On September 28 of this year the Federal Trade Commission voted to seek public comments on proposed information requests to better understand patent troll practices. This move by the FTC marks the first step on the road to possibly regulating patent trolls.
Patent trolls are firms that buy patents with the sole purpose of suing others whose goods infringe the patent. Patent trolls do not attempt to produce the invention disclosed by the patent, but rather sue those firms that do.
With the FTC’s latest focus on patent trolls, it is clear that patent trolls are becoming problematic for businesses. In 2011 alone, according to a Financial Times article, litigation by trolls accounted for sixty percent of all patent lawsuits filed in the US. Trolls create IP minefields for businesses, whereby businesses must exert resources to carefully act to not infringe a patent troll’s patent. Sometimes companies decide to not undergo innovation because doing so might put the company at risk of being sued by a troll. This action also antagonizes the ultimate purpose of patents – to further scientific and technological progress – by slowing the pace of innovation. It, therefore, makes sense that the FTC has decided to fight back against trolls – especially in light of the agency’s key mission “to examine cutting-edge competition and consumer protection topics that may have a significant effect on the U.S. economy.”
In spite of the FTC effort, it is unclear what regulations could effect in greater transparency of patent troll activities. One viewpoint is that if patents were bought and sold on an exchange, such centralization and transparency could make it easier for businesses to protect against patent trolls – by buying the patents first or through other financial incentives – and for regulators to prevent against behavior that thwarts competition and innovation. Creating a patent exchange would require better patent valuation techniques as well as a shift in thinking. While some firms, such as Ocean Tomo, have tried to popularize the idea of a patent exchange (e.g. Ocean Tomo’s IPXI product), this reality has not become widely accepted. Might this be the future?