WASHINGTON — Stepping into a volatile debate in the technology sector, the Federal Trade Commission said Friday that it would use its subpoena power to begin an investigation of so-called patent trolls, businesses whose primary purpose is to stockpile patents and use them to sue other companies.
The action, which the commission’s chairwoman recommended in June, is the first step in what is likely to be a lengthy and broad investigation. It could eventually result in antitrust enforcement against some of the companies and could provide momentum for efforts underway in Congress to tighten restrictions on such suits.
The effort is intended to document the costs and benefits of a rising tide of patent litigation, said Edith Ramirez, the commission’s chairwoman. In announcing the investigation, the FTC said it would seek information from roughly 25 companies that buy and sell patents, and 15 other companies that manufacture devices and write software and applications.
“Patents are key to innovation and competition, so it’s important for us to get a better understanding” of how the companies, also known as patent assertion entities, operate, Ramirez said Friday.
The subpoenas will solicit information about the financial operations of the firms, and they will seek to uncover how much the companies earn from patent lawsuits and licensing, and how the profits are distributed to investors.
“This will give regulators the ability to penetrate the shroud of secrecy that patent trolls operate behind,” said Daniel Nazer, a lawyer at the Electronic Frontier Foundation, a nonprofit organization that focuses on free speech and technology. “Patent trolls have complex structures, with thousands of shell companies. It’s impossible to know who is pulling the strings and getting the dollars.”
But other patent experts say they fear that the effort could be little more than a fishing expedition, looking for problems that the investigators have already decided exist.
“At the end of the day, these are licensing companies that are practicing their property rights, much as a landlord is practicing his property rights by leasing a house,” said Adam Mossoff, a law professor at George Mason University.
The decision to move forward with the investigation was approved 4-to-0.