'Patent Trolls' Face Rising Tide of Federal Scrutiny

NEWS ANALYSIS: Federal authorities are making an effort to rein in patent trolls, but the muddled, dysfunctional U.S. patent system makes significant change a long process with chances of success limited.

By now you've probably heard plenty of stories about the excesses of patent trolls, or Patent Assertion Entities as they're politely referred to in legal circles.

There's been a lot of talk about reining in those trolls in Washington, and there's been some action that might at least make it harder for them to coerce large amounts of money from companies that aren’t doing anything beyond trying to conduct their businesses. Over the course of the past few days the U.S. government has taken steps to limit the worst of the abuses.

On June 20 the new chairwoman of the Federal Trade Commission, Edith Ramirez, announced that the FTC would be launching what's called a Section 6(b) study of the patent troll business model. This is a necessary first step toward regulating how these entities operate.

The study is intended to reveal who these patent trolls are and how they work. The study should also reveal the complex workings of intertwined shell companies that patent trolls use to avoid anyone finding out who they really are.

Ramirez said that the patent troll business model is "focused on purchasing and asserting patents typically against operating companies with products currently on the market." She said that usually these patents are extremely broad—so broad in fact that they cover activities that these companies were already performing before the patent was issued. She noted that such patent trolls are already filing the majority of patent infringement lawsuits in the United States.

These entities have come to be called "patent trolls" in the media and by their victims because they are like the mean, ugly trolls in fairy tales who hide under bridges and leap out to confront unsuspecting travelers with threats of mayhem if the travelers don't pay their "tolls."

Ramirez, speaking at a conference organized by the Computer and Communications Industry Association and the American Antitrust Institute at the National Press Club in Washington, said that a significant number of these infringement lawsuits are aimed at small businesses, hotels, restaurants or financial institutions. The alleged infringements include activities such as using a scanner purchased from an office superstore, displaying calories counts on a restaurant Website or accepting hotel bookings online.

Unfortunately, the FTC study is just the first step in what will be a very long process. But there are other steps that are also working to get a handle on the situation. On June 24 the International Trade Commission said that it will require companies complaining of patent infringement to prove that they have a significant presence in the U.S. before any other action is taken.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...