April 11, 2017

FTC Chair Maureen Ohlhausen tells ABA IP Law conference she backs evidence-based patent law reform

Federal Trade Commission Acting Chairman Maureen Ohlhausen said Thursday that she supports evidence-based reforms to U.S. patent laws like those proposed in a recent agency report and cautioned against establishing new standards without a compelling reason to do so.

Ohlhausen, who was appointed by President Donald Trump in January to serve as acting chairman of the FTC after having served on the commission since April 2012, was the keynote luncheon speaker at the American Bar Association Section of Intellectual Property Law’s 32nd Annual Spring Conference at the Crystal Gateway Marriott in Arlington, Va. Her talk focused on optimizing innovation by protecting and strengthening intellectual property protections.

“It is clear that strong IP rights are vital to the U.S. economy,’’ Ohlhausen said, noting that study after study show that IP rights are incentives to innovation. She said the government recently reported that IP-intensive industries support at least 45 million U.S. jobs and contribute more than $6 trillion to the U.S. gross domestic product.  “Studies also found that the strength of IP protection is positively and significantly associated with R&D, thus countries which provided stronger protections tended to have larger proportions of their GDP devoted to RD activities,” Ohlhausen said.

She said that given the dynamics of the patent laws in the United States and the global competition, reforms and revised guidelines are needed. Ohlhausen referenced two recent reports issued by the FTC, one last October, Patent Assertion Entity Activity: An FTC Study, which sheds light on how Patent Assertion Entities (PAEs) operate. The report also provided recommendations. The second report was jointly issued by the FTC and the Department of Justice. The Antitrust Guidelines for the Licensing of Intellectual Property explains how the federal antitrust agencies evaluate licensing and related activities involving patents, copyrights, trade secrets and know-how.

“While IP licensing is generally procompetitive, antitrust enforcers have a role to play in protecting against anticompetitive abuses,” Ohlhausen said. “I have, however, expressed concern when less likeminded overseas enforcers apply their antitrust laws to dilute IP rights. And doing so inappropriately morphs antitrust law into price regulations and creates harmful disincentives for innovation.”

This is the first time the guidelines have been updated since 1995 and Ohlhausen said the 2017 guidelines exemplify her approach to antitrust IP issues. She listed three reasons. First, she said the guidelines represent a modest update that embraces principles of commendable flexibility. She disagrees with those who thought there should be new specialized guidelines to address PAEs. “I do not support this position because I believe IP issues are not a special case that requires a different competition jurisprudence,” Ohlhausen explained. “We should not establish new standards without compelling evidence to do so.”

Second, she said the new guidelines continue to affirm that IP laws grant enforceable rights that have social value. “Without IP rights, imitators could exploit investments in R&D without competition and rapid imitation would reduce the commercial value of innovation and erode incentives to invest, ultimately to the detriment of consumers,” Ohlhausen said.

And third, the guidelines state that antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors. “So read together with the FTC’s 2007 IP report (on promoting innovation and competition), it is clear that the guidelines will continue to protect strong IP rights in the United States,” Ohlhausen said.

The October report on Patent Assertion Entities was issued around the same time as the release of the European Commission’s Joint Research Center on PAEs and served as a complement to the U.S. report. The U.S. report spotlights the business practices of PAEs, firms that acquire patents from third parties and then try to make a profit by licensing or suing accused infringers. Ohlhausen said the report found two types of PAEs that use distinctly different business models, “focusing either on suing and settling quickly or on negotiating licensing to large patent portfolios,” she said. Portfolio PAEs were heavily capitalized and purchased patents outright that were often worth more than $1 million. “Portfolio PAEs demonstrate complex business practices that could, under the right circumstances, sever a valuable function,” Ohlhausen said.

The second type referred to in the report is Litigation PAEs, which relied on revenue sharing to fund their activity.  She said infringement lawsuits played a key role in the viability and success of the Litigation PAE, which accounted for 96 percent of all patent infringement lawsuits, but only generated about 20 percent of all reported PAE revenues.

As a result of the study of PAEs, Ohlhausen said the agency offered recommendations to alleviate potential abuses: Case management practices that could mitigate litigation costs between PAE plaintiffs and defendants; and encourage Congress to pass rules to increase transparency and to encourage courts to stay litigation by PAEs and end users when parallel procedures are already underway against the manufacturer.

“I support the proposals because they are narrowly tailored to address observed behavior without leading to unintended consequences well beyond PAE activity,” Ohlhausen said.

And she defended the FTC’s decision to include recommendations in the report, acknowledging those who questioned the appropriateness of doing so. But she said that position does not account for the realities of Washington.

“There has been recurring interest in legislation in this area and thus it is important that the agency offer informed guidance to help ensure that any changes have a positive impact in the IP marketplace.”

Mark T. Banner Award recipients honored during IP Law Spring conference

Federal judge Lucy H. Koh, attorney Don. W. Martens and MIT Media Lab research specialist Kate Darling were honored as Mark T. Banner Award recipients for their impact on intellectual property law and/or practice during the ABA Section of Intellectual Property Law’s 32nd Annual Intellectual Property Law Conference on April 4-6 at the Crystal Gateway Marriott in Arlington, Va.

The Mark T. Banner Awards were presented during a luncheon on Wednesday, April 5. The awards are named in honor of Mark Banner, who served as chair of the Section of Intellectual Property Law from 2002-03, and who sought, demanded and attained the very best from himself and from everyone around him. The recipients are:

  • Judge Lucy H. Koh, U. S. District Court, Northern District of California in San Francisco. Judge Koh was appointed by President Barack Obama in June 2010. California Gov. Arnold Schwarzenegger appointed her to the County of Santa Clara California Superior Court in January 2008. She was formerly a partner at McDermott Will & Emery and an assistant U.S. Attorney in the Major Frauds Section of the U.S. Attorney’s Office in Los Angeles. Judge Koh, who received an award from then-FBI Director Louis J. Freeh for prosecuting a major securities fraud case, served in Washington, D.C., as a special assistant to the U.S. Deputy Attorney General at the U.S. Department of Justice and as a Fellow on a U.S. Senate Judiciary Committee subcommittee. She earned a B.A. from Harvard University and a Juris Doctor from Harvard Law School, is married to California Supreme Court Justice Mariano-Florentino Cuellar and has two children.

  • Don W. Martens, founding partner, Knobbe Martens Olson & Bear LLP in Washington, D.C. His entire career represents exemplary contributions, accomplishments and wide recognition in the field of IP. Martens has over 40 years of experience as a patent litigator, special master, arbitrator and mediator. He has been consistently ranked among the top of the field — including as one of the top 10 patent lawyers in the world and several times selected by his peers as one of the best lawyers in the United States. Martens was appointed as special courts master for U.S. district courts in California, New York, Pennsylvania, Connecticut, Ohio and Texas, and was admitted to practice before the U.S. Supreme Court. He has been an advisory council member of the U.S. Court of Appeals for the Federal Circuit. He served as chair of the Section of Intellectual Property Law and as president of the American Intellectual Property Law Association. Martens received a BS in engineering from the University of Wisconsin, Madison. His JD is from Washington University Law School, where he graduated first in his class and was patent editor of the law review.

  • Kate Darling, MIT Media Lab research specialist, Harvard Berkman Center Fellow, Robot Ethics Expert in Cambridge, Mass. Darling is a leading expert in Robot Ethics. In her work at MIT, she investigates social robotics and conducts experimental studies on human-robot interaction. Darling explores the emotional connection between people and life-like machines, seeking to influence technology design and policy direction. Her writing and research anticipate difficult questions that lawmakers, engineers and the wider public will need to address as human-robot relationships evolve in the coming decades. Darling has a background in law, economics and intellectual property. She currently serves as intellectual property policy advisor to the director of the MIT Media Lab. Darling graduated from law school with honors and holds a doctorate of sciences from the Swiss Federal Institute of Technology. She is a fellow at the Harvard Berkman Klein Center for Internet and Society and the caretaker for several domestic robots, including her twin Pleos, Yochai and Peter.