Trolls say they serve a valuable roll protecting inventors and business partners

In response to a request by Congress to wage war on so-called "patent trolls" -- also know as a patent assertion entity (PAE) or non-practicing entity (NPE) -- the U.S. Federal Trade Commission is expected to consider solutions to the problem via a 6 (b) probe, a type of federal investigation.

I. Prepare to Be Probed

This kind of probe is authorized under the aforementioned section in the FTC Act (specifically, 15 USC § 45), the law that created the Commission back in 1914.

FTC Chairwoman Edith Ramirez in recent months has opined that the patent system is growing too big to reasonably enforced.  The technology of a smartphone, for example, was likely covered by tens of thousands of patents (many of which it was in infringement of) she said.

Her organization had taken a soft approach with the so-called patent trolls in a workshop held December 10, 2012 in the capitol, co-hosted by the U.S. Department of Justice (DOJ).  But since then Congress and the White House have been under pressure by their donors in the tech industry to take aggressive action against the trolls, who are leeching away industry profits.

The U.S. FTC is probing "patent trolling". [Image Source: TheNextWeb]

President Obama issued five executive orders earlier this month targeting the trolls.

The FTC will now vote on whether to launch the follow-up to its December workshop, a full probe.  Given the unilateral pressure from lawmakers, this seems virtually certain.

II. Trolls Fight Back

The "trolls" have long rebuked that title and claim they play a valuable role in protecting small inventors and helping some larger firms monetize their portfolios (or liquidate investments) via lawsuit-or-license schemes.  Companies like Intellectual Ventures, the alleged troll founded by former Microsoft Corp. (MSFT) chief technology officer Nathan Myrhvold, and semiconductor licensing technology firm Mosaid Technologies Inc. (TSE:MSD).

Nathan MyrhvoldNathan Myrvhold -- an ex-Microsofter -- heads one of the largest alleged "patent trolls", Intellectual Ventures. [Image Source: ZUMA Press]

Mosaid's chief intellectual property officer Scott Burt comments, "There are companies that are engaged in spurious lawsuits, seeking settlements that are less than the cost of litigation. But not us.  We are a patent-licensing company."

The NPEs (or trolls, if you prefer) are responsible for 60 percent of the roughly 4,000 patent lawsuits filed last year (up from a mere 29 percent in 2010).  And many of the lawsuits push the bounds of credibility -- such as the company who patented scanning a document and emailing it, and then proceeded to sue thousands of small businesses on the East Coast.  One major problem is that it often takes more money to fight a bad patent in court than to simply pay a small settlement to a troll.

Ms. Ramirez says the verdict on NPE's utility is still out, commenting, "A central empirical question, which we will continue to examine, is whether P.A.E.’s encourage invention or instead hamper innovation and competition."

Her board is currently short-staffed due to a deadlock in nominating a fifth commissioner.  Currently there are two Democrats and two Republicans on the FTC.  However, the trolling issue is arguably outside party lines as the tech companies affected donate to both parties.

The only concern about an inquiry is that it could broadly expose business information and trade secrets of alleged NPEs.

Assuming the inquiry proceeds, it's important to remember that no action will be taken -- the inquiry would only be for the purpose of generating recommendations to Congress.  Congress has been sluggish in acting on the issue.  But once the FTC finishes up, it may be budged into action at last.

Source: The New York Times

“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads

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