Opinion: Regrettable White House Intervention on Patent Trolls

Nothing fires up a legislative debate like an unexpected White House intervention, and if the Obama administration’s patent-policy announcements this month were aimed at generating headlines and Capitol Hill conversations, they succeeded. See White House Task Force on High Tech Patent Issues.

But if the intent was to steer the debate toward a balanced approach that would curb frivolous litigation without imperiling an intellectual-property protection system so key to nurturing innovation and job protection in this country, the effort appears to have failed.

Please don’t get me wrong. There are plenty of good reasons for the White House to get involved.

There are nearly half a dozen patent-related bills or proposals under consideration in the House and Senate, and the debate is sorely in need of facts and serious study. Much of the proposed legislation would make wholesale changes to the patent system, ignoring two centuries of clear evidence that strong patent protection promotes innovation, economic growth and a higher standard of living for Americans.

And the new report from the President’s Council of Economic Advisers, the National Economic Council and the White House’s Office of Science & Technology cautions that “improving policy in this area is challenging because maintaining the incentives for innovation provided by patents requires allowing litigation when patents are infringed.”

The White House report also suggests members of Congress should adopt a more reasonable approach when it comes to so-called patent assertion entities – a.k.a. PAEs or trolls – who own patents for technologies but do not themselves manufacture, pointing out that any misdeeds in the system come from bad behavior, not a particular kind of patent holder.

“Some firms that own patents but do not make products with them play an important role in U.S. innovation ecosystem, for example by connecting manufacturers with inventors, thereby allowing inventors to focus on what they do best,” the report says.

There also seems to be some sense at the White House that facts must be established before any new lawmaking takes place. Among the administration’s patent announcements were plans to expand outreach efforts in the patent community with six months of high-profile events across the country, and a new program at the Patent and Trademark office for academic experts to develop “more robust data and research on the issues bearing on abusive litigation.”

That makes sense. The most recent major overhaul of the patent system, the American Invents Act, was passed by Congress just two years ago – after more than seven years of contentious debate – and fully came into fruition only this year.

What’s regrettable is that the White House didn’t wait for such empirical data on patent litigation and instead rehashed the findings of discredited studies of PAE-related lawsuits and their purported economic consequences. Specifically, I mean the infamous $29 billion victims are said to have paid to patent trolls in 2011, a number that has echoed around the Internet and made it into congressional debate despite its dubious origins. The number was produced by a study that failed to adequately define just what a troll is – even universities and many manufacturers were included – and then harvested its data not from a reputable polling or academic institution but from a company that has a dog in the patent fight and profits from fueling fears about infringement lawsuits.

How the number got into the report of a White House that cares a lot about science and fact-based policies is a mystery.

Even more troubling are some of the ideas included in the White House’s legislative recommendations, including one that would weaken the enforcement remedies at the International Trade Commission — despite a recent study that found international IP theft costs the American economy hundreds of billions of dollars every year.

As it happens, the White House announcements came days after David Kappos, the respected USPTO director during President Obama’s first term, produced a serious study on software patents and an argument for not treating them differently.

Kappos, writing in the Stanford Technology Law Review, examines the facts and arguments on both sides of the patent debate, and says the patent system critics are ignoring the “historical tension between the necessary long-term incentives that form the basis for the patent system, versus the desire of consumers to have products and services today at the lowest prices possible.” They are also forgetting how important a role the patent system has played channeling investment in the nation’s future, he says.

“Going back to the dawn of the industrial revolution, we have celebrated the inventors of the steam engine, the cotton gin, the telegraph, the sewing machine, the light bulb, the airplane, to name a few examples, while simultaneously decrying the patent disputes that followed them,” Kappos notes. “Americans love inventors, and we love invention. We just don’t love paying for it. But that is what our system for incentivizing invention — our patent system — is all about.”


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Join the Discussion

6 comments so far.

  • [Avatar for Dale Halling]
    Dale Halling
    July 9, 2013 11:39 am

    I agree with Anon.

    From a practical point of view the better patent assertion groups do financially the more competition there will be for patents and more return for individual inventors.

  • [Avatar for EG]
    June 28, 2013 01:18 pm

    I concur with the views expressed by Randy L. and Anon: the multinational Goliaths, especially in the computer hardware and software area want the playing field tilted as much as possible against the David’s of innovation. This initiative by the White House, as well as the AIA (Abominable Inane Act) has all the large paw prints of them and their front group, the so-called Coalition for Patent Fairness.

  • [Avatar for Anon]
    June 28, 2013 12:53 pm

    Paul F Morgan states; “how much, and what percentage of, patent assertion entity [aka troll] suit recoveries actually goes back to said “independent inventors

    I ask Why?

    A patent is property. Period. The terms of exchange of the property is distinct from any further consideration being implied as being necessary for this discussion. All too easily is the notion of alienability of property beign offered up in sacrifice when the point of that sacrifice is nebulous at best, and improvidently being sought to obtain the goal of Effective Breach at least.

    I fully concur with Randy’s posts, and could not state those views better.

  • [Avatar for Randy Landreneau]
    Randy Landreneau
    June 28, 2013 12:03 pm

    You say “all losers pay” is not politically realistic, but 99% of the political power is with those that would benefit from that outcome. “Some losers pay” is just the first step toward “all losers pay.” If you need proof that legislation is bought by the powerful, the “Medco Bailout” (in the America Invents Act) is a crystal clear example. The multinationals are methodically moving the target to eventually make it so that they will be able to infringe the patents of independent inventors with impunity. The term “patent troll” is part of the public relations campaign, and the goal is to have it applied to any independent inventor that 1) creates and patents something significant, 2) intends to license it rather than produce it, and then 3) uses his constitutional right to sue an infringer.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    June 28, 2013 11:30 am

    Certainly more accurate definitions, statistics and numbers are needed on this subject.
    But in response to the above comment, one such needed statistic is how much, and what percentage of, patent assertion entity [aka troll] suit recoveries actually goes back to said “independent inventors” ? Also, would any of the proposed anti-troll legislation with any chance of actual passage preclude independent inventors from hiring their own contingent fee patent litigation attorneys for any non-fraudulent patent suit? [Automatic fee shifting [all losers pay] proposals are not politically realistic for that and other reasons.]

  • [Avatar for Randy Landreneau]
    Randy Landreneau
    June 27, 2013 11:21 pm

    Innovation has always been a threat to the vested interest. It is only logical that vested interests would use their influence to remove the threat, and they have become amazingly adept at using public relations and political power, and in subverting groups that should be fighting them. The America Invents Act was a big wake-up call. What is going on now, regardless of the PR, is an effort to make it less costly to infringe patents. The end result of this continuing erosion of rights of the independent inventor will be the complete loss of what our Founders envisioned. The patent system created by our Founders played a big part in the innovative prosperity of this great nation, and multinationals are methodically dismantling it, brick by brick.