Last Friday, CCIA filed its comments to the FTC/DOJ’s Public Workshop on Patent Assertion Entities (PAEs) (aka patent trolls). Although antitrust authorities cannot fix all of the foundational problems in the patent system — such as the patent quality problem — they can certainly use their competition expertise and authority to help rein in some of the most egregious attempts to game the system to the detriment of both consumers and innovation. Furthermore, the FTC and DOJ should continue their long tradition of excellent marketplace research that can be used as raw material to update competition law, as the patent system does not function in the stylized way that much of our patent law and antitrust jurisprudence contemplate.
Specifically, we stressed three particular areas that the FTC and DOJ should focus on in the short run.
FTC 6(b) Study – Much of patent troll activity occurs in the shadows, and it is often covered up by a maze of shell companies and non-disclosure agreements. In order for antitrust regulators to figure out which business arrangements and relationships violate antitrust law, they need to have a more comprehensive picture of PAE relationships and practices. Luckily, the FTC is armed with just the tool for this — a 6(b) study. This allows the agencies to send out subpoena-like questionnaires to PAEs and their associates that they are compelled to respond to.
Ensure Commitments Travel With Patents – In order to provide marketplace certainty, technology companies make frequent commitments as to how they will or will not enforce their patents. These commitments include the now infamous FRAND commitments, pledges not to “stack royalties,” pledges not to assert against open-source software, pledges to only use defensively, etc. Companies make these pledges to induce the marketplace to adopt their technology. If trolls acquire patents with previous commitments, and then revoke them, it amounts to an unfair method of competition (and antitrust violation if the market is “locked-in” to the technology in question).
Closely Monitor Patent Privateering – The relatively new phenomenon of patent privateering, where operating companies enlist trolls to attack their rivals for them, raises some potential antitrust questions. The problems become even more acute when multiple competitors collaborate through a troll to bring lawsuits against mutual competitors. The FTC and DOJ should closely monitor this activity and update their guidance — including the 1995 IP Licensing guidelines — with this behavior in mind.