On January 13, 2017, the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) issued updated Antitrust Guidelines for the Licensing of Intellectual Property (the Guidelines). The revised Guidelines follow nearly half a year of consideration and public commentary. According to the FTC, the updates were “intended to modernize the IP Licensing Guidelines without changing the agencies’ enforcement approach with respect to intellectual property licensing or expanding the IP Licensing Guidelines to address other topics.” In that vein, the modest updates to the Guidelines affirm that the antitrust agencies still believe that IP issues do not require an altered analysis and that the licensing of intellectual property is generally procompetitive.”
In a speech at the American Antitrust Association (AAI) and Computer & Communications Industry Association (CCIA) Conference on Innovation, Patents and PAEs on December 10, 2014, Federal Trade Commissioner (FTC) Julie Brill reported that the FTC hopes to complete its study of patent assertion entities (PAEs) by the end of 2015. She cautioned against complacency, however, and said there is much Congress and enforcement agencies can do even before the study of so-called patent trolls is complete.
The FTC is currently conducting an extensive review of PAE activity, using its authority under Section 6 of the FTC Act. The Commission’s authority under section 6(b) enables it to conduct broad economic studies that do not have a specific law enforcement purpose. Under this provision the Commission may also publicize portions of the information it obtains where such publication would serve the public interest.
The FTC has devoted substantial attention to PAEs in recent years. It has hosted or co-hosted a number of workshops to explore PAE-related issues. Although workshop participants shared numerous anecdotes describing the increasing PAE activity, a common refrain in those workshops was the lack of comprehensive and reliable empirical evidence about the costs and benefits of PAE activity. The FTC study was conceived to help fill this gap.
Although the study is underway, Commissioner Brill urged Congress not to await its outcome before taking concrete reforms that could “make it more difficult for PAEs and others that seek to profit by bringing and threatening to bring frivolous patent infringement lawsuits.” She noted that Congress is currently considering several reform proposals. “There is no need to wait for completion of our 6(b) study to act on these and other key legislative patent reform proposals,” Commissioner Brill said. She also emphasized that the ongoing study will have no impact on appropriate law enforcement actions. She said that if the FTC, the Department of Justice or the states “uncover PAE activity that is in violation of current law, they should act expeditiously to take whatever enforcement actions are warranted to stop inappropriate PAE abuse.”
On March 20, 2014, Wisconsin lawmakers passed a bill in an attempt to limit the ability of non-practicing entities (NPE) – also commonly referred to as “patent trolls” – to file claims demanding patent licensing payments. Wisconsin Senate Bill 498 applies to all patent owners who wish to file patent infringement claims, but provides exceptions for institutions of higher learning; federally funded health care or research institutions with annual expenditures over $10 million; and owners of certain food, drug or biological product patents.
The bill requires that any notification seeking to enforce a patent must include comprehensive patent information, including detailed facts forming the basis for the infringement allegations and an identification of any pending or completed court or administrative proceeding related to each asserted patent. After a 30-day period to cure any defects in the demand, the bill authorizes the Attorney General to file an injunction and to recover a forfeiture of up to $50,000 per violation. The court is also given discretion to award compensatory damages to any person for losses suffered as a result of the violation. Additionally, the bill allows private parties to recover punitive damages up to $50,000. The full text of the bill is available here.
Oregon has now become the second state to take aim at non-practicing entities (NPEs), more colorfully called “patent trolls,” with laws addressing patent enforcement. On February 25, 2014, the state attorney general announced that the legislature had passed a measure making it a violation of the Oregon Unlawful Trade Practices Act to send a demand letter that fails to identify the patent and the violation, or that insists the recipient make a licensing payment in an “unreasonably short” amount of time.
The Oregon law is only the latest, however, in a flurry of activity. Vermont passed a similar measure last year and Nebraska is considering doing so now. Also last year, the U.S. House of Representatives passed a bill designed to raise the stakes for NPEs that threaten or engage in patent litigation. The House bill would force plaintiffs to include in complaints the identity of their parent companies and greater detail regarding the alleged infringement. The bill further imposes restraints on discovery to prevent plaintiffs from using discovery costs to pressure defendants for a settlement early in the litigation. In some circumstances, costs could be imposed on losing plaintiffs. The U.S. Senate has not yet acted on the legislation. However, U.S. Senator McCaskill introduced a bill on February 27, 2014 called the Transparency in Assertion of Patents Act that, like the state laws, particularly focuses on making it harder for patent assertion entities to issue demand letters to small companies.
Finally, President Obama is implementing new measures to reduce the prevalence of NPE patent litigation in the future by raising the overall quality of patents. These measures include additional training for patent examiners and crowdsourcing “prior art” from the public.
Lawmakers and commentators disagree over whether NPEs stifle innovation or perform a useful role by creating a broader market for patents. But the movement toward greater regulation of the enforcement and litigation tactics that some NPEs favor is unlikely to lose steam.
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