FTC’s Troll Hunting
From an inventor’s point of view, it’s an exciting day when her patent is sold. In return for her hard work and dedication, not only does the Patent and Trademark Office think that this is an idea worth protecting by granting market monopoly, the market thinks so, too! Not all patents may have market attraction, but for those that do, there’s much money to be made, according to Forbes.
Yet not all patents are monetized equally, and it also appears that not all patents are utilized equally as well. There is Google and Microsoft, the mega-buyers (and users) of the patents, and there are non-practicing entities (NPEs), also known as “patent trolls.” The NPEs buy patents for the sole purpose of asserting infringement claims against companies that may be unwitting users of the involved patents. These ‘assertions,’ Reuters explained, are made by sending a letter suggesting a ‘likely’ patent infringement, threatening an immediate lawsuit unless the recipients agree to pay a hefty license fee. These letters are often, if not exclusively, sent to small companies that lack the means to do a thorough investigation into the validity of the claims. It’s not difficult to imagine the recipient’s panic and frustration upon getting one of these letters. More significantly, such letters can result in market confusion and damage as companies facing infringement claims are forced to address an uncertain claim. While the troll’s demands may or may not be lacking in merit, the insidiousness of the claim lies in the motivation to extract monetary response from the recipients rather than to exercise the patent’s full scope of functionality.
In response, a number of states have started to take action in pursuit of better consumer protection against the trolls. Last year, the New York attorney general initiated and reached a settlement that barred the most notorious patent troll, MPHJ Technology Investments LLC, from using deceptive means to assert license fee claims against New York businesses, noted Reuters. Other states and the Federal Trade Commission began examining the market harm arising out of abusive patent litigation as well, which led to a lawsuit against the same troll.
As a result, the FTC reached a settlement this week with the MPHJ Technology Investments that requires the MPHJ to refrain from making false representation in asserting patent rights, reported the New York Times. The director of the FTC’s Bureau of Consumer Protection stated, “patents can promote innovation, but a patent is not a license to engage in deception.”
However, the industry remains unsatisfied, according to the Ars Technica, whose writer calls the FTC measure as a mere ‘slap on the wrist.’ Not only was there no monetary damage, according to the article, this settlement rules out only one of many tactics the NPEs can use to harass the small businesses without any other restrictive guidelines to remedy future harms. Also alarming is the MPHJ’s change in tone. In last year’s settlement with New York’s attorney general, MPHJ had issued a statement acknowledging that the guideline issued by NY was “reasonable” and the settlement was an “acceptable resolution.” In response to the FTC settlement, however, MPHJ was much more defensive and hostile as it continues to assert the accuracy of its demands, claiming First Amendment rights for protecting the right to enforce the patents against the companies suspected of infringement, reported the New York Times. It remains to be seen what measures the FTC would adopt in the future against the troll’s assertion.