aNewDomain.net — Led by our patent expert, IP attorney and aNewDomain.net editor Tom Ewing, our team broke the story earlier this year that the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) were preparing to investigate whether the patent market comprised of so-called patent assertion entities (PAEs) like Intellectual Ventures and others are behaving anti-competitively.
UPDATE: Today, FTC chair Edith Ramirez said the U.S. will take a deep look at the patent transaction market with an FTC patent troll investigation. This news came at a Washington DC CCIA conference hosted with the American Antitrust Institute today. Ramirez, basing her comments around a damning report from the White House on June 4, 2013 regarding patent assertion entities, aka patent trolls, says this is necessary because of potential antitrust abuses.
Our Tom Ewing from aNewDomain.net agrees. “What the FTC is basically saying is that they believe there is enough blood in the water,” says Ewing, “that they want to see what is going on.” The FTC Section 6B investigation announced today is the tool that allows the FTC to do just that.
Find more on the White House patent troll stance here. The FTC will employ its powers under Section 6B — that gives it subpoena power to truly investigate what is going on behind the patent wars, where companies disguising their identities under strangely-named shell companies sue one another and extract licenses. Whether the FTC will go further and go past an antitrust investigation — and into the broader Section 5 enforcement tools it has at its disposal — is as yet to be determined, Ramirez told reporters minutes ago.
More information and subpoena power will help various U.S. agencies figure out what the patent market really looks like, experts tell aNewDomain.
“For example, we do not know how many truly independent players operate in the patent market,” Ewing says. Ewing’s report, published with UC Hastings professor Robin Feldman in the Stanford Law Review, showed, for instance, that Intellectual Ventures has conducted its business of patent buying, licencing and litigating under veil of no fewer than 1,200 shell companies.
Patent trolling is by no means an illegal activity at this writing. But the White House, DOJ and FTC are looking into whether the practice is anti-competitive or potentially violates antitrust or hurts competition.
In a statement on June 4, Intellectual Ventures accused Ewing “of perpetuating a myth” that it had shell companies at all or that they are “vehicles for litigations.” Rather, the 1,200 to 1,300 entities are “acquisitiion entities.”
The FTC announcement today was long expected. Half a dozen government meetings and reports on the patent system of late telegraphed the June 4, 2013 White House crackdown.
The reason the waters are so muddy concerning PAEs is a profound lack of understanding. Understanding is key in an environment where those who understand are unable to talk to investigators for fear of violating NDAs — and those who can talk don’t. The latter do not really know or understand what is going on.
This is due to the strange ways in which PAEs appear to operate. For instance, who is VirnetX? A CIA and NSA backed troll or something else? Who is Personal Audio, the firm that won a judgement from Apple, is suing Adam Carolla, and claims to own the very technology behind podcasting? Click here to find the results of our investigation.
This paper, by UC Hastings professor Robin Feldman, with Tom Ewing and Sara Jeruss, is the largest ever analysis of the activities of patent assertion entities. It shows that well over half of litigations in the patent wars are started by oatent trolls. It is quite a read. Newly expanded. UPDATE JUNE 21 2013. Click here to read Dear Mr. President: Extortion? 12 Leads Re Patent Trolls for Your DOJ-FTC Investigation.
The patent troll world and how or whether it is shaping U.S. high tech and biotech competition is a hot topic government officials are only just beginning to understand. Only a full-on DOJ-FTC investigation would allow them to understand the contours of the patent market where business is typically conducted behind closed doors — in locked offices — buried in a deep metaphorical underground.
Who’s suing whom? That’s what the government wants to know. In his letter to U.S. President Barack Obama — Dear Mr. President — our Tom Ewing gave some hints as to where the government should start looking in this confusing web of tech companies, patent trolls, tech investors and the complex ties that bind all of them. The DOJ posted the aNewDomain.net piece on its website of public commentary leading up to its investigation.
PAEs — more pejoratively known as patent trolls — are increasingly the focus not just with the DOJ and FTC but also among attorney generals of various states.
After all some of the largest PAEs, like Bellevue-based Intellectual Ventures, are even backed by tech companies, as court records show. That affects consumers if legal costs of the patent wars fall down to them.
Image credit of Wright Brothers: Wikimedia Commons
Last month, the state of Vermont became the first state ever to sue a PAE. As you can see in the complaint embedded below the fold, Texas-based MPHJ and its 40 shell companies and subs are allegedly violating Vermont’s consumer protection statutes.
We expect this activity to amp up. On Thursday, June 20, at 9:30 a.m. PT and 12:30 p.m.Eastern, FTC chair Edith Ramirez is the keynote speaker at an antitrust conference in Washington DC. The link for that is above.
Some sources tell us Ramirez may use the platform to announce that the FTC is kicking off a patent troll investigation around its section 6B investigation authority.
That would give the agency subpoena power and leverage to investigate firms that operate under veil and extract licensing fees from inventors using strangely named shell companies.
The State of Vermont Sues Patent Troll MPHJ full doc is below.
Click here for a story I wrote, based on court docs,showing that the world’s largest tech companies fund the world’s largest patent troll — PAE Intellectual Ventures. The list of companies includes Microsoft, Nokia, Facebook, Verizon and many other tech giants. Why do they do it? The answer is elusive, which might explain the need for a DOJ-FTC investigation like the one officials are apparently conducting now. Scroll below the fold for more.
Here is the White House June 4, 2013 report on patent trolling and privateering.
Here’s the full transcript from a recent USPTO hearing on transparency issues as pertains to the patent business.
Below find the comments U.S. President Barack Obama made on the February 14 Google + Fireside Chat hangout, in which he referred to patent trolls as “extortionists.”
Gina Smith is the New York Times best-selling author of Apple co-founder Steve Wozniak’s memoir, ” iWOZ: How I Invented the Personal Computer and Had Fun Doing It”. (W.W. Norton, 2005/2007/2012). With John C. Dvorak and Jerry Pournelle, she is editorial director at aNewDomain.net. Email her at gina@aNewDomain.net, check out her Google + stream here or follow her @ginasmith888.