Hoping to Understand the Troll: the FTC Seeks Public Comment on its Proposed Information Requests

On September 27, the Federal Trade Commission (“FTC”), announced that it had unanimously voted to seek public comments on its proposed requests for information from selected Patent Assertion Entities (“PAEs”), typically referred to as “patent trolls.” The FTC’s proposed 6(b) order seeks information from approximately 25 yet-to-be-named PAEs in the wireless communications sector regarding among other things, their “patent acquisition, litigation, and licensing practices.”

Through these proposed requests, the FTC hopes to gain a better understanding of how PAEs operate, and how their actions impact innovation and competition. According to FTC Chairwoman Edith Ramirez, the FTC seeks to “use [its] 6(b) authority to expand the empirical picture on the costs and benefits of PAE activity. What [the FTC] learn[s] will support informed policy decisions.” The FTC intends to broaden its knowledge of PAEs by compelling these entities to answer 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?

The FTC also intends to seek the same information from “approximately 15 other entities asserting patents in the wireless communications sector” in order to compare and contrast PAE behavior with patent assertion activity of non-PAEs in a given field.

The proposal, will soon be published in the Federal Register. The FTC is specifically seeking comments of the following nature:

1. 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;
2. the accuracy of the FTC’s estimate of the burden of the proposed collection of information;
3. ways to enhance the quality, utility, and clarity of the information to be collected; and
4. ways to minimize the burden of collecting information.

Comments must be received on or before 60 days from the date of publication of the proposal in the Federal Register.

Gibbons will continue to monitor developments on this important front.