Government Trustbusters Scrutinize Patent-Holding Firms - Law ...

By Ashby Jones

We?ve spilled a lot of pixels in recent months on companies that make money largely by buying up patents and licensing them to others. (The derisive term for these players is ?trolls,? though they?re often referred to by other names, like ?non-practicing entities? or ?patent-assertion entities? or ?patent monetization entities.?)

The industry says it has every right to license legally-granted patents to folks who might be infringing them. Critics say the NPEs too often make bogus demands that, when they?re rebuffed, lead to frivolous and costly litigation.

Well, a new chapter in the long-running debate seems to be opening up. U.S. antitrust authorities are examining whether such firms are disrupting competition in high-tech markets.

?There?s a possibility of competitive harm here,? said Joseph Wayland, who served as the Justice Department?s acting antitrust chief until last week. Mr. Wayland said officials are devoting ?huge energy, particularly at a senior level? to this and other antitrust issues surrounding patents.

The Justice Department and its fellow antitrust enforcer, the Federal Trade Commission, say they are inviting parties with a stake in the matter to informal hearings next month in Washington, where tech companies are expected to encourage tougher scrutiny of what they describe as a threat to innovation.

The agencies? examination of specialized patent-holding companies is part of a broad review of how holders of patents use them as strategic weapons against competitors.

In particular, the agencies have expressed concern about companies that make aggressive legal claims based on patents that are part of industry technology standards. Antitrust enforcers also are interested in mergers or acquisitions that result in large transfers of patents.

Justice Department economist Fiona Scott Morton, speaking to a Chicago audience in September, flagged potential problems with companies teaming up to transfer patents to a specialized entity. Companies that should be competing ?instead are cooperating, through the troll, to raise rivals? costs and share the profits from doing so,? she said.

Michael Carrier, a law professor at Rutgers University, in Camden, N.J.,? said the government?s best bet would be to look at?patent firms in the context of patent acquisitions. The antitrust agencies generally review deals for their potential impact on competition. Ms. Scott Morton, in her Chicago speech, raised concerns that such acquisitions could harm competition.

Royalties ?could get large enough to make some products unprofitable to develop or produce,? she said. ?These higher royalty rates will raise the prices paid by consumers, and may reduce consumer choice.?

Source: http://blogs.wsj.com/law/2012/11/19/government-trustbusters-scrutinize-patent-holding-firms/

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