FTC May Increase Scrutiny of ‘Patent Assertion Entities’

LOS ANGELES—The news on the Patent Assertion Entity (PAE) front is largely positive, assuming you are not a fan of so-called “patent troll” firms. Ars Technica yesterday reported on comments made last week by two directors of the Federal Trade Commission, who told an audience at a legal conference that they are “in favor of opening up a so-called 6(b) investigation about whether or not patent trolls, which the FTC calls ‘patent assertion entities,’ are stifling competition.  “That,” Ars Technicas adds, “would allow the FTC to use its subpoena powers to collect information that's not available to academics, journalists, and others who write about patent troll activities.” It certainly sounds promising, even if the government made similar promises way back in 2005.  This time, however, there are eight more years of experience with real world trends in patent law from which to document to what extent, if any, abuse of the law has helped impede entrepreneurial opportunities. That, after all, is the crux of the complaint. For Ars Techina, which has long criticized trolls of all stripes, the benefits of a new FTC investigation would be tangible. “Once such an investigation is underway,” writes Joe Mullin, “the FTC would be able to get the details of confidential litigation settlements made with trolls both large and small. It could find out when trolls are splitting their revenues with operating companies or larger aggregators like Intellectual Ventures. It could find out how much money really goes back to inventors. That is an important issue, since many patent-assertion entities claim their business model is justified because they help the ‘individual inventor’ get fair payment for their ideas.” It will be interesting see what eventually happens at the FTC, which hosted a “patent troll” hearing back in December. The results of that hearing are only now starting to be assimilated, and resulted in the increased interest by the FTC directors, but even if a subpoena-supported study by the FTC of PAEs is undertaken, Mullin warns that not all of the now secret data about the inner-working of these entities that troll-watchers want to see will likely be forthcoming. “Rather,” he suggests, “the FTC will create a public report with aggregated and averaged information, so anyone looking for a spreadsheet detailing the finances of every patent assertion entity will be disappointed.” That said, Mullin and his Ars Technica editors certainly want subpoena-based inquiries by the feds into a business model they believe is in dire need of some transparency, or they would not have used the subhead, “FTC can crack open secret patent deals to learn about a shadowy business.” The adult industry, of course, has a long history with issues related to patent abuse. As its reliance on new technologies inevitably increases, so to will its vested interest in how these issues are resolved.