White House Wants to Redirect Patent Litigation Costs Toward Jobs And Innovation

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

As referenced in a post below, the White House today released seven new legislative recommendations and five planned executive actions regarding high-tech patent issues. These actions are likely to annoy and stymie patent assertion entities (PAE) or patent “trolls” and give hope to large and small companies. Whether the actions will have a large scale effect on patent litigation remains to be seen, but the proposals are encouraging.

In 2011, the President signed the Leahy-Smith America Invents Act (AIA), which gave more opportunities for post-grant review of patents and also had the intent to “boost patent quality,” according to the White House. These new legislative efforts continue along the same course. In the President’s words, today’s proposals are intended to target patent trolls, who “don’t actually produce anything themselves,” and instead try “to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.”

The White House’s announcement stated that several major companies spend more on patent litigation and defensive acquisition than on research and development. We can only hope that the new executive actions will change this fact and the serve goals of (1) protecting innovators from frivolous litigation and (2) ensuring the highest-quality patents.

The executive actions include attempts to prevent patent trolls from hiding behind shell companies by requiring all companies to designate the “ultimate parent entity” in control of a patent. The U.S. Patent and Trademark Office (PTO) will also provide new strategies to improve claim clarity—particularly in software—including the use of glossaries. My sense is that this particular strategy may slightly improve patent clarity but will not eliminate litigation over terminology.

The PTO is also launching a new plain-English website offering answers to common questions by those facing demands from a possible patent troll. The PTO will increase research into issues bearing on abusive litigation, and the U.S. International Trade Commission (ITC) is launching new procedures to deal with exclusion orders.

Other legislative recommendations include publicizing demand letters by patent trolls. One of the most interesting legislative recommendations is to permit more discretion in awarding fees to prevailing parties in patent cases and more discretion in sanctions for abusive case filings. This potentially large monetary punishment may serve as a greater deterrent for frivolous cases.

As the White House acknowledged, no single law or policy can address all incentives for future innovation in high tech patents. Yet these steps should go a long way toward helping companies spend more on creating jobs, rather than fighting litigation.

WLF Media Program Informs Increasingly Focused Debate On “Patent Trolling”

PodiumPic1According to numerous news sources, including this TechDirt post, the President today will announce a forceful White House effort to not only directly address litigation abuses by some patent holders, but also several underlying weaknesses in the patent system that can be easily exploited.

One executive branch-level action on patent assertion entities/patent monetizers/patent trolls that has been underway since last December is a joint Federal Trade Commission/Department of Justice inquiry. The inquiry began with a public workshop and has progressed into 2013 with a public comment period.

Last Thursday, Washington Legal Foundation held a Media Briefing program focused on this inquiry and the issues surrounding it entitled Patent Assertion Entities” And Antitrust: The FTC/DOJ Inquiry And Underlying Legal Policy Issues”. Lisa Kimmel, FTC Chairwoman Edith Ramirez’s chief legal adviser on intellectual property issues, reported on the inquiry’s focus, its motivation, and next steps.  Lonnie Rosenwald, Chief Counsel for Invention Science & Development with patent monetizer Intellectual Ventures (IV), explained IV’s business model, the benefits it confers on inventors and the patent system, and why government inquiries should focus more on the perceived rise in patent infringement than on competition policy concerns with monetization. Avancept LLP patent consultant and attorney Thomas Ewing questioned Ms. Rosenwald’s benign description of IV’s beneficial role in the patent marketplace and encouraged the federal agencies to take a probing look at IV and other monetizers.

The program is also available on WLF’s YouTube channel.

Two days after WLF’s Media Briefing program, National Public Radio’s “This American Life” program ran a fascinating feature, “When Patents Attack, Part II,” which in part investigated Intellectual Venture’s assertion that its purchase of an online business-related patent conveyed significant benefits on the inventor.