FTC to Begin Inquiry Into 'Patent Trolls'

Rhett Pardon

WASHINGTON — The Federal Trade Commission announced today that it has voted to begin an inquiry into “patent assertion entities,” businesses whose only purpose is to stockpile patent portfolios and use them to sue business entities.

News of regulators getting involved in the issue over PAEs — also known as "patent trolls" — is good news for operators of online adult companies, who rely heavily on technology to deliver content.

In the past 10 years, scores of adult companies have been sued by PAEs over patent infringement claims relative to mobile media delivery technology, pop-under advertisements, live cam delivery, image-hosting technology and interactive online advertisements that use subscription models and data collection.

Other suits waged at adult companies bythe PAEs have involved technology with the ability for web browsers to act as platforms for embedded applications and a certain formula for sending compressed audio and video signals over a network.

The adult companies, of course, have collectively spent millions on legal fees defending against unfamiliar patent-holding companies like Skky Inc., ExitExchange Corp., Joao Control and Monitoring Systems, Tejas Research, Lodsys, Eolas Technologies and Acacia.

With the FTC getting involved, a lengthy and broad investigation is a certainty that could yield antitrust suits against companies.

FTC Chair Edith Ramirez noted earlier this year that she believed there is little real evidence about the costs and benefits of a rising tide of patent litigation.

By a 4-to-0 vote, the FTC agreed to seek public comments on an investigation of 25 companies that are in the business of buying and asserting patents. Another 15 also will be looked at.

After reviewing public comments, the FTC will seek to issue subpoenas to the patent trolls.

Ramirez said the Federal Trade Commission Act allows the agency to gather information about the financial operations of the companies, and it will seek to uncover how much they earn from patent lawsuits and licensing and how the profits are distributed to investors.

That information can form the basis of antitrust lawsuits, among other civil actions.