Long Awaited FTC Study Offers Little In Terms of New Ideas

Yesterday, the Federal Trade Commission released an extensive study on Patent Assertion Entities (PAEs) (here). Interestingly, the report classified PAEs into two classes, Portfolio PAEs (100s of patents) and Litigation PEAs (10 patents or less). The study pointed out that Litigation PAEs filed 96% of the cases in the study and accounted for 91% of the reported licenses, but only 20% of the reported revenue. Ninety-three percent of reported Litigation PAE licenses followed a lawsuit against the eventual licensee and 77% were valued at less than the estimated cost of defending a patent lawsuit through the end of discovery—a threshold below which litigation settlements might be considered nuisance value. To combat this behavior the FTC proposed familiar ideas.

1. Develop rules and case management practices to address discovery burden and cost asymmetries in PAE litigation;
2. Amend Federal Rule of Civil Procedure 7.1 to reach a broader range of non-party interested entities or persons;
3. Establish procedures encouraging courts to stay a PAE’s infringement action against a customer or end-user, where the PAE has also sued the manufacturer of the accused product under the same theory of infringement.; and
4. As courts continue to address the “plausibility” of pleadings in patent cases, ensure that patent infringement complaints provide sufficient notice to accused infringers.

Of course, (4) was already enacted last year in the heightened pleading requirements, (1) and (3) were proposed in the last round of patent reform legislation, and (2) was pursued by the USPTO with the nightmarish attributable ownership rules (that NOBODY, not even the PTO, wanted).

With a new administration coming in, patent reform legislation is likely to take a back seat to other legislative initiatives in 2017. Stay tuned.