FTC’s Ramirez Defends Section 5 Authorities, PAE Investigation at Hearing
Chairwoman Edith Ramirez defended the clarity of the FTC’s Section 5 authority and the agency’s ongoing research on patent assertion entities (PAEs), during a House Judiciary Antitrust Law Subcommittee hearing Friday. Several lawmakers asked Ramirez to issue further guidance on what the commission sees as its Section 5 authority, which allows the FTC to pursue what it considers unfair behavior without regard to the Clayton and Sherman acts. Others expressed concern at the commission’s administrative process, which seems “as if it’s somewhat stacked against the defendant,” said subcommittee Chairman Spencer Bachus, R-Ala. Lawmakers also sought more details on the FTC’s investigation into PAEs (CD Sept 30 p15).
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The “FTC’s failure to establish a clear standard” for when it can apply its Section 5 authority “has created uncertainty for businesses” and led to “costly litigation,” Bachus said in an opening statement. Four lawmakers -- Bachus, House Judiciary Committee Chairman Bob Goodlatte, R-Va., and Sens. Chuck Grassley, R-Iowa, and Mike Lee, R-Utah -- sent a letter to the FTC (http://1.usa.gov/17ikmt7) in October saying the commission has “yet to provide a clear standard to which the public and business community can refer.” It is “particularly troublesome,” the letter said, that the commission has developed “certain Section 5 jurisprudence through entry into private, administrative settlements that lack the benefit of judicial review.” Judiciary ranking member John Conyers, D-Mich., said some people found the FTC’s use of Section 5 authority “inappropriate” and “simply unfair.”
"I disagree with that position,” Ramirez responded. “Congress very deliberately granted authority [for the FTC] to go beyond the literal scope” of the Clayton and Sherman acts. “A very narrow, limited number of cases” are brought using only Section 5 authority, and not the Clayton and Sherman acts, she said. “We've acted appropriately in the times we've used it,” and “provided appropriate guidance” about the commission’s rationale, said Ramirez.
Rep. Blake Farenthold, R-Texas, urged Ramirez to use Section 5 authority on PAEs, companies that buy patent rights just to bring infringement cases instead of developing the technology. Can the FTC take a “more aggressive approach?” he asked. The FTC is “aware of the issue,” Ramirez said, pointing to the new investigation and a daylong workshop last December investigating the problem. “There is an increasing concern about PAE activity,” Ramirez said, and “it appears” the activity now reaches “a number of different sectors, not just the IT sector.” But with “very limited data on what PAEs are actually doing, what the business model is, what type of patents they hold,” it’s hard to know how, or if, the FTC should act, she said. The investigation, announced in late September, should take roughly one-and-a-half to two years if it follows the timeline of “analogous studies” the FTC has previously done, Ramirez said.
Some lawmakers also questioned the FTC’s ability to overrule administrative law judges. In the past 20 years, Bachus said, “it appears as if the commission always proceeds” after an ALJ has ruled in favor of the defendant. “I think that’s an imbalance and something you need to look at,” said Rep. Jason Smith, R-Mo. “I believe that’s too narrow a lens with which to examine concerns about whether or not the procedures under the FTC’s administrative processes are fair and efficient,” Ramirez said.
The June Supreme Court decision in Actavis v. FTC (http://1.usa.gov/1alcRSA) -- which several lawmakers cited as a positive ruling during the hearing -- is a good example of the beneficial results that can arise from continued pursuit of a case after courts rule against the FTC, Ramirez said. The Supreme Court’s ruling authorized the government to bring lawsuits against brand-name drug manufacturers providing payments to delay companies attempting to bring generic drugs to market. The result “was an important victory for consumers and a vindication of basic antitrust and free market principles,” Ramirez said. “Sometimes we need to be persistent” in order to establish “antitrust doctrine."
"Generally speaking, I think our authority is appropriate,” Ramirez said in response to a question from Rep. Doug Collins, R-Ga., about whether Congress should give the FTC more authority through legislation. Ramirez said she'd like to have the “ability to litigate independently when we're seeking civil penalties.” Currently, the FTC has to turn those cases over to the Justice Department. “For the most part I think the authority the agency has is appropriate for the work we do,” she said.