Unmasking the trolls: FTC announces investigation into “patent assertion entities”

The Federal Trade Commission on Friday called for public comments on a proposed investigation into approximately 25 “patent assertion entities,” — more commonly known as patent trolls — and how they affect innovation and competition.

The FTC news, announced in a press release, comes as state and federal law makers are proposing measures to curtail the controversial practice of patent trolling, which involves shell companies amassing old patents in order to make legal threats against companies that actually produce things. Trolling is an effective business model because targets typically pay the trolls to go away rather than undertake an expensive court fight; the trolls, meanwhile, are not vulnerable to countersuits because they are shell companies that don’t have any assets.

In its release, the FTC explains that its investigation would be able to expand on existing studies into trolling by using its subpoena power to force the trolls to disclose the nature of their corporate and legal practices. This may address a common complaint among troll victims: they don’t know who is suing them, because the trolls’ investors can hide beyond lawyers and shell companies.

The FTC did not identify the “approximately 25” trolls it would like to investigate, but it does say it will look into how “PAEs organize their corporate legal structure, including parent and subsidiary entities” — this suggests giants like Intellectual Ventures, which asserts patents on its own but is also tied to multiple shell companies, will be among those investigated. The agency also says it will look into “15 other entities asserting patents in the wireless communications sector, including manufacturing firms and other non-practicing entities.”

Friday’s news comes after FTC chairwoman Edith Ramirez announced plans in June to end the misuse of patents. After the agency receives public comments, it will ask permission from the Office of Management and Budget to begin seeking documents.

The FTC is not the only one this week to take action against trolls. On Wednesday, decorating maven Martha Stewart sued a troll that has been plaguing small iPad developers.