The Administration’s strategy to curb patent abuses revealed

In a long-awaited move, on June 4, 2013, the White House issued five executive actions and seven legislative recommendations “designed to protect innovators from frivolous litigation and ensure the highest-quality patents in our system.” 

Purpose: The president stated that Patent Assertion Entities (PAEs), also referred to as Non-Practicing Entities (NPEs), companies that, in the President’s words, “don’t actually produce anything themselves,” and instead “essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them,” serve to stifle innovation. In addition, citing the “Smartphone Patent Wars,” it was pointed out several major companies spend more on patent litigation and defensive acquisition than on research and development.

The Administration recommended that Congress pursue at least seven legislative measures that would have immediate effect on some major problems innovators face.  These measures would:

  1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance;
  2. Provide trial courts with more discretion in awarding attorney fees to prevailing parties in patent cases as a potential sanction for abusive court filings;
  3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB);
  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. Better align the ITC standard for obtaining an injunction with the four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts;
  6. Incentivize the 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.
At the same time, the Administration announced the steps it is taking through the USPTO to affect greater transparency to the patent system and “level the playing field” for innovators:
  1. The PTO will begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the PTO, specifically designating the “ultimate parent entity” in control of the patent or application;
  2. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity;
  3. The PTO will publish new education and outreach materials, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll, in order to empower downstream users such as “Main Street retailers;”
  4. The PTO will expand outreach efforts, including hosting six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws, and expanding the current PTO Edison Scholars Program, which brings in distinguished academic experts to the PTO to develop more robust data and research on the issues bearing on abusive litigation;
  5. The U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that Customs and Border Patrol and the International Trade Commission use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient.
There is sure to be informed commentary on the ultimate effects of such actions, and IP Value Wire will monitor that closely.