Posted by Social Science Research Network
The US Federal Trade Commission issues report on patent assertion entities
By Michael A. Carrier (Rutgers Law School)
Abstract: In October 2016, the Federal Trade Commission (FTC) issued its long-awaited report on patent assertion entities (PAEs). Sometimes called “patent trolls,” these actors have elicited fierce debate, with critics lamenting their ability to demand ransom money and hold up an industry while proponents applaud their role in making markets more efficient and returning money to individual inventors. Pursuant to FTC Act Section 6(b), the agency issued subpoenas, seeking to obtain information not previously available on these questions. This brief article summarizes the report and then elaborates on the following five observations.
First, the report did not answer the $64,000 question about the effect PAEs have on inventors, as the agency could not “quantify the frequency or magnitude of revenue sharing with independent inventors” due to the “significant differences in how [the] PAEs maintained their data.”
Second, and more successfully, the report uncovered useful information on PAEs’ patents, in particular the timing of enforcement and number of citations.
Third, the FTC gained crucial insights on PAE enforcement, distinguishing between “Litigation PAEs” (which settle after filing suit, enter into licenses less than litigation costs, and pose transparency challenges for defendants) and “Portfolio PAEs” (which are more likely to resemble manufacturing firms in obtaining complex licenses without filing suit).
Fourth, the FTC offered four policy recommendations relating to discovery, transparency, litigation management, and notice. Although they make sense, the proposals do not directly follow from the report, which was “descriptive and limited to the observed sample,” rather than being “generalizable to the universe of all PAE activity.”
Fifth, the report was silent on the appropriate antitrust assessment of PAEs. Despite its robust detail, the report’s findings are not likely to affect antitrust analysis. As I have previously written (http://ssrn.com/abstract=2209521), the antitrust agencies can challenge PAE conduct based on the individual facts of cases, scrutinizing the evasion of standards-based promises through transfer, challenging mergers reflecting an ability and incentive to harm competition, and bringing Section 1 claims against collusive agreements.
In short, the FTC report sheds needed light on a phenomenon that has been shrouded in secrecy and controversy. Though it does not answer the question of the contribution PAEs offer in the innovation ecosystem and its proposals do not bear direct support from its findings, the report sheds invaluable light on PAEs’ patents and enforcement behavior, offering benefits that policymakers should consider in the years ahead.
Featured News
College Sports Leaders in Intensive Talks to Settle NIL Antitrust Case Against NCAA
Apr 30, 2024 by
CPI
EU Investigates Facebook’s and Instagram’s Handling of Disinformation Ahead of Elections
Apr 30, 2024 by
CPI
Antitrust Lawsuit Targets Hotel Giants for Alleged Price Fixing with AI
Apr 30, 2024 by
CPI
ABA Seeks to Join FTC Lawsuit Against Amazon Over Antitrust Concerns
Apr 30, 2024 by
CPI
Google Agrees to Pay News Corp for AI-Related Content
Apr 30, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI