December 17, 2013

Attorney General George Jepsen has joined with 42 other state and territorial attorneys general in expressing support for a Federal Trade Commission (FTC) proposed project to collect information about Patent Assertion Entities (PAEs), also known as “patent trolls.”

PAE’s are a growing consumer protection problem in the United States. Generally, patent trolls acquire patents for the sole purpose of using them to obtain financial gains from entities they claim have infringed the patent. Through the issuance of demand letters to their targets – often consumers, nonprofits and small businesses having little, if anything, to do with the patent – patent trolls demand license fees or settlements under threat of litigation unless the target pays.

“Patent trolls don’t buy patents to develop a technology or product,” said Attorney General Jepsen. “They buy patents solely to use them in claiming patent infringement. What we’ve seen in Connecticut and beyond are complaints from small business owners and nonprofit directors who have done nothing wrong and yet find themselves facing potentially expensive patent litigation if they don’t pay up.”

The FTC recently announced a proposal to gather information from approximately 25 companies that are in the business of buying and asserting patents. The FTC would seek to gather information about how PAE’s organize their corporate legal structure, the types of patents they hold, the ways they acquire patents and compensate patent holders and how they engage in patent assertion.

“Congress and the federal government have shown interest in controlling abusive patent practices,” said Attorney General Jepsen, “and the FTC’s proposal is a positive step that will assist efforts on both the federal and state levels to deal with this problem.”

In their letter, the attorneys general offered their support for the FTC’s proposal, stating their belief that the FTC request “should yield a trove of information relevant to PAEs’ practices, methods and beliefs regarding the veracity (or lack thereof) of infringement claims, and the number and types of their target entities.”

The attorneys general suggest that the FTC share, to the extent permitted by law, the entirety of the response to the information request with state attorneys general. They also recommend two additions: that the FTC inquire about the role of legal counsel – who may play a central role in patent assertion schemes – and that the FTC increase the number of PAEs, manufacturing firms and other firms to which the information request would be submitted.

Assistant Attorneys General Jose Rene Martinez; Jonathan Blake; Patrick Ring; Phillip Rosario, head of the Consumer Protection Department; and Matthew Budzik, head of the Finance Department, are assisting the Attorney General with this matter.

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