1. 11/9/2016 Don’t Feed the Trolls: Practicality in View of the FTC’s Report on Patent Assertion Entities ­ IPWatchdog.com | Patents & Patent Law
Don’t Feed the Trolls: Practicality
in View of the FTC’s Report on
Patent Assertion Entities
The Norwegian fairy tale “Three Billy Goats
Gru·” was far ahead of its time and the
moral of that story has a very relevant,
modern application. In short, the story
introduces three goats that want to cross a
river to eat some luscious grass. To do so,
however, the goats must first cross a bridge;
under which lives a fearsome troll, who is so
territorial that he eats anyone who dares to
cross it. By working together, the goats are
able to plot against the troll, and ultimately
knock him o· of the bridge. A¸er knocking
the troll o· the bridge, the three goats lived
happily ever a¸er. So, if these goats can
figure out how to get rid of trolls, why can’t sophisticated companies do the same?
One of the biggest fears for any company is the danger of an event that is highly unpredictable
and cost intensive. This fear is further magnified when the danger poses a risk of preventing
the company from making, using or selling their core goods and services. In many cases, it is
easier and more cost e·ective to just settle with a patent assertion entity (PAE), o¸en
pejoratively referred to as a “patent troll.” Companies sometimes prefer to settle due to the
inherently defined nature of settlement. These issues are exacerbated when patents are
By Ravi Mohan
November 2, 2016
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2. asserted, mainly due to the: a) highly technical nature of many patents; b) potential for
inventive obfuscation; and c) lack of finality with respect to scope, considering that claim
construction does not occur until later in the litigation process. Indeed, from the company’s
perspective, settling early for a “reasonable” amount comes down to making a business
decision. Thus, the cycle persists, and trolls continue to troll.
Fortunately, at least three “goats” (read: legislative and judicial recommendations) are
provided in the FTC’s Patent Assertion Entities Report.
The first proposed recommendation is to “develop rules and case management practices to
address discovery burden and cost asymmetries in PAE litigation.” In most patent cases
involving a patent troll, discovery is an entirely one-sided proposition. In other words, it is
usually the client that has the relevant materials, documents and information that are the
subject of discovery. Propounding discovery on the patent troll is usually a necessary, albeit
futile exercise. How many relevant materials can you even request when the opposing entity
does not invent, develop, or manufacture products incorporating the patented technology?
To ameliorate these challenges, the FTC Report suggests that early disclosure of asserted
claims and infringement and invalidity contentions in PAE litigation would help to “balance
the asymmetries of plainti· and defendant-side discovery costs.” Theoretically, the concept
has teeth, but perhaps the teeth are not sharp enough to be practical. Let’s dive a bit deeper –
to cover simple Rule 11 bases, the PAE would necessarily conduct some diligence via dra¸ing
of infringement charts (for example) to provide notice to the accused entity. However, in
practice, the infringement charts typically received from patent trolls are low-quality and ripe
for back-and-forth motion practice. The real impact of such practice is that the patent trolls
e·ectively sue multiple parties using relatively poor infringement analyses, and the cases still
proceed. In that sense, the burden on patent trolls is very low.
From the accused entity’s perspective, prior art still needs to be researched, analyzed and
applied with respect to the asserted claims. This can involve very heavy li¸ing and
corresponding expense. Thus, by accelerating this aspect of the discovery timeline,
settlement with the patent trolls is even more foreseeable because the targeted entity will be
faced with tremendous front-end costs with respect to the litigation. Perhaps one
modification to the FTC’s recommendation is to include a mechanism that requires higher
quality and more narrowly tailored infringement analyses from the trolls before discovery is
warranted on behalf of the accused entity. See also Orders On New Patent Rules Show
Plainti·s Have Higher Bar.

3. 11/9/2016 Don’t Feed the Trolls: Practicality in View of the FTC’s Report on Patent Assertion Entities ­ IPWatchdog.com | Patents & Patent Law
The FTC’s second proposed recommendation suggests “[a]mend[ing] Federal Rule of Civil
Procedure 7.1 to reach a broader range of non-party interested entities or persons.” From a
practical standpoint, this recommendation makes sense, but it is arguably the weakest of the
bunch. When dealing with PAEs, most experienced IP counsel will be well aware of the
manufactured operations that are designed purely for venue purposes. Thus, while full
disclosure of a PAEs organizational structural would be beneficial, the fact remains that the
substantive merits of the case would still be in controversy – requiring the targeted entity to
settle or continue the fight. To be sure, when a PAE is involved, clients pay less attention to
“how the PAE is structured” and focus their attention on the bottom line: “what do they want
for this to go away?”
The third proposed recommendation is to “establish procedures encouraging courts to stay a
PAE’s infringement action against a customer or end-user, where the PAE has also sued the
manufacturer of the accused product under the same theory of infringement.” From an
implementation standpoint, this is a fantastic recommendation. Having parallel cases arising
out of the same nucleus of facts serves to do nothing more than usurp our precious judicial
resources. Nobody wins in that circumstance, and for that reason alone, I concur that
“Congress and the Judicial Conference should enact provisions that encourage a district court
to stay actions against end-users until the manufacturer suit has been resolved.”
Just like the goats we discussed earlier, it is unlikely that any one of these proposed
recommendations can independently get us across the proverbial bridge. Indeed, analyzing
the patent landscape and the FTC’s provision of these recommendations is definitely a great
start. However, from a practical standpoint, the narrative needs to shi¸ to the topic of patent
quality more than any other singular point. For example, even a brief analysis will show a
dramatic shi¸ in how PAEs have asserted so¸ware patents – if at all – post Alice. Perhaps that
is a discussion for a di·erent day, but if change is seriously desired, then initiatives should be
cra¸ed so as to balance inventive protection while simultaneously curbing the potential for
PAE activity.
Finally, from a perception standpoint, one of the best aspects of the FTC’s Report is its careful
approach with respect to focusing attention on PAEs, instead of other economically and
culturally significant entities that procure, utilize and assert patents (e.g., solo inventors,
companies that develop their own patent portfolios, and universities.) The FTC’s Report
defines a “PAE” as a firm that primarily acquires patents and seeks to generate revenue by
asserting them against accused infringers. Critically, the FTC’s definition of PAEs excludes
non-practicing entities (NPEs), that is, “firms that, for various reasons, do not make or sell
products and therefore are not vulnerable to a countersuit for patent infringement when they
sue on their own patents.”

4. Tags: due diligence, Federal Rule of Civil Procedure 7, Federal Trade Commission, ¸c, Guest
Contributor, infringement, litigation, npe, NPE's, PAE, PAE Litigation, patent assertion entities,
Patent Assertion Entities Report, patent infringement, Patent Litigation, patent troll, Patent
Trolls, prior art, Three Billy Goats Gru·
Posted In: Federal Trade Commission, Government, Guest Contributors, IP News, IPWatchdog
Articles, IPWatchdog.com Articles, Patent Trolls, Patents
Anon2 November 2, 2016 8:12 am
This is interesting and relevant for falsely accused non-infringers. As for willful infringing entities,
they do not deserve to conduct business in any country of Western Civilization based on individual
rights, and hence deserve no analysis here.
Which raises this question: How should a law abiding and honorable defendant, which genuinely is
concerned that it might be infringing patent rights duly owned by another party, conduct itself
diligently and e·iciently to ensure proper and upright compliance with that law, to ensure those
rights are respected, and to ensure that justice is done?
1.
Paul F. Morgan November 3, 2016 9:03 am
Thanks for a summary of specific details the FTC recommendations.
Re “[a]mend[ing] Federal Rule of Civil Procedure 7.1 to reach a broader range of non-party
interested” entities or persons.” Could they have meant companies who’s employees made the
inventions, procured the patents, and sold them to the suing PAE while retaining a % interest in the
outcome? Or the other party in a joint research agreement from which the patent derived? Or
suppliers of customers being sued?
2.
3.
In closing, it is imperative to applaud the e·orts that are being made to curb PAE activity.
Admittedly, it is easy to be critical of the judicial and legislative recommendations provided
for by the FTC because a one-size-fits-all solution simply does not exist. And, if one is ever
proposed, it will likely ignore the complex, symbiotic relationships that exist in order for the
United States to “promote the progress of science and useful arts” as required by our
constitution.
If we intend to get across the bridge to safety one day, all goats will need to work together.
There are currently 9 Comments comments. Join the discussion.

5. 11/9/2016 Don’t Feed the Trolls: Practicality in View of the FTC’s Report on Patent Assertion Entities ­ IPWatchdog.com | Patents & Patent Law
sta� November 4, 2016 1:30 pm
‘One of the biggest fears for any company is the danger of an event that is highly unpredictable and
cost intensive. This fear is further magnified when the danger poses a risk of preventing the company
from making, using or selling their core goods and services.’
If that ever was true, it certainly isn’t true today. Large infringers have always had a great advantage
over their small inventive competitors -lots of cash to delay and frustrate justice. Today that
advantage and others have grown exponentially. As the patent system now exists it is far too hard,
expensive and slow for inventors and small entities to get and enforce their patents. Large infringers
have little risk of being sued for stealing their small competitors inventions as it commonly takes
small firms 5 years or longer to get a patent, and if they dare assert it they o¸en end up back at the
Patent O·ice which inventors will tell you has become a tool to protect large infringers thanks to a
PTO management straight from large infringer central. When we have to fight to get or keep our
patents we go out of business. As a result, infringement is about as cozy now as it has ever been for
large multinationals who infringe at will. Is this attorney spreading propaganda for large
multinational infringers?
And by the way, why is it when someone takes your car or cash they call it the¸ or robbery, but when
they take your invention they call it infringement? Can’t we call invention infringement what it is…
the¸? What’s with the spin? Can’t we speak plainly and call it what it is rather than obfuscate the
the¸ which only adds to the injustice?
The patent system now teeters on the brink of lawlessness. Call it what you will…patent hoarder,
patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your
invention and we’re not going to stop or pay”. It’s a pure red herring by large invention thieves and
their paid puppets to kill any inventor support system. As Mark Twain said, ‘truth is not hard to kill,
and (that) a lie well told is immortal’. Those who use the amorphous phrase ‘patent troll’ expose
themselves as thieves, duped, or doped and perpetuate the lie.
For our position and the changes we advocate (the rest of the truth) to truly reform the patent
system, or to join our e·ort, please visit us at
https://aminventorsforjustice.wordpress.com/category/our-position/
or, contact us at aifj@mail.com
Paul F. Morgan November 4, 2016 6:50 pm
Sta·, certainly several Supreme Court cases and IPRs have made it more di·icult to obtain licensing
revenue from patents. But it was no all “golden age” of patent law before that either, in which a small
4.

6. company with valuable patents could easily, quickly and quickly stop a determinedly infringing large
company from infringing its patents. Merely as three examples that come to mind of many, the very
many years RCA fought and delayed Col. Armstrong’s important FM patent suit until some time a¸er
he had finally committed suicide. All the years Ford legally fought paying the inventors of safe and
e·ective electrostatic painting [Randsburg] while saving millions of dollars in paint by using it over
those years. The Adams Battery patent that it took going all the way to the Sup. Ct. to get the
government to finally pay for its use.
Paul F. Morgan November 4, 2016 7:04 pm
BTW Sta·, an analogy of patent infringement to car the¸ is not valid. All that a patent ever gives
anyone is the right to sue infringers in a Federal Court. There are no taxpayer supported patent
police, patent prosecutors or patent prisons,
5.
Anon November 5, 2016 8:12 am
Suing is enforcement, and not the “right” Mr. Morgan.
6.
Anon November 5, 2016 8:17 am
The better – but more subtle – response would be that a patent provides a negative right, in
opposition to a positive right.
However, that negative right is still a propery right.
Sadly, it is the judicial and executive branches that have been stealing that property right with the
kowtowing to the E·icient Infringement propaganda and mistreatment of that property right.
7.
sta� November 8, 2016 12:38 pm
From an inventors view Inventions are property -the “faculties of the mind”. So said James Madison
in the federalist papers. Taking property is the¸. Therefore, taking inventions which are a form or
class of property is the¸. A patent is merely a title to an invention just as a title documents ownership
of a car. It really is that simple.
8.

7. 11/9/2016 Don’t Feed the Trolls: Practicality in View of the FTC’s Report on Patent Assertion Entities ­ IPWatchdog.com | Patents & Patent Law
We agree that enforcing patents never was a sure thing -far from it. Armstrong and many others are
great examples. But now the patent system has been so perverted that infringers/thieves now steal
at will. The system is in crisis.
sta� November 8, 2016 2:39 pm
President James Madison wrote in Federalist No. 10:
“The diversity in the faculties of men, from which the RIGHTS OF PROPERTY originate, is not less an
insuperable obstacle to a uniformity of interests. The protection of these faculties is the FIRST object
of government.”
9.