Federal Trade Commission Votes to Conduct Study on Patent Assertion Entities

The FTC announced on September 27 that after a unanimous vote, the Commissioners have decided to launch a study of patent assertion entities (PAEs) and their effect on innovation and competition. The agency has long indicated interest in this issue. The study, which will be conducted pursuant to Section 6(b) of the FTC Act, will allow the FTC to issue compulsory process orders to gather information from PAEs, as well as from other companies that operate in the wireless communications sector.

PAEs have lately garnered scrutiny from the Obama Administration, Congress, and private litigants, as described in more depth here. Their effect on competition and innovation is, however, difficult to measure, because details about licensing transactions are often confidential. But the Commission has the authority to collect non-public information, such as licensing agreements and cost and revenue data. As a result, the study is expected to generate a much richer set of data from which the Commission will be able to draw conclusions. According to the Commission's announcement, the study will target specific issues, including (1) the corporate structure of PAEs; (2) the type of patents held by PAEs; (3) the licensing and litigation conduct of PAEs; and (4) the operating costs and revenues of PAEs.

While the Commission has emphasized on various occasions that it has not yet drawn any conclusions about whether PAEs have a negative effect on competition and innovation, a 6(b) study has the potential to result in enforcement actions in the future. For example, the Commission's position against reverse payment settlements in the pharmaceutical industry was solidified after it conducted a 6(b) study on that subject from 2000 through 2002.

The FTC has issued a public call for comments on proposed information requests to PAEs, and it will accept such comments for 60 days, at this address. Upon expiration of the comment period, the FTC will seek clearance from the Office of Management and Budget to commence issuing compulsory process orders.