FTC publishes a long list of questions it wants to ask “patent trolls”
The FTC has voted 4-0 to start an investigation of so-called “patent trolls.” The first step is to solicit public comment on a long series of questions that the agency plans to submit to about 25 of the most controversial patent-holding companies, which the FTC calls “patent assertion entities.”
The move by the FTC to begin a so-called 6(b) study is not unexpected. Back in June, FTC chairwoman Edith Ramirez spoke about the agency’s interest in such a study. Today’s statement assures that the investigation will move ahead, and the questions show what aspects of patent trolling most interest the FTC. The study was called for by many tech companies, including Red Hat and Google, as well as business sectors that have become new activists on the troll issue, such as supermarkets and restaurant groups.
“We want to use our 6(b) authority to expand the empirical picture on the costs and benefits of PAE activity,” Ramirez said today. “What we learn will support informed policy decisions.”
There have been numerous academic studies of patent trolls, but the FTC will be able to use subpoena powers to learn far more about the business than any of these studies. The commission will be able to learn about trolls’ corporate structures, how much they make, and where the money is really going. The data it collects about individuals trolling organizations will not be made public, but the FTC will likely publish aggregate information. The agency could even file antitrust lawsuits if it believes patent trolls are hampering competition.
As mentioned above, the FTC has published a detailed list of questions it intends to send to the assertion entities. The list is quite in-depth; for instance, in just the top of the “assertions” section, the commission indicates that it will ask for:
1. Demand Information:
a. identify all Demands sent by, or on behalf of the Firm since January 1,
2008 and specify:
(a) all Person(s) to which the Demand was sent;
(b) the Patent(s) Relating to the Demand;
(c) the total time spent and costs incurred by the Firm, or any
Person working on behalf of the Firm, for any research
Relating to the Demand, including but not limited to any
attempt to compare the allegedly infringing product(s) or
process(es) with the Asserted Patent claims;
(d) any Litigation initiated by the Firm Relating to the
Demand, and the outcome of any such Litigation;
(e) any license agreement Relating to the Demand; 10
(f) any revenue obtained by the Firm Relating to each
Demand, separately listed for each year since January 1,
2008, and for each Patent Portfolio held by the Firm.
Other topics that will generally be addressed include how PAEs organize their corporate structure and what types of patents they hold—the form actually asks for a listing of all patents acquired. It will analyze how prior owners of patents get compensated, and how much the assertions cost.
Public comments on the proposed investigation questions must be received within the next 60 days. It will be interesting to see how some patent-holders react to this proposal.
The FTC will also have questions for 15 “other entities asserting patents” in the wireless sector, including manufacturing firms as well as other non-practicing entities that it doesn’t consider “patent assertion entities,” which the FTC limits to companies that both buy and assert patents.
It’s a fine line. Some firms that would certainly be considered “trolls” by the dozens of companies they have sued won’t fit into the FTC’s definition of a “patent assertion entity.” That includes entities that seem to be highly focused on litigation, such as Paul Allen’s defunct Interval Licensing and Walker Digital, which behave in ways that are indistinguishable from patent trolls. They hire the same lawyers, use the same litigation tactics, and fundamentally have the same business model. However, because they use “in-house” patents rather than purchased patents, they won’t fit into the FTC’s definition of “patent assertion entities.”