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FTC opens investigation on patent trolls, wants more information about how they work

FTC opens investigation on patent trolls, wants more information about how they work

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The FTC has taken the first step on a proposal that would help it understand how patent aggregators (often called "patent trolls") operate. In a statement, the agency says it hopes to collect a variety of information about operations like Intellectual Ventures, which uses its massive patent portfolio to extract licensing fees from companies. Google and others argue that patent aggregators all but extort their money, leveraging broad patents that they have no intention of actually using as anything but bargaining chips. Congress and the White House have pushed for action, and the FTC seems potentially ready to take aim at patent abuse. But first, it says it needs to find out more about the trolls themselves.

The FTC and the Department of Justice held a joint workshop last year to investigate whether patent aggregators affect innovation. But the participants said there was little information about how the companies operated, including details about how they collected, licensed, and litigated patents. Existing studies looked at publicly available information, but the FTC can potentially gather data that other agencies couldn't. That means after two months of public comment, it will ask for clearance to make 25 patent aggregators and 15 other licensing companies to hand over data.

To understand patent trolls, the FTC needs to cut through their shell companies

Much of that information-gathering seems to be aimed at simply cutting through the dozens of shell companies trolls can use. Among other things, the FTC wants to know "the firm's complete legal name and all other names under which it has done business," as well as how much every parent or subsidiary company makes. It's also looking for a full list of patents. A company like Intellectual Ventures can hold more than 50,000 patents, and the FTC wants to know when and how each one was acquired, when it's set to expire, and whether anyone else has a legal right to it.

Beyond that, the requests could shed light on how much other companies are affected by patent suits. The FTC wants a list of every single legal threat made since the beginning of 2008, regardless of whether it resulted in licensing or a trial. If it was licensed, companies must say how much they made from the deal; if they went to trial, they need to detail the result, including damages or settlement costs. They'll also need to reveal how much they made and shared with shell companies or partners since 2008.

None of these details is going to immediately equal damning evidence against trolls, and we don't know how the request will change after the comment period — or how long the actual investigation will take. It's also important to note that none of these entities are big brands like Apple and Samsung, which use the patents they hold but aren't above getting locked in legal proxy wars. What this request will do, however, is tell the FTC how big these companies really are, how much ammunition they have, and how frequently they're using it.