FTC Testifies on Patent Assertion Entities and Legislation to Prohibit Deceptive Patent Demand Letters

The Federal Trade Commission testified on consumer protection issues involving patent demand letters, patent assertion entities (PAEs), and proposed legislation to prohibit deceptive patent demand letters.

Delivering testimony before the House Subcommittee on Commerce, Manufacturing, and Trade of the Committee on Energy and Commerce, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices at the Federal Trade Commission, provided lawmakers with comments on a draft bill regarding deceptive patent demand letters, and recognized that demand letters raise broader issues about patents and the U.S. patent system.

 “The Commission shares this Subcommittee’s goal of stopping deceptive patent demand letters while respecting the rights of patent holders to assert legitimate claims, and recognizes that achieving this goal is not easy,” the testimony states.

The testimony states that the activities of PAEs and the related issue of demand letters have been a topic of increasing interest and concern. The Commission is proceeding with a proposed study of PAE behavior, which was first announced last year.

The Commission believes that the agency’s authority under Section 5 of the FTC Act can and should be brought to bear with respect to demand letters where appropriate, the testimony states. The testimony also addresses proposed legislation that would grant the FTC civil penalty authority in this area. The Commission believes such authority would have potential benefit and may deter some bad actors. The testimony also notes potential concerns about a knowledge requirement that would apply to some violations under the proposed legislation.  The testimony further notes that the Commission is pleased that the proposed legislation would supplement, rather than replace, the Commission’s existing authority under Section 5 of the FTC Act.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

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