Jessica M. Karmasek Aug. 19, 2014, 12:15pm

WASHINGTON (Legal Newsline) - A Federal Trade Commission study designed to develop a better understanding of how patent assertion entities may impact innovation and competition has been given the green light.

This month, the FTC received approval from the White House’s Office of Management and Budget to go ahead with its two-part study of PAEs -- or as some would call them, “patent trolls.”

Generally speaking, a non-practicing entity or PAE purchases groups of patents without an intent to market or develop a product.

In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought.

The study was first announced last fall, after which the FTC received 70 comments in response to a notice seeking public input on the proposed study.

The commission has said the study aims to further one of its key missions -- “to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.”

“Patents are key to innovation and competition, so it’s important for us to get a better understanding of how PAEs operate,” FTC Chairwoman Edith Ramirez said in September.

“We want to use our 6(b) authority to expand the empirical picture on the costs and benefits of PAE activity. What we learn will support informed policy decisions.”

Apple Inc., Microsoft Corp., Intel Corp., Verizon, the American Intellectual Property Law Association and the National Association of Attorneys General were among those who submitted comments.

Most said they backed the study, while others suggested some revisions to its scope. However, no commenter opposed the study.

“We firmly believe that efforts by FTC to examine the problem of patent enforcement abuse, which undoubtedly presents risks of antitrust and unfair and deceptive trade practice violations, are entirely consistent with the FTC’s function and purpose,” the attorneys general wrote in their letter to the FTC in December.

“Given the value that increased knowledge would have in pursuing efforts to prevent violations of antitrust and unfair and deceptive practice laws, we believe the merits of the proposed information request are beyond question.”

Other studies, concluding that PAE litigation activity is on the rise, have focused mostly on publicly available litigation data.

But the FTC has said its study -- because of the commission’s unique Congressional authority to collect non-public information like licensing agreements -- should provide a more complete picture.

Among the study’s 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?; and

- What do PAEs earn through assertion activity?

The commission will begin sending out requests for information to various PAEs, manufacturers and others soon.

From Legal Newsline: Reach Jessica Karmasek by email at

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