Frivolous Patent Lawsuits - F.T.C. Is Said to Plan Inquiry

The chairwoman of the Federal Trade Commission is expected on Thursday to recommend a sweeping investigation of “patent trolls,” companies that buy large portfolios of technology patents and use them to sue software designers and makers of products like smartphones and tablet computers, people briefed on the inquiry said.

The chairwoman, Edith Ramirez, is planning to ask the full commission to approve an inquiry that will include the issuance of subpoenas to companies that are known as patent-assertion entities, or, unflatteringly, as patent trolls. The move comes after the issuance of several executive orders by President Obama directing executive agencies to take steps to “protect innovators from frivolous litigation.”

If approved, which is likely, the F.T.C. investigation will require patent-assertion companies to answer questions about how they conduct their operations, including whether they coordinate their lawsuits with other patent holders and if they funnel proceeds from lawsuits and patent licenses back to the original patent owner.

Patent-assertion entities, also known as P.A.E.’s, typically have no operations other than collecting royalties on patents. They accounted for more than 60 percent of the roughly 4,000 patent lawsuits filed last year, up from 29 percent two years earlier.

“There are companies that are engaged in spurious lawsuits, seeking settlements that are less than the cost of litigation. But not us,” said Scott Burt, chief intellectual property officer at Mosaid Technologies, a Canadian company that is nonetheless considered one of the largest patent trolls. “We are a patent-licensing company.”

The types of lawsuits that have been filed or threatened sometimes exceed comprehension. One such suit recently threatened thousands of companies with liability for damages on charges they violated a patent by hooking up a document scanner to a computer network and sending a scanned file by e-mail to an employee.

Ms. Ramirez is expected to discuss her recommendation on Thursday at a patent law workshop sponsored by the American Antitrust Institute and the Computer & Communications Industry Association, a trade group. A spokesman for the F.T.C. declined to comment on the topic of her speech.

She previously has hinted at the idea of a broader study of patent trolls, telling an antitrust group in January: “A central empirical question, which we will continue to examine, is whether P.A.E.’s encourage invention or instead hamper innovation and competition.”

The F.T.C. is not expected to single out any individual company in the investigation.

People briefed on the plans said that the inquiry will focus on companies at both ends of the patent-troll spectrum. At one end are the small companies, essentially legal shells, which gather patents and cite them when sending demand letters to thousands of businesses claiming infringement on a patent for some activity. In 2011, a company targeted coffee shops for setting up Wi-Fi networks for customers.

At the other end are large companies like Mosaid, which has its American headquarters in Plano, Tex., and Intellectual Ventures, a Bellevue, Wash., firm that was co-founded by Nathan Myhrvold, a former chief technology officer at Microsoft. Those entities buy portfolios of intellectual property rights from technology innovators like Microsoft and Nokia and use them to generate millions of dollars in licensing payments.

Read More... http://www.nytimes.com/2013/06/20/business/ftc-is-said-to-plan-inquiry-of-frivolous-patent-lawsuits.html?ref=business&_r=1&

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