Intellectual Property Attorney

U.S. Government Takes Baby Steps Toward Curbing Litigation By Patent Assertion Entities (Patent Trolls)

This past July, dozens of high-profile companies urged members of Congress to support legislation that would stem the tide of litigation brought by Patent Assertion Entities (PAEs), or so-called “patent trolls”. Forty four companies in total, including well-known entities such as Amazon, Google, Wal-Mart and Dell, wrote to leaders of the Senate and House of Representatives urging them to support legislation that would allow the U.S. Patent & Trademark Office to review business method patents and to invalidate them if it believes they should not have been granted. Business method patents are often used by PAEs as the basis for patent infringement lawsuits.

The U.S. Government is at least taking some small steps towards addressing PAEs. In a news release distributed today (September 27, 2013), the U.S. Federal Trade Commission (FTC) announced that it will seek public comments on the agency’s
proposal to gather information from PAEs. Popular use of the term PAE appears to have originated with the FTC – although the definition of a PAE and what is popularly known as a patent troll is the same. According to the proposal, the FTC defines PAEs as “firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies.” The FTC is seeking information that appears designed to measure and assess how PAEs are organized and structured and how they receive compensation through “assertion activity”, i.e., through demands and litigation.

It has been widely reported that lawsuits by PAEs (patent trolls) dominate litigation dockets and require companies to spend billions of dollars in defense costs. By some estimates, in 2012, lawsuits by PAEs (patent trolls) comprised a whopping 61% of the total number of patent infringement lawsuits filed. In a
speech by Joshua D. Wright, Commissioner of the FTC on April 17, 2013, he cited Cisco’s general counsel as estimating that Cisco spends $50 million per year in defense of lawsuits brought by PAEs and that, as a result, the company has “reduced funding for new patent applications in order to fund this litigation”.

We will continue to monitor and report on the FTC’s activities, as well as Congress’ activities, aimed at stemming the tide of litigation brought by PAEs (patent trolls).

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