspects of legal, judicial and administrative reforms. These reforms are aimed at improving the current patent law system and are too early to get a proper review.Chapter four focus on how to regulate PAEs in China. China is possible to be a supplier of patents or PAEs because the protection and market for patent are still underdeveloped. However, as china make advances in these aspects, it is also suitable for PAEs to appear in china. Legal and non-legal measures should both be used by china to regulate the PAEs. The legal aspect indicates patent law and antitrust law while the non-legal one includes making and practicing of patent focus strategy by the enterprises and nurturing participants through developing the patent market by the government.