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June 04, 2013

White House Offers Some Options in Dealing with Patent Trolls

By Ed Silverstein, TMCnet Contributor

The White House has come up with some solutions to address the increasing problem of frivolous patent lawsuits – brought about by what are commonly known as “patent trolls.”

The Obama administration has issued five executive actions and seven legislative recommendations to address the issue –which is stifling innovation and business profitability.

The executive actions include requiring applicants for patents or patent owners to update ownership information if they are involved in a case before the United States Patent and Trademark Office (USPTO).

In addition, the USPTO will train its examiners “on scrutiny of functional claims and will, over the next six months, develop strategies to improve claim clarity.” The administration wants to see end-users no longer be “subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement.”

The USPTO, too, will do a better of job of informing end-users about their rights in connection with a patent troll. Also, there will be more research related to litigation initiated by patent trolls. The White House also called for stronger enforcement related to exclusion orders.

The National Economic Council and the Council of Economic Advisers released a report, “Patent Assertion and U.S. Innovation,” which describes the issues on patents and calls for “bold legislative action.”

The moves by the White House build on improvements that came from the Leahy-Smith America Invents Act (AIA) – which was approved in 2011.

“Our efforts at patent reform only went about halfway to where we need to go,” Obama said in February in reference to the AIA.  “What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”

Without additional action, those who innovate “continue to face challenges from Patent Assertion Entities (PAEs, or patent trolls).” They “essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them,” Obama has said.

The legislative recommendations from Obama include:

  • Have Congress expand the USPTO’s program for covered business method patents.
  • Give courts more discretion “in awarding fees to prevailing parties in patent cases.”
  • Require patent holders and applicants the “Real Party-in-Interest.”
  • Give consumers and businesses more legal protection “against liability for a product being used off-the-shelf and solely for its intended use.”
  • Change the standard used by the International Trade Commission for getting an injunction.
  • Curb abusive lawsuits through more transparency.
  • Give the ITC more flexibility in hiring qualified administrative law judges.

Meanwhile, Congress is considering legislation on patent trolls as well. House Judiciary Chairman Bob Goodlatte (R-Va.) and Senate Judiciary Chairman Patrick Leahy (D-Vt.) have come up with a proposal that would “limit the kinds of documents that firms could force their opponents to produce during the discovery phase of a trial,” The Hill newspaper reported.

Patent trolls have been a drain on the economy. Patent trolls cost U.S. businesses some $29 billion in 2011, according to a study from Boston University. The study also found that 2,150 unique companies were forced to mount 5,842 defenses in lawsuits during 2011. And the study showed that small- and medium-sized organizations were 90 percent of the defendants sued, and paid about 37 percent of the total costs during 2011.

In addition, the Coalition for Patent Fairness recently held a conference which attracted many industry representatives – ranging from those representing small businesses and larger companies, TechZone360 reported.

“These organizations – large and small – are fed up. They’re sick and tired of patent assertion entities (PAEs), more commonly known as patent trolls, and their often baseless but costly attacks,” Alan Schoenbaum, general counsel at Rackspace (News - Alert), said in a recent blog post. “It’s a drain on innovation, a plague to all of technology and a drag on the economy.”

“We welcome President Obama’s focus on this important issue. Increasingly, retailers are forced to defend themselves against infringement suits simply for using off-the-shelf products that incorporate patented technology,” Bill Hughes (News - Alert), senior vice president for government affairs at The Retail Industry Leaders Association, said in a statement. “The prospect of costly litigation to resolve even the most dubious of claims enables patent trolls to generate settlements that neither reflect the intent of the law nor the actual value of their claims. Meaningful action must be taken to reign in this abusive practice.”

Edited by Alisen Downey
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