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08 April 2013, 12:12

Call for action against patent trolls

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Patents icon Google, Red Hat, BlackBerry and ISP EarthLink have called on the US Federal Trade Commission and US Department of Justice to take action against patent assertion entities (PAEs), or as they are more commonly known, patent trolls. In a letter to the agencies, the companies point out that PAEs are now filing four times as many cases as they did in 2005 and claims cost US companies at least $29 billion in direct costs in 2011 and $80 billion when accounting for indirect costs. Although large companies face hundreds of PAE lawsuits, the vendors point out that small and medium-sized companies are the most frequent targets. According to the comments, 62% of all recently filed patent litigation is PAE lawsuits.

Although trolls have not been able easily to get injunctions since the 2006 eBay ruling, they have switched to using US ITC to block those they are attacking in court and this, combined with other assymetrical elements in the patent system, means they can still cause major problems for the companies they sue.

Patent Assertion Entities are a subclass of Non Practicing Entities, companies which hold patents but do not make anything related to the patent. NPEs in general are immune to the traditional defence in patent cases of counter suing for patent infringement – as they do not practise in the field, they do not infringe. Although some NPEs, such as the Open Invention Network, have been created to act as defensive buffers against patent aggression, PAEs are usually expressly created to bring legal threats and lawsuits against any company that it feels may infringe the patents they hold. Some PAEs are even created by companies selling their patents to specially created shell companies expressly so that the shells can sue competitors.

The vendors' letter specifically picks out this "outsourcing" of patent litigation and suggests that it could "transgress the antitrust laws". They ask the FTC and DOJ to look more deeply into PAE arrangements with companies, the secrecy with which they operate and the motivations of those involved. It urges the formation of a Section 6 investigation into the issues to be started for "examining this issue of vital importance".


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