Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Ramirez addresses competitive implications of patent assertion entities at ABA section event in Washington, D.C., (Nov 18, 2013)

By Linda O’Brien, J.D., LL.M.

FTC Chairwoman Edith Ramirez discussed the need to understand the competitive implications of the activities of patent assertion entities (PAEs) at a networking event, sponsored by the American Bar Association Antitrust Section’s Intellectual Property Committee on November 12 in Washington, D.C.

Ramirez began her remarks by setting forth the FTC’s interest in the competitive costs and benefits of PAE activity. To gather the information necessary to tackle this question, the FTC proposed a study in September to examine PAEs and their impact on innovation and competition. The study will build on the FTC’s earlier work in this area.

Proponents claim that PAEs are efficient middlemen that increase the return to invention, especially for small investors. Critics argue that PAEs, sometimes called “patent trolls,” exploit flaws in the patent system and add a growing tax on innovation, particularly in the information technology sector.

Ramirez observed that research from several different studies shows that the share of infringement lawsuits filed by PAEs has increased as much as over 30 percent between 2007 and 2012. She notes that PAEs role in patent litigation is only part of a bigger picture.

In its study, the FTC aims to use its authority to gather empirical evidence on PAE activity. The main part of the study will be a broad examination of the PAE business model. A second part will be a more tailored case study of PAE activity in the wireless industry sector. For the broad analysis, Ramirez said that the FTC plans to send requests for information to 25 PAEs covering a broad range of patent acquisition and assertion activity across a range of industry sectors. As an example, proposed requests will seek information on the composition of PAE portfolios, whether the patents are essential to any standards or encumbered by other licensing obligations, the costs of acquiring patents, and whether the PAEs share an economic interest in its portfolio with other entities. This information is currently not available for research or policy analysis, Ramirez observed.

The tailored case study will focus on the wireless sector to learn more about the relationship between the PAE business model and assertion activity. Ramirez added that wireless communications was selected because it is a relatively well-defined sector with a significant amount of assertion activity by manufacturing firms, PAEs, and other traditional non-practicing entities. The FTC proposes to request information from other types of licensors active in the wireless sector, such as manufacturers.

Ramirez noted that the comment on the proposed expires on December 2. The FTC welcomes comments from academics, stakeholders, and all interested persons on the goals of the study and how the study design and information requests can be improved.

Ramirez concluded by emphasizing that FTC activity on both the policy and enforcement side should be part of a broader response to the flaws in the patent system that fuel inefficient behavior by PAEs and other firms. Reforms that improve patent quality and reduce litigation costs for challenging weak intellectual property and defending frivolous lawsuits are crucial to providing an environment that fosters innovation and promotes consumer welfare. Although improved understanding of the PAE business model will inform the policy dialogue, Ramirez urged a continued effort for additional progress on patent reform .

News: Antitrust FederalTradeCommissionNews