FTC expected to peer into the inner workings of NPEs

FTC chairwoman, Edith Ramirez, is planning to ask the full commission to approve an inquiry into the effect on competition of the existence and actions of NPEs (non-practicing entities), or commonly now, PAEs (patent assertion entities), or as they are often broadly, derogatorily referred to, “patent trolls.”  (IP Value Wire will continue to attach the NPE moniker to each such story so that researchers can easily find all related articles on the subject.) The move appears to be a coordinated response to several executive orders issued by the White House directing agencies to take steps to “protect innovators from frivolous litigation.”

The FTC investigation would require the target NPEs to answer questions about their operations, including what role any lawsuits play in their business.

As reported on Patent Progress, Ms. Ramirez is expected to recommend what is known as a 6(b) study to gather information for use by Congress, the courts or executive agencies in dealing with the issue of frivolous lawsuits. Through a 6(b) study, the FTC can carefully analyze the competitive impact of many of the practices of PAEs. For instance, much of the concern over NPEs focuses on their lack of transparency. The FTC can remedy that; a 6(b) study can focus on the following issues, among others:

• Who owns the NPE and what does the NPE own?
• What are the types and scope of demand letters used by NPEs?
• What are the success/failure metrics on NPE-instigated litigation?
• How are patents acquired by NPEs and from whom?
• What is the purpose of an NPE acquiring a patent?
• How does the NPE determine which patents to acquire?
• How does the inventor benefit from NPE activities and how would any changes to the system affect the inventor?