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From Antitrust Law Daily, September 27, 2013

FTC Chair defends antitrust involvement in standard setting disputes, launches PAE study

By Jeffrey May, J.D.

Antitrust enforcement actions are appropriate responses to abusive standard setting practices, FTC Chairwoman Edith Ramirez told attendees of 40th annual international antitrust law and policy conference this morning. Ramirez said that antitrust agencies are legitimately concerned about the impact on competition of “patent hold-ups” by holders of standard essential patents (SEPs) that have committed to a standard setting organization (SSO) to license the SEPs on fair, reasonable, and non-discriminatory (FRAND) terms. The chairwoman disagrees with the view held by some, including Commissioner Joshua Wright, that the FTC should avoid getting involved in the contracting practices of SSOs.

Patent hold-ups occur when an SEP holder seeks higher royalty rates or other more favorable terms after its technology has been adopted by a standard setting organization (SSO). SSOs are reviewing their policies to address this issue. However, the FTC will continue to be vigilant in this area, and is watching for improper exercises of market power, Ramirez said. The chairwoman noted that the “public and private stakes are high.”

Patent Assertion Entities Study. In other high-tech news, Ramirez announced at the Fordham conference that the FTC is seeking public comments on a proposal to gather information from approximately 25 companies that are in the business of buying and asserting patents, known as Patent Assertion Entities (PAEs). The FTC intends to use this information to examine how PAEs—sometimes called “patent trolls”—do business and develop a better understanding of how they impact innovation and competition.

After considering the public comments, the FTC will submit a request to the Office of Management and Budget (OMB) for clearance of the FTC’s proposal to issue compulsory process orders seeking information from the PAEs.

Back in June, Ramirez proposed conducting the investigation under the agency’s FTC Act section 6(b) authority. At that time, the chairwoman said that the agency was “on the watch” for PAEs that attempt to induce payments from small businesses on the basis of patents in which they have no ownership interest or standing, or on the basis of an expired patent.

The Federal Register notice for the FTC’s request for public comments on the PAE study is here. The agency will accept comments for 60 days.

Interested parties may file a comment online. In addition, comments, labeled “PAE Reports: Paperwork Comment; Project No. P131203,” can be sent to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex J), 600 Pennsylvania Avenue, NW, Washington, DC 20580.

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