Welcome back to Legal Geek. This week, we take a look at a landmark FTC consent order and settlement issued earlier this week, the consent order imposing limits on a patent troll for the first time.
https://archive.org/details/LegalGeekEp28
The Federal Trade Commission is a government entity that has the dual mission of protecting consumers, specifically by stopping unfair and deceptive practices in the marketplace, and of promoting competition, specifically by enforcing antitrust laws. The FTC has come across this segment's radar for antitrust before, but now we see the consumer protection branch in full effect.
Whenever a complaint is received from one or more consumers by the FTC about deceptive business practices, the agency investigates the complaints and brings lawsuits to force changes in conduct for bad actors. That's what happened here against MPHJ Technology Investments and its law firm.
Patent assertion entities, also referred to as patent trolls, are one example of potential bad actors in the marketplace. These patent assertion entities buy up vague and broad patents for the express purpose of threatening lawsuits to many businesses to strong-arm them into patent licenses which become significant revenue streams based on the purchased patents. This trend has been strong for a decade in the patent world, but most efforts to curtail this practice in Congress and elsewhere have been ineffective or slow in coming about.
However, the FTC may have just opened a new viable attack against such patent assertion entities because MPHJ has been forced in this consent order to stop sending threatening letters making misstatements about the number of other companies who have already agreed to license the patents and misstatements about threatening litigation when no real preparation or intent to sue is there. Further violations of this nature will now come with a $16,000 fine per incident, and considering MPHJ has already sent out over 9,000 letters, that price tag could rise into the millions if the deceptive conduct continues.
The primary reason patent trolls are such a drain on the marketplace is that they wield all the power with very little downside, as companies often will pay these entities to avoid expensive and lengthy patent litigation. By taking away the ability to baselessly threaten litigation, patent trolls lose much of the power that makes this a top issue. Therefore, as the FTC opens a 30 day public comment period for us to comment on this consent order, it seems like a good idea to flood the FTC with positive comments reinforcing this decision.
Bottom Line: this FTC decision may have an initial small effect against only one bad actor patent assertion entity, but the potential for this to happen to other patent trolls could finally change the landscape in this long-fought battle over patent rights. The FTC may have finally solved how to protect innovators while clearing out true abuses of the patent system.
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Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitz
