FTC’s Ramirez Takes on Patent Trolls

Suggests commission launch investigation and exercise current enforcement authority

Federal Trade Commission chairwoman Edith Ramirez put patent trolls on notice, announcing a series of steps the agency could take to get to the bottom of the growing activity among patent assertion entities to extract license fees from other companies.

Ramirez recommended the FTC use its authority to conduct a broad economic study of patent assertion activity, which could include issuing subpoenas to PAEs. She also announced that the FTC would look more carefully at PAEs' antitrust activity and watch for PAEs that target businesses using false claims to induce license fees.

"Righting this type of wrong is what the FTC does best," said Dick O'Brien, evp of the 4As, one of the five advertising and marketing organizations that formed the Stop Patent Abuse Now Coalition to lobby for patent reform. 

Ramirez's action plan, announced at an event at the National Press Club held by the American Antitrust Institute and the Computer and Communications Industry Association, follows two weeks after the White House announced a series of executive actions and as lawmakers on both sides of the aisle and in both chambers work on legislation.

The FTC has looked at patent assertion entities before, issuing a report in March 2011—and more recently holding a workshop last December—in conjunction with the Department of Justice. But a lot has changed since that 2011 report, Ramirez said.

Compared to just a couple of years ago, PAEs now make up the majority of infringement lawsuits in the U.S. and half of the firms targeted are outside the IT sector, with retailers the most common low-tech targets. According to the National Retail Federation, more than 200 retailers have been targeted by PAEs.

"Many retailers and small businesses now find themselves victims of nuisance suits that are far cheaper to settle than litigate," Ramirez said. "Some PAEs send thousands of demand letters to target businesses. Even hotels and coffee shops are not immune," Ramirez said.

The FTC will also be on the watch for false or deceptive claims PAEs make in demand letters. "This would include telling a small business that it owes money to a PAE for a patent license when the PAE has no ownership interest in the patent or standing to assert any patent rights; has only an expired patent; or makes false threats of litigation," Ramirez explained.

Lawmakers and a coalition of advertising and marketing organizations have been pressing the FTC to use its authority to go after the demand letters, an action that was recently taken by the state of Vermont.

From an antitrust perspective, the FTC may take a closer look at the patent portfolios that companies are assembling, especially if the company is "acting as a clandestine surrogate for competitors," Ramirez said.

"Seeing this issue receive top-level attention from the FTC is a significant development," said National Retail Foundation's svp and general counsel Mallory Duncan. "It's time for Washington to put an end to this abuse of our nation's laws."

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