June 20, 2013 | By Daniel Nazer

Bad News For Patent Trolls! FTC To Look Under the Hood of the Trollmobile

The Federal Trade Commission announced today that it stands ready to take on patent trolls. In a speech at the National Press Club, Commissioner Edith Ramirez made two big announcements. First, she revealed that the FTC will conduct a wide-ranging investigation into the conduct of patent trolls. Second, she confirmed that, when appropriate, the FTC is committed to using its antitrust enforcement powers. This is great news for innovation and very bad news for trolls.

In her speech today, Chairwoman Ramirez displayed a deep understanding of both the causes and the costs of patent troll litigation (although the FTC prefers the term ‘patent assertion entity’). She explained that most troll lawsuits involve software-related patents which often include broad functional claims. We agree that low-quality, overbroad software patents are a leading driver of the patent troll problem. Chairwoman Ramirez also discussed the disturbing trend of patent trolls targeting end users. She noted that small businesses are being hit with demand letters for using ordinary office equipment. And she explained that trolls are targeting online retailers for the use of simple features like drop-down menus. She noted that only a small portion of the cost imposed by patent trolls ever finds its way back to inventors.

We already know all of this. But the FTC can play a significant role in filling out the picture and shifting the larger debate. We saw with before when, in 2011, the FTC published an excellent report on the problems caused by vague patents. The FTC can provide similar guidance—and influence—regarding the troll problem. Patent trolls tend to operate in secret behind a web of shell companies. By using its authority under section 6(b) of the FTC Act, the agency will be able to use its subpoena power to discover what is really going on. This is why today’s announcement is such big news. The FTC has both the expertize and the power to uncover the truth. We hope the agency uses them well.

In addition to announcing an investigation, Chairwoman Ramirez affirmed that the FTC stands ready to enforce antitrust laws against patent trolls. Just last month, Vermont filed a groundbreaking consumer protection complaint against against a patent troll. Although we welcomed that action, we noted that the patent troll problem is a federal issue that demands a federal response. So the FTC's anouncement is very timely. The agency will consider action against both patent privateers (those that assert patents as a clandestine surrogate for competitors) and trolls that engage in deceptive practices against small businesses (such as asserting patents without standing or making false threats of litigation). This will make some of the most infamous patent trolls very nervous. We hope FTC action will deter patent troll abuse nationwide.

Earlier this year we filed comments with the FTC urging that the agency take action against trolls. We made two recommendations: 1) that the agency conduct an investigation into troll activity; and 2) that the agency consider using its enforcement power against the most abusive trolls. We are thrilled to see the FTC taking both steps. Today’s announcement is part of a growing movement for action. The time for fundamental patent reform has arrived.

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