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FTC Chair Wants Investigation Into Frivolous Patent Suits

Federal Trade Commission Chairwoman Edith Ramirez says that patent assertion entities, often called "patent trolls," may be hurting consumers, and is calling for a deeper analysis of the issue.

The “patent troll” may have met its match.

The derisive term is used to describe companies that engage in numerous lawsuits based on patents they own but don’t use. The firms have found a critic at the top of the Federal Trade Commission, who called for a review of such entities on Thursday.

There is mounting evidence that PAE activities may have an adverse impact on competition and consumers. But at this stage, analysis of the costs and benefits of PAE activities is limited.

More details below:

The issue: In recent years, a number of firms have faced lawsuits from patent assertion entities (PAEs), companies that do not create products but own patents for commonly used products. Defendants often settle the lawsuits, as the cost to settle is significantly lower than it would be to fight in court. In the video above, Drew Curtis, founder of popular news aggregator Fark, discussed how he successfully fought a lawsuit against a firm that owned a patent “… for the creation and distribution of news releases via email.”

The response: During a keynote address at the National Press Club, Federal Trade Commission Chairwoman Edith Ramirez asked for an investigation into PAEs, which she noted are becoming a key source of patent lawsuits. “There is mounting evidence that PAE activities may have an adverse impact on competition and consumers. But at this stage, analysis of the costs and benefits of PAE activities is limited,” Ramirez said according to The Hill. The FTC’s investigative approach, The New York Times reported Thursday, could involve subpoenas against PAEs, using a tool of inquiry called a 6(b) study.

Prior actions: This isn’t the first action on patent issues this year. Earlier this month, the White House took a tough stance against patent abuse through a series of executive orders, including one blocking the usage of shell companies in patent lawsuits. (Associations, by and large, spoke in favor of the move.) Congress has been keeping an eye on this issue as well, with multiple bills being discussed in the two chambers of Congress, most notably the SHIELD Act. At the state level, Vermont passed a law targeting “bad faith” patent usage.

Ernie Smith

By Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. MORE

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