FTC will target patent trolls, commissioner says

The agency, even while studying patent assertion entities, can take action against unfair practices, Brill says

The U.S. Federal Trade Commission can take action against patent trolls when the patent-holding firms engage in unfair business practices, even as the agency works to complete a study on their business model, a commissioner said.

The FTC plans to complete its ongoing study of patent licensing firms -- often called patent assertion entities (PAEs) or patent trolls -- within the next year, FTC Commissioner Julie Brill said Wednesday. In the meantime, the agency should target its enforcement power toward PAEs when they unfairly threaten patent infringement lawsuits, Brill said during a forum on PAEs.

Even before the FTC's study is completed, there's room for the FTC to enforce the law barring unfair business practices and for the U.S. Congress to pass new laws limiting some PAE practices, Brill said.

"Further reforms to the patent litigation system are clearly warranted to make it more difficult for PAEs and others that seek to profit by bringing, and threatening to bring, frivolous patent infringement lawsuits," Brill said.

Several large tech firms and digital rights groups have called on Congress to pass patent reform legislation focused on discouraging PAEs, after recent studies have suggested that these patent-holding businesses account for more than half of all patent infringement lawsuits filed in the U.S. in recent years.

Other trade groups have questioned the impact of PAEs on the U.S. patent system. Earlier this month, speakers at conservative lawyers group the Federalist Society for Law and Public Policy Studies questioned whether PAEs are causing serious problems and suggested that recent patent reform legislation could erode intellectual property rights.

A year ago, the House of Representatives passed the Innovation Act, a bill targeting patent trolls, but similar legislation stalled in the Senate.

Hours before Brill's speech, groups including the Innovation Alliance, the Pharmaceutical Research and Manufacturers of America, and the Medical Device Manufacturers Association, sent a letter to congressional leaders saying the Innovation Act isn't needed after recent Supreme Court decisions related to patents and enforcement action by the FTC.

"We will continue to strongly oppose legislation that would weaken the overall patent system and thereby diminish innovation and job creation in the United States," the letter said. "As a result of these developments, we are even more concerned that some of the measures under consideration over the past year go far beyond what is necessary or desirable to combat abusive litigation."

Brill on Wednesday endorsed some provisions of the Innovation Act, saying Congress would require companies filing patent infringement complaints to include specific allegations of infringing behavior, instead of the often "bare-bones" documents filed at the start of lawsuits. She also called on Congress to give courts more authority to award attorney's fees and discovery costs to defendants in questionable patent infringement lawsuits.

"There's no need to wait for the completion of [the FTC's] study to act on these and other key legislative patent reform proposals," Brill said. "Various provisions in the bills will most certainly discourage frivolous lawsuits and improve patent quality, actions that I believe are needed now."

In the meantime, the FTC, the U.S. Department of Justice and state attorneys general can move to "stop inappropriate PAE abuse," Brill said.

The FTC, in November, announced a complaint and a settlement with MPHJ Technology Investments, a company that the agency accused of sending more than 9,000 patent licensing demand letters to about 4,800 small businesses between September 2012 and June 2013.

MPHJ had purchased patents for what Brill called "widely used computer scanning equipment," and threatened lawsuits against the small businesses unless they paid a licensing fee. But the company had "no intention to initiate lawsuits," Brill said, and the FTC charged MPHJ with violating a U.S. unfair business practices statute.

The New York Attorney General's Office also reached a settlement with MPHJ, back in January.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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