05/08/13

House of Cards: Tech Companies Requesting Probe of NPE Business Model


By: Jesus Hernandez
Blog Editor, Contributor  
 
A group of tech companies has submitted comments to the FTC and the DOJ requesting a probe into the business model of patent assertion entities (aka 'non-practicing entities', aka 'patent trolls').  [1] The group includes Google and Blackberry, among others.  The comments were submitted as part of a Patent Assertion Entity Activities Workshop conducted by the FTC [2]
Of note is the fact that this group of tech companies want the federal agencies to investigate the business model of innovative firms outsourcing their patents to patent assertion entities, which thereafter enforce said patents against competitors. [3] Specifically, they find the practice to be anti-competitive and in violation of antitrust laws. Indeed, the comments analogize this practice to the 16th century practice of 'privateering.' [4] As Verge author Adi Robertson has pointed out with respect to the comments, "Google didn't name names, but it linked to an article citing both Microsoft and Nokia as companies that employed privateering." [5]

However, the practice has been defended by other tech companies, even before the same agencies being petitioned to start the probe.  [6] If such a probe is in fact started, it will be interesting to see if the patent assertion entities' business model would stand the scrutiny of the FTC and DOJ.

Endnotes:

[1] COMMENTS OF GOOGLE, BLACKBERRY, EARTHLINK & RED HAT TO THE FEDERAL TRADE COMMISSION AND U.S. DEPARTMENT OF JUSTICE on PATENT ASSERTION ENTITIES, http://ftc.gov/os/comments/pae/pae-0047.pdf ("Comments of Google")


[2] Patent Assertion Entity Activities Workshop (December 10, 2012), http://www.ftc.gov/opp/workshops/pae/ (last visited May 8, 2013)


[3] Comments of Google 2-3.


[4] Comments of Google 2 ("Although we agree that the current patent system undesirably encourages PAE activity, we are also concerned with, and suggest that the agencies should seriously examine, the outsourcing of patent enforcement by operating companies – companies that develop technology and sell products – to PAEs and the competitive implications of such activities. So-called “privateering” amplifies the threat to innovation and competition already posed by PAEs.")


[5] Adi Robertson, Google asks FTC and Department of Justice to investigate 'patent privateering', http://www.theverge.com/2013/4/5/4187914/google-asks-ftc-and-doj-to-investigate-patent-privateering (last visited May 8, 2013)


[6] Susan Decker, Google Seeks Probe of Patent Privateers Defended by Nokia, http://www.bloomberg.com/news/2013-04-05/google-seeks-probe-of-patent-privateers-defended-by-nokia.html (“Often we do not have the resources or otherwise are not best positioned ourselves to exploit those inventions, either through our own products or through our own licensing activities,” Paul Melin, Nokia’s chief intellectual property officer, said on a panel. “Divestments of patents have become a very important channel for us to monetize and realize the value of our research and development.”)




 
 
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