Patent trolls, beware - the Federal Trade Commission is watching.
The agency today released a 300-page report examining the effect that patent trolls – or as the FTC more tactfully dubs them, "patent assertion entities" - have on competition.
The FTC noted increased activity in the information technology industry by patent-owning entities focused “on purchasing and asserting patents against manufacturers already using the technology, rather than developing and transferring technology.” The practice, said the FTC, “can deter innovation by raising costs and risks without making a technological contribution.”
In preparing the report, the FTC held eight days of hearings beginning in December 2008; cosponsored a workshop with the Patent and Trademark Office and the Department of Justice in May 2010; and received more than 50 written submissions.
One fundamental problem, according to the FTC, is notice – “how well a patent informs the public of what technology is protected.”
The difficulties begin with patent claims, where the language “is inherently imprecise,” the agency found. Additionally, it said, “Some applicants may have incentives to draft ambiguous claims that might be viewed narrowly by the PTO and then construed broadly in litigation.”
The FTC suggested that the PTO adhere to “an indefiniteness standard that weeds out claims reasonably susceptible to multiple interpretations.”
Also, the FTC recommended establishing undisputed claim term definitions, noting that “litigants disputing claim interpretation may turn to different dictionaries to find a favorable definition.”
The FTC urged that patent examiners be encouraged “to build a record that improves claim scope clarity,” and to “make greater and more informative use of statements of reasons for allowance and for withdrawing indefiniteness rejections.”
Another recommendation was for legislation requiring publication of patent applications 18 months after filing, whether or not the applicant also sought patent protection abroad. Under current law, applications filed in the United States alone can be kept secret until the patent issues.
As for the courts, the FTC urged judges to rein in infringement damages by grounding calculations and injunction analysis in “economic principles that recognize competition among patented technologies.”
This includes capping royalty damages “at the amount a willing licensee would pay, which may be determined by the value of the invention over alternative technologies,” as well as increasing the role of district courts in excluding unreliable expert testimony on damages.
The FTC said courts should incorporate concerns “about the leverage that an injunction may give a patentee to obtain royalties exceeding the economic value of an invention.”