On Tuesday, June 4, 2013, the Obama Administration announced that the President was taking up the fight against patent trolls with immediate Executive action and by asking Congress to adopt certain legislative reforms. The White House announcement explained that patent trolls are a drain on the economy, but recognized that “no single law or policy can address all these issues.” For that reason, the Obama Administration wants to tackle multiple changes to “increase clarity and level the playing field for innovators.”

What follows are the Legislative Recommendations and the Executive Actions announced:

Legislative Recommendations

1. Require patentees and applicants to disclose the “Real Party-in-Interest.”
2. Permit more discretion in awarding fees to prevailing parties in patent cases.
3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents.
4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use.
5. Require the ITC to apply the traditional four-factor test in eBay Inc. v. MercExchange.
6. Incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public.
7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

Executive Actions

1. Ordering the USPTO to immediately initiate rulemaking to require the “Real Party-in-Interest” to be disclosed.
2. Tightening functional claiming by re-training patent examiners to better understand what they are supposed to be doing with respect to software patent applications.
3. The creation of an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll.
4. Expansion of the PTO Edison Scholars Program, which brings in distinguished academic experts to the PTO.
5. Launching an interagency review of existing procedures that Customs and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards.

As you can see, requiring that the “Real Party-in-Interest” be identified seems particularly important to the White House, appearing both on the list of Legislative Recommendations and on the list of Executive Actions. Of course, the USPTO is well underway with the process to require the “Real Party-in-Interest” be identified. Thus, when the White House says that the USPTO will be immediately directed to undertake the project, the announcement is at least a little behind the curve. The USPTO embarked on this rulemaking path in November 2012 with a Federal Register Notice. One public comment period has come and gone, and the USPTO has held Roundtable meetings. Thus, 2 of the 12 items in the White House announcement relate to something that is already being addressed, and the other Executive Actions are maybe much ado about nothing.

Sadly, most of the Executive Actions are simply hollow. Additional training for patent examiners doesn’t deal with patent litigation abuse, which is the real issue. The truth is the patent system is not broken, but there is very real abuse of the litigation system that is allowed to exist by district court judges, as pointed out in a recent op-ed by Chief Judge Rader in the New York Times. So while the White House laments the poor patents issued, many in the industry think that the real problem is that those who abuse litigation are not being held accountable for what has been characterized as “extortion-like” activities aided by more than one federal judge.

The one item that would provide the most benefit is a legislative fix that would permit more discretion in awarding attorneys fees. But if the granting of fees to the winner is left to the discretion of district court judges, fees may still not be awarded in any meaningful way. To have impact, payment of attorneys fees would need to be mandatory.

Big tech companies are pushing to have patent trolls pay their attorneys fees. That would be a good step forward when there is extortion-like activity. But to be perfectly fair, big tech companies engage in litigation abuse as well. They settle bad cases but litigate for many years — even over a decade — when sued on a good patent that they are actually infringing. Thus, the solution is to recognize that there are bad actors that manipulate litigation in unintended ways to achieve a victory based on the financial reality that suing and being sued costs money. Thus, if plaintiffs have to pay if they lose, defendants should have to pay if they lose as well.

Of course, big tech companies will never allow such a system. So we are back to Chief Judge Rader’s solution as being the most appealing and effective: District Court judges must use their inherent and statutory powers to better police abusive patent litigation and not allow their courtrooms to be the setting of extortion-like shake-downs.

This entry was posted on Friday, June 7th, 2013 at 15:51 and is filed under posts. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.