The Federal Trade Commission has proposed a study that would put patent trolls under the microscope and possibly force some to be more transparent about their business practices.
In what is being viewed as another sign that Washington DC is increasingly serious about patent litigation reform, the FTC announced on Friday that it intends to embark on a formal inquiry that would subject 25 patent assertion entities – otherwise known as trolls – to thorough scrutiny in an attempt to “get a better understanding” of how they operate.
Groups such as the Electronic Frontier Foundation, the Consumer Electronics Association, and the Application Developers Alliance say that patent trolls, such as Lodsys, harm innovation by litigating in order to extort money from developers and companies based on generic software patents that they don’t even use for practical purposes. In recent months, similar sentiments have been expressed on Capitol Hill, where Congress is debating patent litigation reform, and even in the White House, where President Obama has come out against patent trolls.
Proponents of patent litigation reform say the FTC’s proposed study, which is likely to take more than a year, is potentially significant and will help advance their cause. While the FTC doesn’t have powers to force changes in the system that would eliminate all problems associated with patent trolls, it may provide ammunition in the battle to take down the trolls. For instance, reform advocates have repeatedly used 2011 FTC study that addressed patent quality as a way to argue to courts and policy makers that systemic change is necessary.
“It just shows there’s widespread recognition of the problem,” says EFF lawyer Julie Samuels, who also serves as the Mark Cuban Chair to Eliminate Stupid Patents, of the proposed report. While policy changes are up to Congress, she says, it’s important that all branches of government, including the Administration and States Attorney Generals, play a role in bringing about reform. The FTC is an important part of that.
“There is not one single proposal that will totally fix the problem,” Samuels says. “But taken together, if all these branches of government do their part, we could see real, fundamental change.”
Application Developers Alliance president Jon Potter says the FTC’s move suggest it sees patent litigation as potentially creating consumer protection and anti-trust issues. He says the FTC’s powers to investigate and collect data, as well as its “broad subpoena authority,” would be valuable in shining a light on “notoriously secretive” trolls.
Despite recent political distractions, from the debate on immigration reform to potential military action in Syria, and now the threat of a government shutdown, Potter is pleased at patent reform’s progress in the nation’s capital. In particular, he applauds the introduction of House Judiciary Chairman Bob Goodlatte’s (R-VA) second patent reform discussion draft, which would require companies suing for patent infringement to be more transparent while allowing companies being sued to more easily challenge overly broad patents.
The Application Developers Alliance looks forward to the hearings around Goodlatte’s discussion draft, he says. “We also think that once legislation is actually introduced and hearings actually happen that the discussions will narrow.”
Ultimately, the goal of patent litigation reform proponents is to change the business model of patent trolling, he says, and increase the costs and risks of abusive patent litigation. News of the FTC’s impending report may well be a step closer to achieving that goal.