Proposed Requirements for Recordation of Real-Party-in-Interest Information Throughout Application Pendency and Patent Term, Docket No. PTO-P-2012-0047 (Before the Patent and Trademark Office)

Before the
United States Department of Commerce
Patent and Trademark Office
In the Matter of
Notice of Roundtable on Proposed Requirements for Recordation of Real-Party-in-
Interest Information Throughout Application Pendency and Patent Term
Docket No. PTO-P-2012-0047
Comments of the Antitrust Division of the United States Department of Justice
And the United States Federal Trade Commission
February 1, 2013

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 1
The U.S. Patent and Trademark Office (“the PTO” or “the Office”) issued a
Federal Register Notice on November 26, 2012, announcing that it would be conducting
a roundtable discussion to obtain public input from organizations and individuals on how
the Office could change its rules of practice to (1) collect information about patent
ownership (including the real party in interest (“RPI”)) during patent prosecution and
post-issuance and (2) make such information publically available.1 The Antitrust
Division of the U.S. Department of Justice and the Federal Trade Commission (FTC),
whose missions are to protect and promote competition, offer these comments in support
of the PTO’s adoption of rules that would increase the transparency of patent ownership
by requiring disclosure of the RPI for both published patent applications and issued
patents.
Pursuant to the PTO’s proposal, a patent applicant would have a duty to provide
RPI information when filing its application and would be required to update that
information within a reasonable time period of any ownership change (presumed to be
within 3 months of the transfer of ownership). The applicant would then certify that the
RPI information on file is accurate when the PTO issues the patent. After issuance, the
PTO intends to have RPI information verified or updated at the time the patent owner is
required to pay the fees necessary to maintain the patent rights, i.e., 3.5, 7.5 and 11.5
years after the PTO issues the patent, and if the patent becomes involved in any post-
issuance proceedings before the Office.
The Antitrust Division and the FTC support the efforts of the PTO to provide
more complete information regarding patent ownership to the public. Under Secretary
Kappos recently noted that “[a] root cause of problems with our current environment for
software patents — and indeed all patents — is simply deciphering ownership. At the
heart of a well-functioning innovation environment is accurate information about who
owns what assets, so that license rights can be confirmed or sought, and unproductive
effort simply avoided.”2 Consequently, the PTO has concluded that it would be in the
public interest to implement rules that would decrease this information gap. The
Antitrust Division and the FTC expect that the proposed changes will increase efficiency
in the patent marketplace, thereby benefiting competition and innovation. In fact, the
Antitrust Division and the FTC would support changes to the Office’s rules of practice
requiring RPI information to be recorded with the Office within a reasonable time after
each transfer of ownership throughout the life of a patent.
1 77 Fed Reg. 70, 385 (Nov. 26, 2012), available at http://www.gpo.gov/fdsys/pkg/FR-2012-11-
26/pdf/2012-28333.pdf.
2 David J. Kappos, Under Sec’y of Com. for Intellectual Prop. & Dir., U.S. Pat. & Trademark Office, An
Examination of Software Patents, Keynote Address at the Center for American Progress (Nov. 20, 2012),
available at http://www.uspto.gov/news/speeches/2012/kappos_CAP.jsp.

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 2
I. 	Background
Current difficulties in identifying the owner of a patent make the patent system
less efficient than it could be. The PTO’s system of recording patent assignments and
transfers in ownership is generally voluntary. Parties may, at their option, record
assignments with the Office by paying a fee and filing a form. Neither the Patent Act nor
PTO regulations require such recordation, although an assignment not recorded with the
PTO is “void as against any subsequent purchaser” who lacks notice of the assignment.3
As a result, although the Office’s records are open to the public, they do not include all
assignments. Given the absence of a requirement to record patent transfers, determining
who owns a patent can prove very challenging. This difficulty is increasingly significant
given the growth of the secondary market for patents in the United States.
Moreover, even when an actual owner or assignment is recorded, the RPI may not
be known. For example, many firms house patents in subsidiaries or special purpose
entities (sometimes referred to as “shell companies”) that may be recorded as the patent
owner without conveying any real information as to the “true” or controlling owner. The
Antitrust Division and the FTC strongly believe that in order for any transparency rules to
achieve their goals, the definition of RPI must be crafted to provide meaningful
information to potential licensees, regulators, financial markets, and consumers.
Identifying the parent or controlling firm in a patent ownership chain will promote
efficient markets.4
In its notice announcing the Roundtable, the PTO identified several benefits of its
proposal, including: 1) providing the public with a more comprehensive understanding of
which United States-issued patent rights are being held and maintained by various
entities; 2) providing financial markets with more complete information about the
valuable assets generated and held by companies; 3) providing inventors and
manufacturers with a better understanding of the competitive environment in which they
are operating; and 4) facilitating the examination of patents by the PTO, particularly in
light of new provisions in the America Invents Act.5 6
3 35 U.S.C. § 261 (2011). The PTO does require proof of assignment to permit an assignee to take certain
actions as owner of the patent or application in PTO proceedings. See 37 C.F.R. § 3.73 (2011).
4 David J. Kappos, Under Sec’y of Com. for Intellectual Prop. & Dir., U.S. Pat. & Trademark Office,
Opening Remarks at USPTO Roundtable on Real Party in Interest Information (Jan. 11, 2013), video
available at http://helix-1.uspto.gov/asxgen/2013-0111EditedRoundtableonRPI.wmv.
5 Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284-341 (2011).
6 77 Fed. Reg., supra note 1, at 70,386.

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 3
II. 	Discussion
As discussed below, increased informational transparency of patent ownership
will benefit competition and innovation by improving the patent system’s notice function.
As the FTC recognized, poor patent notice “hinders competition by forcing firms to
design products with incomplete knowledge of the cost and availability of different
technologies.” 7 Knowledge of the actual owner of a technology will enable a designer to
more accurately evaluate the costs of incorporating a particular technology into products
prior to incurring significant sunk costs.
The PTO has proposed two possible definitions for RPI. The first is a “Broad”
definition that, as described in the Federal Register Notice, and discussed below, may not
include an ultimate parent entity (UPE). The second, “Limited” definition explicitly
includes the UPE. Due to the federal antitrust agencies’ experience with this term, the
Antitrust Division and the Federal Trade Commission support an RPI definition that, at a
minimum, includes the UPE, either by including all UPEs in the “Broad” definition, or by
adopting the “Limited” definition.
A. 	Transparency in RPI Information Benefits Competition
The Antitrust Division and the FTC fully support the implementation of new rules
that would require the disclosure of RPI information for published patent applications and
issued patents. Providing access to information about the true, controlling owner of a
patent will yield a number of benefits. It is likely to improve the notice function of our
patent system, which will promote competition and innovation to the benefit of U.S.
consumers by facilitating bilateral licensing, increasing design freedom, and allowing
firms to better manage risk. Under Secretary Kappos outlined a number of these benefits
in his opening remarks at the Roundtable:
[T]his new RPI initiative … can have several benefits. Not only… improving the
marketplace for innovation, but also reducing gamesmanship in litigation strategies
and improving the operation of the USPTO all around the board. Now with a more
complete ownership record the public has more comprehensive understanding of what
patent rights are being maintained and by whom. The financial markets have more
complete information about the valuable assets being generated and held by patent
owners and inventors; manufacturers have a better understanding of the competitive
environment in which they are operating, allowing them to be more efficient in
obtaining and allocating resources they need. RPI information also could benefit the
USPTO. 8
7 FED. T RADE COMM ’N, T HE EVOLVING IP M ARKETPLACE : A LIGNING P ATENT N OTICE AND REMEDIES
WITH COMPETITION 3 (Mar. 2011), available at http://www.ftc.gov/os/2011/03/110307patentreport.pdf
[hereinafter 2011 FTC E VOLVING IP M ARKETPLACE REPORT ].
8 Kappos Opening Remarks, supra note 4.

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 4
Overall, informational transparency will improve the efficiency of the IP
marketplace. In an optimal marketplace for patents, competing technologies would be
well known, claims would be well specified, and the applicability of claims would be
clear. In addition, the patent rights holders would be easy to determine. As a
consequence, firms developing products could weigh the relative merits, likelihood of
licensing, and licensing costs of competing technologies and decide whether to license
the patented technology, develop a non-infringing competing technology, or omit the
covered feature.9 The current marketplace falls short of this ideal, and the PTO’s
adoption of RPI rules could help address some of these shortcomings.
RPI rules improve transparency by ensuring that potential licensees can more
easily identify who owns and controls the patented technologies to which they want
access. This facilitates bilateral licensing by making it easier for users to contract for
rights to use certain technologies up front. If the patent owner asks for an excessive
royalty at that time, the user may still have the option to redesign its product to use a
competing technology or omit the feature claimed in the patent. However, in order for
such ex ante contracting to occur, potential users have to know with whom to contract.
The RPI rules are a step in the right direction to avoid “hold up” 10 issues to the extent
that such rules enable technologies to better compete for adoption before potential
licensees make significant investments in a particular technology.
As the FTC’s 2011 IP Marketplace Report explains,
[a]ssignment records play an important role in clearing patent rights. One strategy
for navigating an environment with many potentially relevant patents is to
concentrate clearance efforts on patents held by competitors or others who are
likely to sue. This strategy falters if the public lacks notice of assignments.
Moreover, if the clearance search determines that a patent is a problem, knowing
the owner is essential to seeking a license. Indeed, information on the owner can
be essential for a firm to determine if it already has rights to the patent via a cross
license. Recordation of assignments would help with these notice problems. …
Recording assignments of government-conferred rights to exclude is necessary to
ensure public notice and will not unduly burden patent transfers.”11
9 In contrast to the optimal marketplace, consider an opaque marketplace that provides little notice of what
rights exists and who holds those rights. In this case, there are a number of risks of market failure,
including the risk that after the choice of technology and unrecoverable investments in product
development have been made, rights holders can approach the downstream firm and demand royalties that
reflect a “hold up” value.
10 For a discussion of hold up, see, e.g., Mark A. Lemley & Carl Shapiro, Patent Holdup
and Royalty Stacking, 85 T EX. L. REV. 1991 (2007).
11 2011 FTC E VOLVING IP M ARKETPLACE REPORT, supra note 7, 129-30.

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 5
One strategy a firm might pursue to extract license revenues that exceed the value
of its patent portfolio is to demand royalties for a portfolio of patents held by separate
subsidiaries without specifying all of the patents in the portfolio. In such a case, a
putative licensee must estimate the relevance and value of a license to the portfolio
without accurate or complete information. If the potential licensee cannot find out which
patents the asserting entity owns (and thus cannot evaluate the patent’s strength or
relevance to the licensee’s product or business), hold up problems may be exacerbated.
Even where a license agreement is reached, a licensee cannot be assured that it has
licensed all of the firm’s relevant patents – i.e., that patent peace is reached. Excessive
license fees and uncertainty about future royalty demands may harm incentives to
innovate.
Additionally, and importantly, RPI rules also will improve the ability of the
antitrust agencies to monitor the competitive impact of patent acquisitions, especially
serial acquisitions in the same market by the same purchaser. The “Broad” and
“Limited” definitions of RPI under consideration may not be broad enough to address all
information that could be of antitrust concern, such as every entity that may have a
financial stake in the enforcement of patents, but the proposed definitions should
facilitate this inquiry.
Publication of information is an established part of the quid pro quo for obtaining
a patent. “In granting an inventor a temporary patent, the public is given permanent and
valuable consideration. In exchange for the limited grant, inventors must fully disclose
their invention for all the world to see, study, replicate, and make improvements
thereon.”12 Most of the focus on this quid pro quo has been on the disclosure of the
scientific and technical information in a patent. However, inaccurate ownership
information also undermines the policy motives for requiring disclosure and the benefits
of notice.
Based on experiences reviewing patent acquisitions, feedback from participants at
our December 2012 Patent Assertion Entity (PAE) Activities Workshop,13 our May 2010
Workshop on the Intersection of Patent Policy and Competition Policy held jointly with
the PTO,14 the FTC’s hearings on The Evolving IP Marketplace,15 and numerous
12 See James E. Rogan, Under Sec’y of Com. for Intellectual Prop. & Dir., U.S. Pat. & Trademark Office,
Prepared Remarks for the Hearings on Competition and Intellectual Property Law and Policy in the
Knowledge-Based Economy 2 (Feb. 6, 2002), available at http://www.ftc.gov/opp/intellect/rogan.htm.
13 See generally Public Workshops: Patent Assertion Entity Activities, U.S. D EP’ T OF J USTICE & FED.
T RADE COMM ’N (Dec. 2012), available at http://www.justice.gov/atr/public/workshops/pae/index.html.
14 See generally Public Workshops: The Intersection of Patent Policy and Competition Policy Workshop,
U.S. D EP’T OF J USTICE , FED. T RADE COMM ’N, & D EP’ T OF C OMMERCE U.S. P ATENT AND T RADEMARK
O FFICE . (May 2010), available at http://www.justice.gov/atr/public/workshops/ip/index.html.
15 See generally The Evolving IP Marketplace, FED. T RADE C OMM ’N, available at
http://www.ftc.gov/bc/workshops/ipmarketplace/.

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 6
interactions with market participants, the Antitrust Division and the FTC believe that the
benefits of increased transparency significantly outweigh any potential costs in the
market for patents.
B. 	A Robust Definition of RPI Will Promote Competition
RPI rules must be meaningful if they are going to create the positive effects we
envision. Firms should not be able to easily undermine or overcome the purpose of the
recordation requirement through a vast web of holding companies and legal subsidiaries,
as appears to be an increasingly common practice among certain non-practicing entities.
Thus, transparency with respect to simple “ownership” will not capture the complexities
of the industry. A meaningful definition of RPI, however, could create transparency that
might mitigate some of the problems that we see in the IP marketplace.
The PTO proposed two possible definitions of RPI in its Federal Register Notice.
The first is a “Broad” definition that would include entities with the legal right to enforce
the patent. This definition would likely include exclusive licensees in certain cases;
however, an ultimate parent entity (UPE) may not qualify for this definition if it is not an
exclusive licensee and does not have standing to sue.16 The second, “Limited” definition
would require disclosure of “the legal title holder(s) and ‘ultimate parent entity(ies) of the
patent application or issued patent.”17 An “ultimate parent entity” is “an entity which is
not controlled by any other entity,” as defined in the Code of Federal Regulations. 18 The
Antitrust Division and the FTC have significant experience with the term UPE and have
found it to work well.19 We support a definition of RPI that includes the UPE, either by
including all UPEs in the “Broad” definition, or by adopting the “Narrow” definition.
Moreover, the clear benefits of RPI information disclosure support extending the rules to
a recordation obligation for each change in RPI. This would ensure accuracy of RPI
records between and after collection of maintenance fees.
III. 	Conclusion
The Antitrust Division and the FTC commend the PTO for its efforts to
implement its duty of “dissemination to the public information with respect to patents”20
16 See, e.g., Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc. 620 F.3d 1305, 1317-18 (Fed. Cir.
2010) (holding that an assignee’s parent corporation did not have standing to bring an infringement suit).
17 77 Fed. Reg., supra note 1, at 70,388.
18 16. C.F.R. 801.1(a)(3) . See 77 Fed. Reg., supra note 1, at 70,388 for discussion of the PTO’s proposals.
19 The Agencies have had decades of experience with the concept of ultimate parent entity in carrying out
their HSR duties and it has worked well in that context, in part because it helps the Agencies identify the
parties of interest in the transaction. UPE is defined in the Premerger Notification Rules, 16 C.F.R.
801.1(a)(3).
20 35 U.S.C. § 2(a)(2).

Antitrust Division and Federal Trade Commission
February 1, 2013
Page 7
and supports efforts to make public information regarding patent ownership as accurate
and complete as possible. The availability of more complete and accurate information
regarding the ownership of patents will enable the patent marketplace to function more
efficiently. The PTO’s proposed changes are likely to improve efficiency in patent notice
and licensing and should discourage potential abuses of the process. Thus, the proposals
have the potential to stimulate innovation, enhance competition, and increase consumer
welfare.