Agency Information Collection Activities; Submission for OMB Review; Comment Request; Patent Assertion Entity (“PAE”) #00017

Submission Number:
Mark Bohannon
Red Hat, Inc.
District of Columbia
Initiative Name:
Agency Information Collection Activities; Submission for OMB Review; Comment Request; Patent Assertion Entity (“PAE”)
Matter Number:


Red Hat, Inc. appreciates the opportunity to submit comments on the revised proposal from the Federal Trade Commission (“FTC”) to send information requests to approximately 25 Patent Assertion Entities (“PAEs”), as well as to approximately 15 other entities asserting patents in the wireless communications sector. Red Hat strongly supports this action by the FTC, and urges the Office of Management and Budget ("OMB") to approve it expeditiously. Red Hat is a leading global provider of open source software solutions, using a community-powered approach to deliver reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. An S&P 500 index member, Red Hat provides high-quality, secure and affordable technology solutions that are found throughout mission-critical systems in the financial, transportation, telecommunications and government (civilian and defense) sectors and in enterprises in the U.S. market and around the world. As the FTC is aware, Red Hat, along with others, submitted extensive comments early in the process, emphasizing the anti-competitive impact of PAEs. (See submission PAE-0047.) In particular, we emphasized the role of PAEs in fostering privateering. We continue to believe, as we did then, that “today ... we are witnessing an important shift in the relationship between certain operating companies and PAEs. Some operating companies appear to be outsourcing patent enforcement to PAEs and providing incentives to those PAEs to enforce patents against the transferring company’s rivals. Privateering poses numerous perils to competition, consumers and innovation.” As we noted in our comments submitted on the First Notice in December to the FTC, the specific Requests are necessary and required to implement the FTC’s proposed order, and the estimates of time and expenditures by the FTC appear comparable with prior FTC assessments in earlier 6(b) studies. The specific Requests are consistent with the the Paperwork Reduction Act, 44 U.S.C. 3501-3521. With the revised proposal, it appears the FTC has bent over backwards to accommodate the small number of comments that raised concerns about the original Requests. The Requests should not be scaled back by the FTC. As put forward and modified by the FTC, the proposed 6(b) industry study will add significantly to the existing literature and evidence on PAE behavior. As the FTC acknowledges, earlier studies have focused primarily on publicly available litigation data and concluded that PAE litigation activity is on the rise. Through the FTC’s unique statutory authority, it is in the position to collect nonpublic information, such as licensing agreements, patent acquisition information, and cost and revenue data, which will provide a more complete picture of PAE activity. The FTC is also uniquely positioned to undertake this information request, given its roles and statutory authority in both competition/antitrust and consumer protection policy and enforcement. Red Hat is pleased to see that the FTC’s proposed 6(b) study is supported by USDOJ. (See Renata Hesse, Deputy Assistant Attorney General, “The Art of Persuasion: Competition Advocacy at the Intersection of Antitrust and Intellectual Property”, remarks as prepared for delivery, Seattle, Washington , November 08, 2013.) It is also directly responsive to the White House’s policy initiatives related to high-tech patent issues. This study is an important step by the FTC. But is not a substitute for meaningful legislative action by Congress, judicial scrutiny of key issues coming before the courts, and continued efforts by the USPTO to address patent quality generally (and specifically issues surrounding software-related patents) or appropriate FTC actions under its existing authority. Please do not hesitate to contact us if we can provide additional information.