FTC probe of patent troll activity driven by competition concerns

The dual risks of limiting competitiveness and restraining innovation have caused the Federal Trade Commission to announce a probe of patent trolls.

FTC Chairwoman Edith Ramirez is planning to wield the agency’s subpoena power to launch a 6(b) investigation** into the trolls’, or so-called Patent Assertion Entities’ (PAE), litigation strategies and business methods, as they “raise red flags for competition and consumers.”  FOSSpatents reported on the webcast of the announcement here.

This sounds very much like my first post on this blog, in which I discussed affirmative, strategic discovery steps a defendant facing an NPE/PAE/troll should take to defend vigorously against unfounded infringement claims that are designed solely to extract a nuisance-value settlement, as litigation would not be cost-effective.  Maybe Chairwoman Ramirez read my piece?  Maybe not, but FTC staff certainly reviewed the EFF’s public comment on curbing PAE/troll activity, in which the Electronic Frontier Foundation demanded:

“The FTC should consider deploying its investigatory and enforcement powers against PAEs. EFF believes that at least some PAE litigation, especially that brought against end-users, seriously harms consumers and may not be entitled to Noerr-Pennington immunity.”

This enforcement investigative effort (the FTC acknowledges that it may lack proper jurisdiction over the patent-related portions and may leave actual enforcement to other branches of the federal government) comes on top of the legislative initiatives and bills discussed previously on this blog.

** A so-called 6(b) request involves Section 6 of the FTC Act, 15 U.S.C. Sec. 46.  Its sub-section 6(b) empowers the Commission to require the filing of “annual or special … reports or answers in writing to specific questions” for the purpose of obtaining information about “the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals” of the entities to whom the inquiry is addressed.  Recipients of a 6(b) order may file a petition to limit or quash, and the Commission may seek a court order requiring compliance. In addition, the Commission may commence suit in Federal court under Section 10 of the FTC Act, 15 U.S.C. Sec. 50, against any party who fails to comply with a 6(b) order after receiving a notice of default from the Commission. After expiration of a thirty-day grace period, the defaulting party is liable for daily penalties, each day of noncompliance.

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