FTC Plans Patent-Troll Probe
The growing frustration with the U.S. patent system that recently inspired the White House to push for patent reform will soon elicit a similar response from the Federal Trade Commission.
FTC Chairwoman Edith Ramirez on Thursday is expected to propose a broad inquiry into the business practices of patent trolls, firms that buy up intellectual property developed by others and use it squeeze vast payouts from companies they accuse of infringing it.
The FTC investigation, which was first reported by the New York Times, is expected to be a 6(b) study, which is an information-gathering exercise, not a criminal investigation. That said, it may well be a step toward one. It will allow the FTC to use its subpoena powers to require patent-holding companies to answer questions about their business practices, shell-company arrangements and licensing payments, all with an eye toward determining whether they are abusing the current system and harming competition.
With a recent study concluding that some 62 percent of all patent lawsuits filed in 2012 were brought by patent trolls — more than double what they were two years prior — Ramirez’s proposal seems a wise move, a long time in coming. As David Balto, a former FTC policy director and outspoken critic of patent-assertion entities, believes, the dramatic increase in patent-troll litigation over the past few years is a clear indicator that our patent system is in need of reform.
“There is an urgent need for the FTC to put a spotlight on the egregious practices of patent trolls,” Balto said. “They use uncertainty and deception to exploit vulnerable small businesses, raising costs for consumers, stifling innovation and ultimately dampening economic growth. Hopefully the FTC study will put a spotlight on these practices so enforcers, courts and Congress can put a stop to this pernicious litigation.”