Last week, the White House’s Office of Management and Budget approved the FTC’s request to study how patent assertion entities (PAEs or, less charitably, patent trolls) operate and to what extent they affect competition and innovation. The study was originally proposed in September 2013 and modified this past May in response to public comment.
- How do PAEs organize their corporate legal structure, including parents, subsidiaries, and affiliates?
- What types of patents do PAEs hold and how do they organize their holdings?
- How do PAEs acquire patents; who are the prior patent owners; and how do they compensate prior patent owners?
- How do PAEs engage in assertion activity (i.e., how do they behave with respect to demands, litigation, and licensing)?
- What does assertion activity cost PAEs?
- What do PAEs earn through assertion activity?
- How does PAE patent assertion behavior compare to that of other entities that assert patents?
As for when we can expect the study to be completed, an FTC spokesman was quoted as saying “sometime next year.”
The FTC expects requests for information to be issued shortly. Recipients for the first part of the study will be 25 PAEs “that use different organizational models and assertion strategies.” The requests will focus on the nature of the patent portfolios held, whether any are essential to industry standards, the costs of acquiring the patents and whether others share an economic interest in the portfolio. The FTC also is particularly interested in how the patents are asserted; thus, the requests will cover licensing and litigation activity as well as costs associated with the assertion.
For the second part of the study, the FTC will seek information from approximately 15 manufacturing firms and PAEs that have asserted patents in the wireless communications sector comparing how the various players assert their patent rights. Though some had requested that the FTC not limit this to the wireless communication industry, the FTC wants to limit its study because wireless communication “is relatively well-defined with a significant amount of assertion activity by PAEs, manufacturing firms, and NPEs.”
The study will certainly be interesting, but we doubt it will stem the tide of states that will want to weigh in and propose some legislation to curtail PAE activity, especially considering the fact that Congress has not yet acted. As always, stay tuned!