FTC to launch inquiry into patent assertion entities

FTC to launch inquiry into patent assertion entities


The US Federal Trade Commission (FTC) has announced it will begin an investigation into patent-assertion entities (PAEs).

The FTC will use its subpoena power, a writ by a government agency which gives it the authority to order a testimony, to garner detailed information from PAEs.

According to the FTC, PAEs are “companies that are in the business of buying and asserting patents.”

They have become increasingly common on US shores but have attracted criticism in some spheres for carrying out unnecessary and frivolous litigation, causing some to label them patent trolls.

The investigation will attempt to solicit information about PAE finances including how much they earn from patent lawsuits and licensing and how profits are distributed to investors. 

The FTC will ask for information from approximately 25 NPEs that own patents in the wireless communication sector as well as around 15 other patent-owning entities.

The targeted companies will be required to disclose, among other things, extensive data on each of their patents held since 2008, patent acquisition information, and patent assertion information.

Bob Stoll, partner in the patent team and co-chair of the IP practice group at Drinker Biddle & Reath LLP in Washington, DC, expressed doubt over the survey. 

“I am concerned about the extension of the FTC subpoena powers to collect this information,” he told WIPR.

“I think it would be more productive to study harmful activities by anyone than to study just the purchasers of patents who don't manufacture. We should be focusing on actions not actors.”

Stoll added that “harmful” activities which it would be more productive to study included masking the real party of interest to prevent potential licensees from knowing what other patents are held by the people they are dealing with and pursuing end users, who may not have the resources for the suit, instead of the manufacturer. 

US President Barack Obama recently pledged to introduce legislative reforms to clamp down on the PAEs earlier this year.

Furthermore, a recent report, published on August 22 by the Government Accountability Office, revealed that from 2007 to 2011, one in five patent lawsuits were brought by PAEs.

The GAO said the potential for “large monetary rewards” was an incentive.

“An investigation probably should be done because this has become a hot topic,” said Ralph Loren, partner at Edwards Wildman Palmer LLP in Boston.

“The figures for patent litigation filed by those seemingly collecting patents are high and are clogging up the courts. Everybody is saying this [unnecessary litigation] has become a burden and you have to make sure that the lawsuits filed have a basis.”

“This investigation will give the FTC a start in terms of getting information but I think eventually it will look to expand beyond the initial 25 companies,” Loren added.

The decision to carry out the investigation was unanimously approved, 4 to 0, by the commission.

(Source: WIPR)

People watch

It is lucky for Chen Jun to began his career in the IP industry 14 years ago when the first group of IP managers for businesses appeared on the stage in China and he has been in the industry.

It was this “Whampoa Military Academy” for IP that educated China’s first batch of corporate IP management personnel. Many of these engineers left Foxconn in the years since.