Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC to study patent assertion entities: Ramirez, (Jun 21, 2013)

By Lynn Stanton, TRDaily

The head of the Federal Trade Commission said today that she plans to have the agency conduct a study of patent assertion entities (PAEs), or “patent trolls” as their critics sometimes call them.

In a keynote address at a policy discussion about PAEs and competition law yesterday, FTC Chairwoman Edith Ramirez said that she would like her agency “to generate a better understanding” of the PAE business by conducting an investigation under its FTC Act section 6(b) authority.

“And of course the Commission stands ready to apply its enforcement authority,” Ramirez added. She noted that, with respect to PAEs, “antitrust concerns may arise with respect to their formation” and the creation of their portfolios of patents.

The FTC Chairwoman said that her agency is also “on the watch” for PAEs that attempt to induce payments from small businesses on the basis of patents in which they have no ownership interest or standing, or on the basis of an expired patent.

Noting that earlier this week the U.S. Patent and Trademark Office announced a rulemaking proceeding “to require regular updating of patent ownership information,” Ms. Ramirez said that timely recordation of real-party-in-interest information would help antitrust regulators monitor the serial transfers of related patents.

Chairwoman Ramirez said that among the findings of a joint FTC–Justice Department workshop held last December was that an increasing share of patent lawsuits were brought by PAEs. In addition, “data and anecdotal evidence indicate PAEs now file more than half of their lawsuits” against retailers and other firms that merely use tech products in running their businesses, rather than against companies that produce and sell the alleged infringing technology. “We heard complaints from Internet retailers forced to defend” themselves against patent lawsuits for using common online features like drop-down menus or shopping carts, she said.

However, the FTC Chairwoman warned against depicting PAEs “with one broad brush.” She said that PAEs can serve competition and innovation by reducing the hurdles that small companies face in enforcing their patents.

“PAEs may also increase liquidity in patents” and “provide some assurance to venture capitalists” that patents can be sold to recover some of the investment when a venture fails to prove a success, she said. Also, “a company may be more likely to engage in R&D if it can sell patents that no longer serve its business model,” she said.

The discussion of PAEs and antitrust policy was organized by the Computer & Communications Industry Association and the American Antitrust Institute.

Meanwhile, Senate Judiciary Committee Chairman Patrick Leahy (D., Vt.) today urged Chairwoman Ramirez in a letter to FTC “to prioritize investigations of and enforcement actions to prevent unfair and deceptive trade practices in patent infringement allegations. The situation is particularly egregious when a patent owner sends numerous demand letters threatening an infringement action without having made a reasonable inquiry into the claims, and therefore having no actual intent to file a civil action, for which the owner would be subject to sanctions. These letters are simply used to extract unwarranted payments.”

Sen. Leahy said he planned a bill soon aimed at addressing patent abuses. He added that he will work in a bipartisan, bicameral fashion to address the issue, noting that he had “hailed” a discussion draft on the subject released by House Judiciary Committee Chairman Bob Goodlatte (R., Va.) last month.

The National Retail Federation today said it welcomed the announcement of plans for an FTC investigation of PAEs. “Patent trolls are a drain on the economy,” NRF Senior Vice President and General Counsel Mallory Duncan said. “It’s time for Washington to put an end to this abuse of our nation’s laws. Seeing this issue receive top-level attention from the FTC is a significant development.”

The move comes two weeks after the White House announced a series of executive actions and legislative recommendations intended to crack down on frivolous lawsuits filed or threatened by patent trolls. At least half a dozen members of Congress have proposed legislation on the issue.

News: Antitrust FederalTradeCommissionNews