On March 7, 2011 the Federal Trade Commission released a report on the patent system, titled The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition. The report is based on testimony gathered from eight days of public hearings held during 2009 and 2010, public comments and independent research.

The report, which is more than 300 pages long including appendices, offers economic observations about the consumer benefits of the patent system, especially in facilitating technology transfer and fostering competition in innovation and technology markets. The report also offers numerous recommendations for reform to both the U.S. Patent and Trademark Office and to Congress and the courts. The focus of the recommendations is in two areas: the notice requirements (as a function of patent claims) and remedies for patent infringement.

Recommendations for reform of notice requirements focused on problems with indefinite claim language and inadequate disclosures, along with difficulties in verifying chain of title and completing a patent clearance. More specifically, the report pointed to the lack of uniform terminological and taxonomical conventions as impediments to consistent and cost-effective determinations of the scope of patented inventions.

Recommendations for reform of remedies law focused on the importance of reference to alternative non-infringing technologies in calculating damages, as well as the elimination of the entire market value rule. The report expresses concern that lost profits and reasonable royalty damages calculations are prone to overestimate the economic value of patented products or processes.

The report also indirectly addressed controversy over the role of non-practicing entities (NPEs) and universities in the patent system. In a footnote, the report explains that, “Taken literally, the term NPE encompasses patent owners that primarily seek to develop and transfer technology, such as universities and semiconductor design houses. Patent assertion entities do not include this latter group.”

The release of the report coincides with a recent flurry of activity in the U.S. Senate on patent reform. Commissioner Leibowitz acknowledged the role that FTC’s 2003 report had in debates about patent reform and suggested that the new report might have similar role in improving the patent system: “These reports, combined with the hard work by many leaders in Congress to improve a troubled system, will help ensure that patents continue to serve America’s innovators and consumers.”

The FTC’s press release for the report is available at http://ftc.gov/opa/2011/03/patentreport.shtm .

The report itself is available at http://ftc.gov/os/2011/03/110307patentreport.pdf.