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Obama on Patent Trolls – Much Ado About Nothing


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
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Posted: June 4, 2013 @ 4:51 pm
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Just ahead of President Obama’s fundraising trip to Silicon Valley later this week the White House announced that the Obama Administration is taking action to address the problem of patent trolls. News outlets were touting the executive action that President Obama was going to take to put an end to the problem of patent trolls once and for all.

There is no doubt that the Obama position will be loved by Google and other Silicon Valley technology giants that despise the patent system. Given the revolving door between the Obama Administration and Google, the long-term close relationship between President Obama and Google (see here, here and here), and the fact that patent issues don’t resonate with John Q. Public, it seems likely that the President stepping in now to allow him to tout that he is engaged with issues of importance in the minds of tech giants who will be asked for large checks later this week.

But what executive action could the President really take that would make a difference?

The honest answer is that there is no executive action President Obama could take that would influence patent litigation. Still, he will be pressed by the tech giants in Silicon Valley for help dealing with what they deem unwarranted patent litigation. This has, apparently, led the White House to announce insignificant executive steps to address the so-called problem.

Of course, there is a problem with abusive patent litigation, but the problem is not nearly as widespread as the Silicon Valley elite would have you believe, nor is it isolated to the camps of patent owners seeking to enforce patents.Truthfully, Silicon Valley thinks whenever they get sued it is unjustified, but who could be against taking action to stop patent trolls? Well… those who really understand that the problem is nuanced and that litigation abuse occurs both against tech giants and by tech giants.

Yes, tech giants get sued on terrible patents that are clearly invalid and which they don’t infringe anyway, but those same tech giants settled bad claims on crappy patents while at the same time they litigate to the death good, valid patents on important technologies that they do infringe. There are few “Snow White” players in the patent litigation space, and the constant vilification of patent trolls and claims that the patent system is broken are too broad to the point that they are misleading.

By settling crappy cases the Silicon Valley elite they create a boogeyman that only the government can defeat, while at the same time they run rough-shot over true innovators who are dragged through years (or decades) of litigation. Shouldn’t they be settling and licensing good patents rather than vilifying true innovators? If they are being extorted by bad patents they don’t infringe that is a problem they have created by constantly paying bad claims. There are few guarantees in life, but if big tech continues to settle bad claims they are guaranteed to be plagued by bad claims on bad patents where there is no infringement.

So why does Silicon Valley want to weaken the patent system? Well, not everyone in Silicon Valley wants to weaken the patent system. There are numerous innovator companies, research and development companies, universities and independent inventors that understand the importance of patents. You can also look at the Silicon Valley elite and appreciate that they too once upon a time understood the importance of patents, building their dominance with rapid and generous accumulation of patent rights on important technologies. But as big companies become bigger it becomes increasingly difficult to truly innovate. IBM is a notable exception. There are others that are exceptions, but with ever more layers of bureaucracy to weed out good ideas and inventions corporate size is a detriment to maximizing innovation.

So it seems that the Silicon Valley elite have their patents and to preserve their dominance they need to make it more difficult for innovators to accumulate strong patent rights in the same way that they did. Their positions are all about maintaining their dominance, not about addressing the problem with abusive litigation. I say this with confidence because I repeatedly offer to solve the so-called patent troll problem for companies that can’t figure it out on their own and I have never had a single company even call to inquire. Obviously they are not looking for solutions, but would rather have a boogeyman they can point to in order to achieve what they really want, which is a dismantled patent system.

Regardless of the politics and business protectionism that underlies this and other efforts to solve the so-called patent troll problem, let’s take a look at the executive measures touted by the White House.

1. Making “Real Party-in-Interest” the New Default

With respect to making known the real-party-in-interest, the White House announcement stated:

Today, 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.

Talk about the White House being out of touch and not knowing what is going on within the Executive Branch! The PTO is not going to begin work on a rulemaking process today because the process started last year. Thus, this point is nothing more than blowing smoke and taking credit for the agency moving forward on this point more than six months ago. Indeed, on November 26, 2012, the PTO published in the Federal Register a Notice of Roundtable on Proposed Requirements for Recordation of Real- Party-in-Interest Information Throughout Application Pendency.  This Federal Register Notice put a deadline of January 25, 2013 for written comments relative to requirements for recording information about the real-party-in-interest.

2. Tightening Functional Claiming

On functioning claiming the White House explained:

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, such as by use of glossaries in patent specifications to assist examiners in the software field.

Targeted training of examiners? This is just insulting. As if the USPTO doesn’t train its patent examiners or the patent examiners are in some way in need of re-programming.

This is laughable anyway. There are over 7,800 patent examiners and expecting them to all be on the same page at the same time when the Supreme Court in their infinite wisdom abhors bright line rules is ridiculous.

Further, re-training patent examiners will only matter if they are trained with new material and information that is different from what they are currently doing relating to functional claiming. The trouble is this is not the role of the Executive Branch. Functional claiming stems from the Patent Act (specifically 35 U.S.C. 112(f)) and the case law interpreting the statute. I just don’t see any justification under our system of government for the Executive Branch to swoop in and change well-established interpretations of a statute without amendment by Congress or a varied alteration by the Judiciary. The role of the Executive Branch is to enforce the law, not to redefine the law.

3. Empowering Downstream Users

With respect to empowering the people, the White House explained:

Today, the PTO is announcing 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.

How is a plain-English Frequently Asked Questions (FAQs) page on the USPTO going to do anything substantive? This is a nearly comical feel good but accomplish nothing step. People sued by those who are engaging in extortion with crappy patents don’t need a FAQ page to tell them that they are not infringing and the patent they are being sued on is laughably incomplete. What they need is a streamlined and affordable way to band together with others similarly situated to challenge the patent in an affordable proceeding at the USPTO. So while a FAQ section is easy to put together it isn’t going to help and what would help isn’t being pursued.

And don’t give me that there are new ways to challenge bad patents. Those who are the problem seek extortion payments of $10,000, $20,000 or $50,000. The filing fee to challenge a patent after issue is many thousands of dollars and the legal fees can go well into the hundreds of thousands of dollars. That is less than litigation, but way more than an individual or small mom-and-pop can pay. So the exorbitant fees for these reviews and the complexity of the procedural rules makes them useful for those who have money in the first place.

4. Expanding Dedicated Outreach and Study

On outreach the White House explained:

Today, we are announcing an expansion of our outreach efforts, including six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws.  We are also announcing an expansion of the PTO Edison Scholars Program, which will bring distinguished academic experts to the PTO to develop — and make available to the public — more robust data and research on the issues bearing on abusive litigation.

How is expanding the Scholars Program going to accomplish anything useful? Does the White House think that patent scholars are in short supply or can’t engage in research without the assistance of the federal government?  While there are others I can point to, allow me to single out Professor Robin Feldman of the University of California Hastings College of Law, who is a frequent guest contributor here on IPWatchdog.com. Professor Feldman has been at the forefront of doing tremendous research on abusive litigation, bringing many facts to the debate. See, for example, articles by Professor Feldman. More facts are never bad, but this type of factual information and “robust data and research” is already going on in the private sector without government assistance.

As for talking about the problem, that is fine if we are really going to talk about the issues and not just pretend that patent litigation abuse is a one way street. Still, there has been ongoing and lengthy discussions within the private sector at conference after conference. More talk won’t change the reality that the Silicon Valley elite settle crappy claims and litigate good claims to the death. Similarly, more talk won’t change the fact that mom-and-pop companies are being forced to pay extortion-like payments for bad claims. Furthermore, it won’t change the reality that there are numerous non-practicing entities that are innovators that have always been the backbone of the U.S. innovation economy. In fact, none other than Thomas Edison was a non-practising entity and few, if any, would consider him a patent troll.

5. Strengthen Enforcement Process of Exclusion Orders

On exclusion order the White House explained:

[T]he U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that [Customs and Border Protection] and the



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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.

Frankly, I’m not sure what this even means. Given that President Obama supports legislation that would limit the ability of the ITC to issue injunctions I have to question how fair and balanced this interagency review will be and what such a review might hope to achieve. Big tech companies have been working to strip the ITC of jurisdiction since at least the time the ink was still wet on President Obama’s signature on the America Invents Act on September 16, 2011. I am particularly suspicious of such efforts. For more see NPE Data Does Not Support Patent Infringer Lobby, Follow the Money – Will the ITC Lose Jurisdiction? and Are Some Patent Owners More Equal than Others?

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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Troll Basics, Patent Trolls, Patents, Technology & Innovation, USPTO

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

12 comments
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  1. More government foolishness and stupidity.

    If some of these kuckleheads had their way, they’d probably have jailed Edison … and thrown away the key.

    Abraham had a patent on one of his inventions. Since he didn’t commercialize it, shall we demonize him as a “troll,” as well?

    Sheesh.

  2. Sorry — am referring to Abraham Lincoln.

  3. Trolling would be a serious problem if the troll’s patent disclosure is unclear or vague and if the troll was using the vaguely disclosed idea to sue a real commercialized product that is making real money and creating real jobs in the economy.

    I feel the inventor’s skill and ability to implement the invention or to create real products from the claimed invention should probably be considered seriously. Being able to implement the invention does not necessarily mean that the claimed invention needs to have been commercialized or sold on the markets.

  4. I enjoyed Greg Ahronian’s (patnews) irreverent remark about “overly broad” claims.

    What? They (the PTO examiners) aren’t doing that already?

    (making sure the claims are not “overly broad” –D’oh)

  5. Jon,

    While your suggestion might be difficult to implement, it has some merit. Might have to tweak it a bit to cover universities, Edison, Lincoln, etc… since they would be considered trolls.

  6. Incisive post. It does appear as if the anti-troll, anti-patent initiative is better organized than many suspect. It’s amazing that there has been little or no effort to expose the self-serving proposals that are cirulating in congress and being promoted by the Wh. In today’s NYT Judge Rader and Prof. Coleen Chien collaborated on “Making Patent Trolls Pay in Court”. An unlikely duo. I didn’t realize the CAFC judges could help set policy.
    http://www.nytimes.com/2013/06/05/opinion/make-patent-trolls-pay-in-court.html?ref=opinion&_r=0

  7. Gene: Excellent article. You are always at your best when you are not pulling any punches. The proposed anti-troll admin fixes are clearly feel-good window dressing. You were right to call them on it.

    As a practitioner who represents a number of clients beset by NPEs, I suggest that one pathway to lessening troll litigation can be modeled on observing how the retail industry handles what I can only presume has been decades of “slip and fall” or “shell in my soup (not chowder)” type of nuisance lawsuits brought by aggressive plaintiffs’ attorneys. Note the litigation history of many of the NPE plaintiff law firms and see how many have a history of classic plaintiff injury type of cases. Until the insurance industry can be convinced to issue patent infringement policies using actuarial data to compile realistic coverage for claims brought by NPE’s (no loss of profits for an NPE; no basis for a permanent injunction) you are going to see the defendant class having to continue to self-insure patent damages. Effective insurance policies with enumerated coverage limits would lessen the burden on the defendant corporation class.

    Other helpful procedural changes (not fixes) would be to raise more FRCP 11 challenges by defendant’s counsel and encourage the courts more effectively enforce same. Another weakness that could be corrected by Congress would be to eliminate the Form 18 pleading exception for direct infringement and change it to the higher requisite Iqbal pleading standards as employed for pleading indirect infringement causes of action. In short, raise the bar to entry into the Article III courts and make it easier for defendants to challenge under FRCP 12 for deficiencies in pleadings/facts. Keep up the great writing—this field needs commentators like you.

  8. Brad-

    I couldn’t agree with you more. I have been saying for a very long time that the solution to the patent troll problem can be learned from how the insurance industry handled the dramatic increase in auto accident claims in the 1980s. They paid everything no matter how bad. In the 1990s they settled nothing no matter how good. By paying on everything that led to many filing claims that were objectively bad, but knowing that they would get something to make it worthwhile. Settling bad claims cannot continue.

    Interesting thought on insurance products. I wonder whether those facing the troll problem could band together via an industry group to form a collective insurance if more traditional insurance providers don’t step up to the plate.

    I’ve also been screaming that the district courts already have the tools to handle this. Judge Rader with Colleen Chien and David Hrick published on Op-Ed in the NY Times today that raised Rule 11 as well as 35 USC 285, pointing out that judges have the ability to handle abusive litigation already. Rader et al conclude: “Judges know the routine all too well, and the law gives them the authority to stop it. We urge them to do so.”

    Frankly, I think your clients need to unleash you! Make an example out of a couple of these extortion artists. If anyone can do it I know you and your firm certainly can.

    Cheers.

    -Gene

  9. Bruce,

    I like Chief Judge Rader, so I too am a bit chagrined to see his name attached to such a piece (in more than one way, from the fact that is is attached at all to the company he is keeping on the piece [that being Chien, whose work has been largely debunked]).

    Prior Chief Judge Michel took the higher road and retired so that he could champion policy without tainting his office.

    The only bright side that I see (more to the truth is hope) is that perhaps the President will recognize an existing presidential orders (12866 and 13563, I believe), and realize that if action is currently avialable, then that action is what should be taken first.

  10. Gene,

    I believe there is another solution (which, I think, has also been endorsed by Judge Rader): Put together a small-claims type patent court with streamlined procedures (which will hopefully translate to significantly lower costs – for both plaintiffs and defendants) for claims that are less than (pick a number), $250,000.

    If I’m a defendant and some patent holder is coming after me with an obviously invalid patent and is trying to extort a $20,000 or $50,000 settlement and I know that I can get a fast (low cost) ruling on validity or infringement in that cost range, its more likely that I’m going to fight than pay an extortion type settlement.

    Conversely, if I’m a patent holder and I have a good patent (in the sense that doesn’t have validity issues or a weak infringement case) but my damages model isn’t very large, I would much rather go down the small-claims court route to quickly validate my case without having to spend a lot of money against a defendant (or defendants) when there isn’t a great deal of money to be had in the way of damages.

    The way the economics of the system are currently structured is that a patent troll’s leverage (and I use the term “patent troll” as someone who is suing on an invalid patent or has a very weak infringement case) is that the costs of defense greatly exceed the cost of settlement. Take that leverage away and trolls will likely start to fade away as more defendants fight (since the cost of defense in a small-claims patent context are significantly lower).

    I’m on the plaintiff side of the patent litigation business and I would love to see the trolls go away. They not only harm businesses and consumers with these types of extortion settlements but they skew the playing field against patent holders that have legitimate patent claims by poisoning the public’s perception (and likely some judge’s perception) of patent holders that maybe don’t practice the invention but that do have legitimate patent claims.

  11. Seems to me that most of the problems that people are complaining about are being caused by the lawyers of the defendants–frankly. I think a good attorney can make the plaintiff more pain than the defendant up until judgement. I keep reading these posts, “oh boy, I got a letter and then it cost me $50,000 to deal with it.” Well, if you had a good lawyer probably not. Probably as simple as either ignoring the letter with a few paragraphs in a file for the record of you belief that the letter or a simple few paragraphs back to the letter write. Something like, “My client examined your patent and their product and does not believe they are infringing. Please provide additional details regarding your allegations.” Let them do the work. If they come back with a claim chart, then—and the patent is either invalid or you don’t infringe, then you can still write back with a brief letter. Basically, there is no reason to spend your clients money before they file a lawsuit when they are pushing a bad patent.

    But, I see lawyers take $100K from their clients for bad patents. Come on. Don’t you think that a lot of problem is learning how to respond to the trolls. If they file a lawsuit, even that can be done step wise to force them to spend more than you. Of course some local rules can make that difficult, but again, I think the problem is that the “troll” has become an excuse to take the clients money —on the defense side.

  12. The arguments that there is going to be some simple cheap way to invalidate a patent is a pipe dream. There is no magic solution. The solution —like always– is to apply lots of common sense and elbow grease. Push back on the troll with proportional force. Make them spend more than you, and keep up at least a bluff that you will go to court and continue to escalate with them continuing to spend more than you.