Wednesday, April 17, 2013

Patent Trolls Be Gone (Soon)

by Dietrich Schmitz

Consensus is building, we can only hope, for a resolution to the ongoing, ever-growing  patent litigation epidemic. (Image credit: Thomas Edison)

In an ars technica story, the Federal Trade Commission is taking up the matter in a formal investigation of Patent Assertion Entities (PAE) and whether their activities constitute a form of stifling the competition and restraint of trade.   Historically, it has been problematic in determining the PAE relationship in agency to corporations that 'delegate' patent enforcement to such entities and what financial considerations are involved (kick backs, settlement sharing arrangements, etc.):

"The biggest problem with the troll issue is the lack of information," said David Balto, a former FTC policy director who now has a private antitrust practice. "Through the 6(b) power, they can figure out the relationship between the patent trolls, and the firms they're acquiring patents from."

The ars story goes on further to highlight the special investigative powers that obtain from section 6b insofar as how they confer to the FTC the ability to investigate the following:

  • The full ownership interest of PAEs and a list of all subsidiaries and affiliates;
  • What are the relations between PAEs and the owners of the patents and how do the owners benefit from patent enforcement;
  • What are the type and scope of demand letters used by PAEs;
  • How often is litigation by PAEs successful; at what stage is litigation typically resolved;
  • How are patents acquired by PAEs and from whom; what is the purpose of these transactions; and
  • How does the PAE determine which patents to acquire.
In a separate piece written by the esteemed Pamela Jones of, Pamela groks it this way:

But the most important part of the Google et al. request, to me, hasn't yet been highlighted in the media reports I've seen. What they are asking for is not just an investigation into trolls, but into active companies outsourcing their patent enforcement *to* PAEs. And what they are asking for is whether such activities in some instances can rise to the level of antitrust violations. 
That is something I've wondered about for a while -- why didn't regulatory bodies see what is happening to Android, for example, with all the old guard working apparently together to try to crush it? One thing that Microsoft and Nokia have done, for example, is outsource patent enforcement to MOSAID and other patent enforcement-style non-practicing entities. (If you recall, Google filed a compliant specifically about that with the EU Commission last summer.) The new comments call the new outsourcing to trolls patent privateering, which they say is designed for assymetric patent warfare -- meaning the defendant's business is at stake, but the outsourcing company's business isn't, and the troll has nothing to lose, because it has no business. 
So, finally, the day I've been waiting for begins.
It has been historically difficult to determine how PAEs operate and what their actual relationship legal and financial is to the corporation which assigns patents to them.  The method of negotiating out of court settlement is also part of the focus to reveal what otherwise has been traditionally concealed under seal of standard non-disclosure agreements.  Such activities might include application of invalid patents, abuse of Patent Office and worse extortionate (Antitrust Rico Act) methods of coercion to secure licensing from alleged ip-infringing parties all under the cloak of an NDA.

We can only hope that this investigation will shed light on such practices and that discovery will induce needed legislative change to U.S. Patent Law specifically with regard to issuance of Software Patents, severely limiting, if not eliminating, their use entirely.

-- Dietrich
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