As interest grows across a number of constituencies on how to solve the perceived problem created by patent assertion entities — less euphemistically known as "patent trolls" — one FTC commissioner cautioned Wednesday that his agency should not be too quick to flex its antitrust muscle.

Joshua D. Wright, a recent Republican appointee to the Federal Trade Commission, said the history of antitrust law is replete with evidence that the temptation to condemn new business models can be quite strong. But Wright, who was speaking at an antitrust seminar hosted at Dechert in Philadelphia, said it shouldn’t be forgotten that the FTC solves competition problems, it doesn’t regulate contractual or licensing disputes. The economist, attorney and academic said there is simply not enough empirical evidence to show one way or another whether patent assertion entities, or PAEs, support innovation or stifle it to the point that they run afoul of antitrust law.

PAEs typically don’t manufacture or sell anything, but rather buy patents from patent holders in order to make money off of licensing agreements and royalties or to assert damages claims against alleged patent infringers through litigation, he said.

The business model is often lamented by certain sectors of corporate America who claim they have to reduce their research and development costs and use that money to fend off patent infringement suits by so-called patent trolls. The majority of patent infringement suits filed, Wright said, are by PAEs. But proponents of PAEs say they provide capital to inventors who otherwise don’t have a means to market their invention or fund new innovation.

The concept has gotten the attention of the FTC, which hosted a joint workshop last year with the antitrust division of the Department of Justice that included key constituents from both sides of the issue.

For Wright, the big, unanswered question is how much of the money going to PAEs is being filtered to activities that provide a consumer benefit through increased innovation. If the cost of a patent license goes up because of a transfer from a patent holder to a PAE, that isn’t enough to rise to an antitrust violation, Wright said. Maybe the PAE is just better at marketing and can get a higher price, he said. Where some may focus their antitrust concerns, he said, is on a "raising rivals’ costs" theory in which there are antitrust implications to causing the cost of your competitors’ business to rise to the point that you put them out of business.

When looking at the mass transfer of IP from one entity to a PAE, Wright said he doesn’t see that as either substantially lessening competition or creating a monopoly.

While Wright was cautious about using antitrust law to combat concerns over PAEs, he said he does think there could be a role for the FTC to play in the issue. But the scope of that role, Wright said, has to be informed by what it learns in the coming years on the effects of PAEs on the market.

The FTC is trying to get a better handle on those effects through its subpoena power, according to media reports this week that said the FTC might use its Section 6(b) investigative authority to subpoena financial information relating to patent infringement settlements and how PAEs are splitting their revenues with other companies.

Wright said some have suggested PAEs be subjected to heightened scrutiny by the FTC, but he cautioned against that. He said he doesn’t think there is enough evidence to show PAEs are operating in a form that creates a monopoly or that they have a significant enough effect on consumer welfare to warrant greater oversight.

What might be warranted however, according to some involved in the FTC/DOJ workshop, is a review of existing patent law. Wright said patent law might have an advantage over antitrust law in combatting certain concerns opponents of PAEs have.

Wright told The Legal after his speech that he thinks there is a place for antitrust law in this enforcement scheme, but said the scope needs to be defined and may need to be coupled with input from other agencies. He said there may be tools that are better suited for addressing the concerns over PAEs than certain antitrust provisions. Wright also noted that the FTC and DOJ jointly proposed increased disclosure of patent transfers.

Mike Cowie, a partner in Dechert’s antitrust practice in Washington, D.C., and former head of a 25-attorney FTC team handling antitrust merger investigations, said there are a number of people and entities "treating PAEs like piñatas." He said PAEs are being attacked from all directions. Cowie said it was refreshing to hear Wright emphasize the absence of empirical evidence on the issue and the need to get that data before any rush to bring investigations.

When asked whether there might be a better statutory or legal scheme to address concerns over PAEs, Cowie said one option would be to reform the patent system. He said some have argued the standards for patentability need to be changed.

Carl W. Hittinger, a Legal contributor and antitrust attorney with DLA Piper, said it is way too general and quick of a conclusion to assume there are antitrust issues involved in PAE business models. He said the issues are very complicated and most likely need to be decided on a case-by-case basis. Hittinger said intellectual property laws can probably cover any concerns raised by PAEs.

"To throw antitrust on the pile [without more empirical evidence] would be wrong," Hittinger said.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.