Are the Regulators Coming after the Patent Trolls?

by BakerHostetler

FTC and DOJ discuss antitrust implications of patent acquisition entities

The Federal Trade Commission and the Department of Justice recently held a workshop to discuss the effects of patent assertion entities (PAEs) on innovation and competition. A PAE, more commonly, and more colorfully, known as a patent troll, is an entity that buys patent rights not to practice the patented invention, but to extract licensing agreements by threatening or bringing costly infringement litigation. PAE activity has steadily increased over the recent years to the point where, this year, PAEs accounted for approximately 60% of all infringement actions filed. Moreover, data suggests that infringement suits brought by PAEs tend to be disproportionately meritless: PAEs lost 92% of the time when cases were decided on the merits.

Although the workshop included both supporters and detractors of PAEs, it is clear the DOJ and FTC are concerned that PAEs may limit competition and innovation in the marketplace. The workshop included a panel discussion on whether the antitrust laws offered any relief from the potentially anticompetitive effects of PAE activity.

The panel discussed several hypothetical scenarios, but the most likely areas for antitrust scrutiny seemed to be 1) when PAEs acquire a patent portfolio sufficient to exercise some market power, and 2) when a PAE coordinates its enforcement activity with the original patent owner or owners.

First, if a PAE obtains some market power by acquiring a large patent portfolio, the PAE could run afoul of Section 7 of the Clayton Act or Section 2 of the Sherman Act. The panel noted PAEs with large patent portfolios can coerce settlements that protect weak patents, misuse standard essential patents, or circumvent licensing obligations of the original patent owner, all of which could abuse the PAE’s market power.  Panel participants agreed, however, that asserting a Section7 or a Section 2 action against a PAE raises problems in defining the relevant market because PAEs do not themselves participate in any traditional product market.

Second, a PAE could violate Section 1 of the Sherman Act if it coordinated activities with one or more of the original patent owners. Companies sometimes hesitate to file infringement actions against their competitors because the competitors may file counterclaims for infringement of their own patents. But PAEs, which do not have any operations that could infringe any patents, could target the original owners’ competitors in the market, thereby raising their costs and impeding their ability to compete with the original owners. The participants discussed some real-life examples where coordinated activity attracted regulatory attention in other countries. But the panelists agreed that a Section 1 claim would be subject to market definition problems, and the PAE’s act of filing suit may be protected under the Noerr Pennington doctrine as if it had been brought by the original patent owners.

The recent discussion showed the DOJ and FTC have concerns about the effect of PAEs on competition and innovation in the market, but are frustrated that PAE activities do not fit neatly under the traditional antitrust enforcement mechanisms. The agencies are continuing to monitor PAE activity, and are accepting public comments on issues raised by PAEs until March 10, 2013.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BakerHostetler | Attorney Advertising

Written by:


BakerHostetler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.