The FTC and Department...
The FTC and Department of Justice Antitrust Division should “seriously examine” patent privateering -- “the outsourcing of patent enforcement by operating companies ... to [patent assertion entities (PAEs)], and the competitive implications of such activities,” Google said Friday in a…
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filing it submitted jointly with BlackBerry, EarthLink and Red Hat. The FTC and Justice continued collecting public comments following a workshop they held in December to get industry input on the effects of PAEs and how the agencies could minimize the harms PAEs could cause (CD Dec 11 p11). The filing deadline was Friday. Patent privateering “poses numerous perils to competition, consumers and innovation,” Google said. It “detrimentally alters enforcement incentives,” the company said, noting that PAEs are immune to possible countersuits because they do not offer products or services, shifting what is normally a patent peace into “asymmetric patent aggression.” Patent privateering can also “threaten royalty stacking and result in exploitation,” Google said. Privateering also encourages operating companies to enter into “contractual commitments secured from their PAE surrogates to raise rivals’ costs and thereby harm competition and stifle innovation,” Google said. Patent privateering may also “transgress the antitrust laws,” since patent acquisitions are subject to the Sherman Act and Section 7 of the Clayton Act, Google said. “Schemes by which operating companies outsource patents to PAE proxies to raise rivals’ costs may be subject to invalidation under Sherman Act Section 1 and Section 2,” the company said. “And, depending on the circumstances, employing PAE enforcement agents to evade FRAND commitments (including no royalty stacking pledges) may violate precedent under Section 5 of the FTC Act as well as the Sherman Act,” the coalition said, referring to fair, reasonable and non-discriminatory licensing. The Google-led coalition recommended the FTC and Justice conduct an inquiry into the relationship between operating companies and PAEs. An inquiry “would enable the Commission and the public to deepen their understanding of how operating companies’ arrangements with PAEs affect innovation, competition and consumers,” Google said. “The fruits of [the inquiry] also would provide a foundation for the antitrust agencies to assess whether solutions to the competitive concerns patent outsourcing arrangements pose lie in antitrust enforcement, in changes in the patent laws (where the antitrust enforcement agencies might play an important advocacy role), or elsewhere” (http://bit.ly/10kVRqi).