F.T.C. Opens Inquiry into Patent-Infringement Litigators

Article excerpt

The Federal Trade Commission said it would seek information on businesses whose main purpose is to sue other companies to collect patent royalties.

The Federal Trade Commission has voted to begin an inquiry into "patent-assertion entities," businesses whose only purpose is to stockpile patent portfolios and use them to sue companies like software designers and smartphone makers, the agency announced Friday.

The action is the first step in what is likely to be a lengthy and broad investigation, which could, at its extreme, result in antitrust lawsuits against the companies.

Edith Ramirez, the chairwoman of the F.T.C., said in June that she believed there was little real evidence about the costs and benefits of a rising tide of patent litigation.

By a vote of 4 to 0, the commission agreed to seek public comments on an investigation of "approximately 25 companies that are in the business of buying and asserting patents," the agency said in a statement. It also will look at about 15 other companies that assert patents in the wireless communications industry, including manufacturers of smartphones.

After reviewing public comments, the F.T.C. will seek to issue subpoenas to the patent-assertion entities, which are also known, unflatteringly, as "patent trolls."

"Patents are key to innovation and competition, so it's important for us to get a better understanding of how P.A.E.s operate," Ms. Ramirez said in the statement Friday.

The issue is also heating up in Europe, where a new pan-European patent court system is to take effect in 2015. On Thursday, a group of more than a dozen big American and international companies sent a letter to European officials warning that loopholes in the system could make it too easy for patent trolls to file lawsuits on the Continent.

Ms. Ramirez said Friday that the Federal Trade Commission Act allows the agency to gather information about the financial operations of the companies, and it will seek to uncover how much they earn from patent lawsuits and licensing and how the profits are distributed to investors. …