Posted by Henry M. Sneath, a principal, shareholder and IP Group Chair at Picadio Sneath Miller & Norton, P.C. in Pittsburgh, Pennsylvania.
The FTC has issued a lengthy, exhaustive, relatively benign (309 pages) report on the state of competition in the IP Marketplace and the role of what they politely call “patent assertion entities” (PAE) – Patent Trolls formerly known politely as “non-practicing entities” (NPE). Forgetting the changing face of politically correct nomenclature for Trolls, the FTC has examined the role of these entities in the IP Marketplace and it is clear that the FTC is not a big fan of the PAE crowd. They are seen as driving up cost, without any corresponding addition to the community of technological advancement. The FTC March 2011 released report is entitled: “The Evolving IP Marketplace – Aligning Patent Notice and Remedies with Competition.” Bottom line: The FTC urges that Patent drafters utilize clearer language to describe claims; that the PTO utilize “an indefiniteness standard that weeds out claims reasonably susceptible to multiple interpretations;” that courts reign in infringement damages and cap royalty payments and; that courts consider the leverage that injunctions provide to patent holders when they seek to extract a favorable royalty or damage deal. I’d like to say that our government dollars were hard at work here, but who didin’t know all that.
As to the PAE community – The FTC critically writes:
“Some argue that PAEs encourage innovation by compensating inventors, but this argument ignores the fact that invention is only the first step in a long process of innovation. Even if PAEs arguably encourage invention, they can deter innovation by raising costs and risks without making a technological contribution.” See FTC Report at P. 9
Here were some of the problems that the FTC examined in hearings and study. None are particularly novel or inventive:
- Patent language is inherently imprecise (wow – that’s news);
- Some art areas, such as software, lack clear nomenclature and common vocabularies for claiming (didn’t know that);
- Claiming using functional language, which describes what the invention does rather than what it is, can produce abstract, ambiguous claims (ok – that’s mildly newsy);
- Some applicants may have incentives to draft ambiguous claims that might be viewed narrowly by the PTO and then construed broadly in litigation (no S—!);
- PTO examination often focuses on issues of novelty and nonobviousness and may result in deferring clarification of claim boundaries until litigation (OK – decent insight here) (Disclaimer – Editors comments are in bold and may represent some facetiousness) (See actual FTC Report at page 10)
The report is an attempt to examine the delicate balance between the promotion of, or the stifling of, competition in the IP marketplace. It throws bones both to the tech transfer community and to true product producers and manufacturers, but remember, it’s a government report. Here’s an example:
“Courts should not presume irreparable harm based on a finding of infringement or the patentee’s use of the patent. Conversely, courts should recognize that infringement can irreparably harm the ability of patentees that primarily engage in technology transfer through licensing to compete in a technology market.” See FTC report at page 27.
In other words, the FTC was for injunctions, before they were against them. Or – they voted for irreparable harm, before they voted against it. We will continue to review the lengthy report and provide more analysis in the near future. Read the full FTC report here on our law firm site: http://www.psmn.com/CM/Custom/TOCResourceLibrary.asp