FTC on Patent Trolls

By Dennis Crouch

The Federal Trade Commission has decided to move forward with a full study of patent assertion by companies who are in the business of buying and then asserting patents. In FTC lingo, these are referred to “Patent Assertion Entities” or PAEs. From the agency:

PAEs are firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC is conducting the study in order to further one of the agency’s key missions—to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.

In addition to seeking voluntary information, the FTC proposes to use its subpoena power of to require the assertion entities to provide information to the agency and address the following questions:

  • How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
  • What types of patents do PAEs hold, and how do they organize their holdings?
  • How do PAEs acquire patents, and how do they compensate prior patent owners?
  • How do PAEs engage in assertion activity (i.e. demand, litigation, and licensing behavior)?
  • What does assertion activity cost PAEs?; and
  • What do PAEs earn through assertion activity?