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White House Task Force on High-Tech Patent Issues


Written by White House
Posted: June 4, 2013 @ 11:23 am
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Today the White House announced major steps to improve incentives for future innovation in high tech patents, a key driver of economic growth and good paying American jobs.  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.  Additionally, the National Economic Council and the Council of Economic Advisers released a report, Patent Assertion and U.S. Innovation, detailing the challenges posed and necessity for bold legislative action.

In 2011, the President signed the Leahy-Smith America Invents Act (AIA), a landmark piece of legislation designed to help make our patent system more efficient and reliable.  As technology evolves more rapidly than ever, we must ensure our patent system keeps pace.  As President Obama said in February, “our efforts at patent reform only went about halfway to where we need to go.  What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”

The AIA put in place new mechanisms for post-grant review of patents and other reforms to boost patent quality.  Meanwhile, court decisions clarifying the scope of patentability and guidelines implementing these decisions diminish the opportunity to game the patent and litigation systems.  Nevertheless, innovators continue to face challenges from Patent Assertion Entities (PAEs), companies that, in the President’s words “don’t actually produce anything themselves,” and instead develop a business model “to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.”  These entities are commonly known as “patent trolls.”  Likewise, the so-called “Smartphone Patent Wars” have ballooned in recent years and today, several major companies spend more on patent litigation and defensive acquisition than on research and development.

Stopping this drain on the American economy will require swift legislative action, and we are encouraged by the attention the issue is receiving in recent weeks.  We stand ready to work with Congress on these issues crucial to our economy, American jobs, and innovation.  While no single law or policy can address all these issues, much can and should be done to increase clarity and level the playing field for innovators.

LEGISLATIVE RECOMMENDATIONS

In that spirit, the Administration recommends 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. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases).
  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.  Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer.
  5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test ineBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts.
  6. Use demand letter transparency to help curb abusive suits, 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

Today the Administration is also announcing a number of steps it is taking to help bring about greater transparency to the patent system and level the playing field for innovators.  Those steps include:

  1. Making “Real Party-in-Interest” the New Default.  Patent trolls often set up shell companies to hide their activities and enable their abusive litigation and extraction of settlements.  This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements, or even knowing connections between multiple trolls.  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.
  2. Tightening Functional Claiming.  The AIA made important improvements to the examination process and overall patent quality, but stakeholders remain concerned about patents with overly broad claims — particularly in the context of software.  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.
  3. Empowering Downstream Users.  Patent trolls are increasingly targeting Main Street retailers, consumers and other end-users of products containing patented technology — for instance, for using point-of-sale software or a particular business method.  End-users should not 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.  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.
  4. Expanding Dedicated Outreach and Study.  Challenges to U.S. innovation using tools available in the patent space are particularly dynamic, and require both dedicated attention and meaningful data.  Engagement with stakeholders — including patent holders, research institutions, consumer advocates, public interest groups, and the general public — is also an important part of our work moving forward.  Roundtables and workshops that the PTO, DOJ, and FTC have held in 2012 have offered invaluable input to this process.  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.
  5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC 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.

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Posted in: IP News, IPWatchdog.com Articles, Patent Trolls, Patents

21 comments
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  1. Gene,

    The continuing malarkey on so-called “patent abuse,” now from the White House. So much for expecting this administration to do anything about helping small innovative small American businesses.

  2. “Leveling the playing field”,

    translation=

    cutting them inventors who are too small to substantially contribute to campaign funds down to their appropriate, voice-in-government size, namely, zero.

    Ours is once again, the best government that money can buy.

  3. @stepback and anon,
    THIS is another example of why natural rights matter.

  4. The Google Protection Act of 2013
    http://www.businessweek.com/articles/2013-05-30/googles-eric-schmidt-invests-in-obamas-big-data-brains

  5. Dale,

    This has nothing to do with natural rights.

    This has everything to do with weakening the patent system. But not under a different-non-Libertarian methodology.

    Here, this is aligning patent infringement with the notion of contract’s efficient breach. The absolutely only reason ever why the ownership of a patent (patents are enforced individually – each on their own right) matters is to be able to determine whether it will be efficient to knowingly infringe that patent, to weight the risks of ‘breach’ versus fairly dealing with the intended power of the negative patent right. Note too the intended entwining of the FTC to the Court’s eBay ruling.

    When it comes to patents, the Libertarian view still has its difficulties (and I would invite you to carry on the discussion on the other thread and addres the points I raised there).

  6. My apologies, FTC should read ITC.

  7. Dale,

    It is your 1st Amendment right to believe in “Natural Rights” and/or any other religion or ideology you wish to believe in and I respect that.

    However, I don’t subscribe to the theory that each man is an island who totally “owns” himself and can do with himself as he selfishly pleases. (Example, A libertarian infects himself with a highly contagious disease which has a 24 hour incubation period and then decides to spend his last 24 hours of life in crowded public places.)

    We are each part of a society and we inter-depend on one another for our survival and well being (or lack thereof).

  8. [...] 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 [...]

  9. Step-

    Funny that you mention campaign donations. I just published my first commentary on this truly non-news worthy announcement. I suspect this has everything to do with the President swinging through Silicon Valley to collect checks at a fundraising dinner later this week.

    -Gene

  10. Every animal has conditions necessary for its survival. In man that is the ability to use HIS mind. Reason is the tool man uses to evaluate reality and it only functions on an individual basis. This is science, not religion. This is as well proven as the Evolution. This why the only government consist with human survival and happiness is one that protect you natural rights. It is why the wealthiest, longest living, best educated, least polluted countries are the best at protection human rights (see Heritage and Frasier Institute Index of Economic Freedom). This has everything to do with natural rights, because otherwise the patent system is a meaningless, arbitrary program to give special legal powers to certain people. And that is exactly how the Obama Administration looks at patents and all property rights.

  11. Dale,

    Sorry, but I have to disagree with your statement of “it only functions on an individual basis.”

    It does operate on an indiviudal basis – but to the degree that it operates on a non-individual basis, that is the exchange of reason with another, is what determines the level of civilization.

    You mentioned that Jefferson changed the traditional triumverate and removed property based on slavery. To what legal basis then are you attaching property as a fundamental right?

    And yes, I am attempting to constrain the discussion to patent law (if we can).

  12. Dale,

    When I get a chance, I’ll point you to web content that disproves (yes with science) your belief system based on “rationality” of the “individual” human “mind”.

    In brief, it appears your philosophy is based on Enlightenment Age notions of a rational human “mind” including those of John Locke and of his theory of “informed” consent of rational-minded citizens to be governed by representatives in a representative republic form of government.

    Rational? Representative? Informed?
    Seriously?
    Doesn’t everything you see about you disprove that notion already?

    p.s. Please don’t try to get too serious on this topic or you will go the way of the Mad Hatter in Alice’s Wonder Trip down the Rabbit Hole.

  13. Gene,

    Obama making a Wonderland Trip through the Valley of the Silicons?

    That explains it.

    He’ll probably mess up my commute.

    p.s. We don’t do silicon anymore. Shhh. Don’t tell anyone. It is a highly open secret.

  14. Property rights come from the logical implications of natural rights, just a slavery being immoral comes from the logical implication of natural rights.

    People can communicate their thoughts, but they cannot think for someone else.

    Reason is a volitional faculty. Just because some people decide to not use reason – almost always selectively, does not prove that reason is the only faculty for understanding reality. Reason is why we have cars, medicine, organic fuels, books and the internet. Choosing not to reason leads to death, disease and gulags.

  15. Gulags?

    You mean like the slave camps that were maintained primarily in the Southern portions of the USA and under its Constitution from before 1776 to at least 1865 if not until 1963 Selma? Those gulags?

  16. How many more contradictions can the report have?

    For example, on page 3:

    Patent intermediaries can play a useful social role.

    illiquid markets …. may benefit from specialized intermediaries.

    For example, an individual inventor might sell a patented battery technology to an intermediary, who then sells or licenses the patent to a cell phone manufacturer who has both the equipment to make the battery in large scale and the ability to market the advantages of the new battery when combined with that phone.
    This arrangement allows inventors to specialize in innovation and benefit from the specialized commercial knowledge and connections of an intermediary. …. Effective brokering of patents by intermediaries can therefore increase the value of patents, fostering greater incentives to innovate. And finally, potential inventors may not have the resources to protect their patents from infringement; their incentives to invent may be increased if they can sell their patents to firms that specialize in litigation and other means to collect license fees from those who are using the patent technology.

    Which mostly gets it but then directly contradicts it on page 4 by attacking the same business models!:

    PAE’s:

    do not practice their patents

    acquire patents solely for the purpose of extracting payments from alleged infringers

    their strategies for litigation take advantage of their non-practicing status

    So which is it – intermediaries play a vital role in helping inventors and creating market efficiencies – or intermediaries cause death and destruction?

    Obviously, much of this depends on your biased perspective. If you are the small innovative software company that approaches a large giant such as Google, Microsoft, or Apple and is told “interesting, but we don’t want it” only to find out that your same innovation is pushed out in a subsequent version/update/product – then patent intermediaries seem like one of your only options left. However, if you are the large software company that would rather cut that expensive, risky, and unpredictable R&D and instead monitor the competitor landscape (especially all those small innovative software companies) – then those pesky patents and patent intermediaries are standing in your way of copy-pasting their innovations.

  17. Step-

    Good luck navigating Northern CA on Thursday! That can be difficult on any day, but with Air Force One landing to liberate the “1 percenters” of copious amounts of cash… I don’t envy your commute!

    -Gene

  18. Jodi,

    FDR was a fan of this quote and I guess so is Obama

    The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

    F. SCOTT FITZGERALD

  19. [...] have come at a worse time for the President. In the early morning hours on June 4, 2013, the White House announced actions it was taking to combat the problems presented by patent trolls. Truthfully, this announcement was [...]

  20. I like this quote by FDR, (given the nod in the White House Report to ‘fear’):

    The only thing we have to fear is fear itself.

    The war on patents continnues with this FUD report.

  21. [...] 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 [...]