Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Congress should not wait for FTC study before undertaking patent litigation reform: Commissioner Brill, (Jan 10, 2014)

By Thomas Long, J.D.

Legislative reforms to the patent litigation system to address the problems caused when activities by patent assertion entities (“PAEs,” sometimes referred to as “patent trolls”) “cross the line” and become harmful to competition and consumers are “clearly warranted,” according to FTC Commissioner Julie Brill. In the Commissioner’s view, Congress should not wait for the Commission to complete a study of PAE practices begun last October before it acts on currently pending reform bills. Commissioner Brill delivered her remarks at the 2014 International Consumer Electronics Show (CES) in Las Vegas on January 8, as an introduction for the Consumer Electronics Association’s Innovation Policy Summit. Her speech was titled, “Patent Litigation Reform: Who Are You Calling a Troll?”

“In just the last two years, lawsuits brought by PAEs have tripled, rising from 29 percent of all infringement suits to 62 percent,” Brill said. “Some evidence suggests that PAEs may have threatened over 100,000 companies with patent infringement in 2012 alone.”

According to critics, Brill said, the PAE business model can amount to a tax on product development, and it can harm competition and consumers. Supporters, however, argue that the PAE business model facilitates the transfer of patent rights, rewards inventors, and funds ongoing research and development efforts.

Brill noted that, over the past decade, the Commission has closely examined the intersection of patent and antitrust laws. The Commission’s 2011 Patent Report began to examine the issue of PAEs and asked whether PAEs might have less incentive to engage in traditional forms of licensing that foster innovation and competition. PAEs do not manufacture products, so they are not subject to countersuit, and they have less incentive to cross-license patents, Brill said. PAEs also lack the reputational concerns that sometimes deter brand-conscious companies from pursuing litigation that appears to victimize competing innovators or inadvertent infringers.

Progress has been made in the courts and in Congress to address these problems, according to Brill. “But there is more that can and should be done,” she stated. Currently pending bills are aimed at PAEs who assert weak or vague patents. These measures are designed to make it difficult for PAEs to secure unjustifiable settlements by threatening costly litigation, Brill said.

“Of course there are many more complex issues associated with PAEs worthy of study,” Brill stated. “PAEs argue that they serve a vital role in the patent system, whether by compensating inventors who might not otherwise have the resources to enforce their patents or by reducing the investment risks associated with early stage technologies by acting as a ready buyer for the patents of failed start-ups.”

Last October, pursuant to the authority granted it by Sec. 6 (b) of the FTC Act, the FTC commenced an in-depth study of “these more complex issues,” Brill said. This study will gather qualitative and quantitative information regarding PAE acquisition, assertion, and licensing practices. The study will focus particularly on the wireless industry.

However, Congress should not wait for the study before acting on pending reform bills, Brill urged. In addition, the FTC and other law enforcement agencies should not wait for the results of the study before undertaking enforcement actions against PAE activity that “crosses the line.”

“Further reforms to the patent litigation system are clearly warranted,” said Brill. “With regard to the legislation under consideration, various provisions in the bills may help to discourage frivolous lawsuits and improve patent quality, actions the FTC has long encouraged. I believe Congress should act with deliberate speed to implement those proposed reforms that will further these goals. And if, after our PAE 6(b) study is completed, it appears that additional reforms are warranted, Congress can consider further action at that time.”

News: Antitrust FederalTradeCommissionNews