Sticks and Stones: How the FTC's Name-Calling Misses the Complexity of Licensing-Based Business Models

Abstract

The purpose of this Essay is not to condemn the FTC study of PAEs. Instead, the FTC's study could be an incredibly important step in the right direction towards understanding the many complex business models that exist in the patent licensing world and how these firms affect innovation and competition.

Part I of this Essay describes the genesis of the FTC's interest in patent licensing firms and the details of the § 6(b) study. It also explores the underlying bases for the FTC's interest in this area, specifically the claims about how patent licensing firms impact innovation and competition. Part II explains that the FTC's study will not provide a true picture of how these firms affect innovation and competition due to its failure to recognize the heterogeneity of patent licensing firms in its survey population and questions. In fact, the FTC's narrow view of patent licensing firms and behaviors could, in fact, cause more harm than good; inaccurate and incomplete data will go far to bolster the inapt theories that are currently holding the day for those who wish to hinder, if not destroy, patent licensing firms. A wider viewpoint, one that recognizes and engages with the variations that exist amongst patent licensing firms and how the differences may manifest as positive or negative effects depending on a firm's business model, would be a better indicator of what types of legal and policy changes are in order.

Keywords: patents, patent licensing, federal trade commission, intellectual property

JEL Classification: K39, K23, O38, O30