FTC Plans Patent Troll Inquiry; PIA Alerts Members

Federal Trade Commission (FTC) Chair, Ms. Edith Ramirez, plans to subpoena patent trolls—companies that buy large portfolios of technology patents and use them to sue others—as part of an inquiry into their methods. If approved, the FTC investigation will require patent trolls 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 trolls accounted for more than 60% of the roughly 4,000 patent lawsuits filed last year, up from 29 per cent two years earlier. MPHJ, one of the latest patent trolls, accuses many small and medium size businesses (SMBs) of violating a patent by hooking up a document scanner to a computer network and sending a scanned file by email to an employee.

Ms. Ramirez is expected to discuss her recommendation on June 27 at a patent law workshop sponsored by the American Antitrust Institute and the Computer & Communications Industry Association, a trade group. She is also expected to recommend what is known as a 6(b) study, after the authorzing section of the FTC Act. This type of inquiry does not always have a specific law enforcement purpose but can gather information for use by Congress, the courts or executive agencies in dealing with an issue.

Patent trolls have captured the attention of the Obama administration. Congress has also taken an interest in the issue, with lawmakers from both parties supporting legislation to rein in patent trolls. Representative Judy Chu, a California Democrat, and Representative Blake Farenthold, a Texas Republican, wrote a letter this month urging Ms Ramirez to use the FTC’s power to police deceptive and unfair practices against patent trolls.

They claimed patent trolls are using a business model that seeks to extract money from end users who must make a difficult choice: settle in order to continue investing in their businesses, or face potentially frivolous litigation.

Printing Industries of America’s (PIA) President and CEO Michael Makin issued a notice to PIA members that there is an alarming increase in the number of printers who have reported being targeted by patent trolls. PIA is working on a strategy to address this issue, and may ask members to assist financially. Makin also suggested that targeted members report to PIA.