On September 27, 2013, the Federal Trade Commission (FTC) issued a Federal Register Notice formally announcing its long-anticipated study on the activities of patent trolls (referred to as PAEs by the FTC) and requesting comments on the structure of this study.  According to FTC Chairwoman Edith Ramirez, “Patents are key to innovation and competition, so it’s important for us to get a better understanding of how PAEs operate…. What we learn will support informed policy decisions.”  The focus of the 6(b) Study appears to be principally the impact of these activities on the wireless communications sector.  However, the FTC has invited comments from other industrial sectors impacted by patent trolls; and appears receptive to broadening its inquiry if patent trolls are having an impact more broadly than the Commission’s initial focus.

The FTC’s 6(b) Study

The FTC’s 6(b) Study will focus on the patent acquisition, licensing and litigation activities of PAEs.  As defined by the FTC, PAEs are “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 technology.”  The purpose of the 6(b) Study is to gather empirical information and data through public comments and the use of compulsory process orders.

Request for Comments

The FTC is requesting public comments on the proposed collection of information.  Specifically of interest to clients in industries impacted by these activities, the FTC is soliciting information on “whether the proposed collection of information is necessary for the proper performance of the functions of the FTC, including whether the information will have practical utility” and “ways to enhance the quality, utility and clarity of the information to be collected.”  Public comments can be submitted online or on paper through the mail and are due 60 days from the date of publication in the Federal Register (the notice has not been published as of today).

Use of Compulsory Process

Through the use of compulsory process orders, the FTC will gather information and data from 25 PAEs and 15 other entities in the wireless communications sector, including manufacturing firms and other organizations engaged in patent licensing activities, “to provide a more complete picture of PAE activity.”  The information requests sent to the PAEs and other patent licensing entities will focus on answering the following questions:

  • How do PAEs organize their corporate legal structure, including parent and subsidiary entities?
  • What types of patents do PAEs hold, and how do they organize their holdings?
  • How do PAEs acquire patents, and how do they compensate prior patent owners?
  • How do PAEs engage in assertion activity (i.e., demand, litigation, and licensing behavior)?
  • What does assertion activity cost PAEs?
  • What do PAEs earn through assertion activity?

Additional Information

For additional information on the FTC’s 6(b) Study on PAEs, see the press release and text of the federal register notice.