Fairy tale trolls and patent trolls share more than just a name.  Both gather property of sorts–trolls gather trees and livestock from fields, and patent trolls gather patents.  Neither serves a productive purpose–trolls destroy everything in their paths and patent trolls use the threat of lawsuits to prevent industrious companies from pursuing success.  Thus, while the companies are sometimes more politely called “patent assertion entities,” it is easy to see why they are more commonly known as “trolls.”

However, there is one significant different between the two types of trolls.  While conventional trolls existed only in fairy tales, patent trolls are a very real part of modern society.  This article discusses a few of the many negative consequences of patent trolls.  It says that patent trolls are “leading businesses to remove common services to avoid being sued–for instance, cafes are pulling WiFi access and websites are removing calorie counters.”  Additionally, a program on NPR, titled “When Patents Attack!” discussed the negative impact of patent trolls.  The transcript of the program is available here [PDF].

And last Thursday, the Federal Trade Commission said, “No more!”  Edith Ramirez, Chairwoman of the FTC, made clear that the FTC is “ready to enforce its antitrust powers,” including the Sections 6(b) and 5 powers granted by the FTC Act.  The FTC can used these powers to investigate and punish companies that use “unfair and deceptive” practices.

The FTC’s statement was generally well-received, especially its intention to use the 6(b) investigatory power to examine the pros and cons of patent trolls.  For example, one article quotes David Balto, an antitrust lawyer, saying that the studies could play “a vital role in guiding Congress and regulators [on] how to put a stop to harmful and deceptive conduct.”

However, it is uncertain whether the FTC will be able to do enough. Some believe that because patents are “official monopolies granted by the government,” they cannot be challenged on antitrust grounds.

Will the FTC be able to stop the patent trolls?  Will more measures be needed?  What risk of unintended, negative consequences? What do you think?

Samantha Taylor

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4 Responses to Trolling for Trouble

  1. Mike says:

    One issue is distinguishing between a “harmful” patent troll and an inventor who doesn’t have the ability to bring her invention to market like the big companies do. Both are non-practicing entities and the only feasible strategy of either is to get royalties from the “industrious” companies for the uses of the patents to which the inventor or assignee (i.e., troll) have the rights. People think “inventor suits” are American, but can’t stand “troll suits.” Is it really worse if such an inventor sells her rights to a troll to enforce? I’m not saying there isn’t a problem with stockpiling patents and threatening every company under the sun; just highlighting another wrinkle that makes reaching a solution more difficult.

  2. Zachary Loney says:

    The FTC would specifically target those entities that have “no ownership interest in, or standing to assert, any patent rights; only an expired patent; or make false threats of litigation.” To be clear, this does not include entities with weak patents. This pertains only to the assertion of invalid and nonexistent patent rights.

    It is likely that many weak patents may still be enforced without doing anything “unfair or deceptive.” Yes, it is a moral shakedown to sue every internet cafe that has WiFi simply because the firm holds one patent in ten thousand that the router incorporated. However, if the FTC were to try to use its section 5 powers, I doubt they would find much traction. The patent, for all intents and purposes, is valid and the owner has a right to assert it as it pleases. There is no deception in the act, simply a very lop-sided power dynamic.

    I applaud the FTC’s recent studies into weak patents and patent trolls, however, it will likely only stop the few incredibly nefarious entities that are exploiting the system through outright lies. I see this statement at worst as political posturing and at best an attempt to bootstrap a solution that will ultimately fail to solve the problem. Congress must still act to level the playing field for small businesses that want to defend themselves against weak patents.

  3. Erin Frankrone says:

    The law and economics literature takes an interesting perspective on patents’ status as “official monopolies granted by the government.” The literature considers patents are a mere probability of enforcing a monopoly. This idea that a patent doesn’t grant monopoly power with 100% certainty is evident in the different quality of patents themselves. Ambiguities, errors, and other idiosyncrasies make certain patents stronger than others.

    The variances is patent strength suggest that smaller companies should not jump to the conclusion that patents are a guaranteed monopoly that can be enforced against them. Rather, the literature suggests that varying patent quality and the relative size of the adverse parties may dictate a variety of outcomes, including the patent holder acquiescing to the entrant’s alleged infringement. This lends credence to the FTC’s observation that trolling practices are largely deceptive and merit the agency’s prevention efforts.

  4. Emily Green says:

    Wow, I think it’s a really fresh perspective to challenge a harmful practice such as patent trolls under antitrust laws. While I understand the concern raised by some regarding official monopolies, I certainly think that in instances of “unfair or deceptive” practices an exception should be made because it seems that the purpose being served is not what the patent is designed to protect.