On September 27, the Federal Trade Commission ("FTC")
announced a proposal to use its authority under Section 6(b) of the
Federal Trade Commission Act, 15 U.S.C. § 46(b), to issue
compulsory process orders requesting detailed information about the
makeup and patent assertion practices of approximately 25 Patent
Assertion Entities ("PAEs") and approximately 15 other
companies in the wireless communication sector. Specific companies
were not identified.
The FTC defined "PAEs" as "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 technology," a
definition intended to exclude "other non-practicing entities
or NPEs that primarily seek to develop and transfer technology,
such as universities, research entities, and design
firms."
The FTC described the proposed study as a follow-on to the Patent
Assertion Entity Activities Workshop that it co-sponsored with the
Antitrust Division of the Department of Justice in December 2012.
It is also a reflection of continuing FTC interest in patent law,
going back at least to its 2003 report entitled "To Promote
Innovation: The Proper Balance of Competition and Patent Law and
Policy" and its 2011 follow-up report, "The Evolving IP
Marketplace: Aligning Patent Notice and Remedies With
Competition." (See Jones Day's Antitrust Alert, "
U.S. Federal Trade Commission Issues Report on the Evolving
Intellectual Property Marketplace.") The proposed study
would make use of the FTC's authority under Section 6(b) to
require companies to provide it with information, including
nonpublic information, for the purpose of conducting studies and
making reports. The FTC also notes that "destruction,
mutilation, alteration, or falsification" of evidence related
to the information requests is subject to criminal
prosecution.
PAEs receiving the requests will be required to provide
information, in some cases quite detailed, about their corporate
structure, all patents and patent portfolios held, how the patents
were acquired and how they have been asserted, and cost and revenue
information. The 15 non-PAE wireless industry participants that
will also be part of the study will be required to provide a subset
of this information.
The FTC said that the study "will provide a better
understanding of PAE activity and its costs and benefits." The
FTC may ultimately produce a report along the lines of those
released in 2003 and 2011, possibly recommending changes in patent
laws or agency rules. The FTC could also decide to hold hearings or
issue further information requests. An investigation of the
licensing practices of one or more specific PAEs is theoretically
possible but appears unlikely.
Public comments on the proposed study are due in 60 days. Any
company wishing to provide comments may do so online at:
https://ftcpublic.commentworks.com/ftc/paestudypra.
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