Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

December 20, 2013

Attorney General Kane joins national effort to fight "patent trolls"

HARRISBURG - Attorney General Kathleen G. Kane has asked the Federal Trade Commission (FTC) to investigate "patent trolls," firms that acquire broadly worded patents and bring lawsuits against legitimate businesses - for patent infringement.

In a letter signed by Attorney General Kane - who is a member of the National Association of Attorneys General Working Group on Patent Trolls - and 42 other Attorneys General, the Attorneys General said "through the issuance of numerous demand letters to their targets (often consumers, non-profits, and small businesses having little, if anything, to do with the underlying patent), [patent trolls] commonly demand license fees or settlements accompanied by the threat of costly litigation if the target does not ' pay up.' These [victims] usually possess little knowledge of patent law and are intimidated by demand letters."

"Due to the high price of patent lawsuits, these trolls pose an unfair, disproportional threat to small businesses and their innovation, which is the engine of our economy. Victims often pay a fee to trolls rather than go through an expensive court fight," Attorney General Kane said. "This amounts to silent extortion."

Attorney General Kane also said patent trolls do not develop the underlying technology, improve upon it or bring it to market, and seek only to extract costly licensing fees from alleged infringers.

The firms typically own one or more patents, but do not use them in manufacturing, marketing or selling products or services. Instead, they seek revenue from licensing the patent to others or through litigation and settlements after filing suit against firms they alleged infringed on their patents.

According to a Boston University study, patent trolls cost businesses $29 billion in 2011 alone. For each suit filed, a troll typically sends hundreds and thousands of demand letters to small businesses and extorts settlements out of them before litigation is even filed.  

In early October, the FTC announced its plan to conduct a wide-ranging investigation of known patent trolls, also known as patent assertion entities. The proposed investigation would arm consumer protection authorities with valuable intelligence as they escalate actions against abusers of the patent system. The letter to the Federal Trade Commission supports and recommends certain enhancements to the FTC's investigation.

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