obama-pics
5 June 2013Patents

Obama announces action against patent trolls

US President Barack Obama has come out swinging against “patent trolls”, calling for swift policy changes to deter frivolous litigation and uphold patent quality.

In a White House statement on Tuesday, Obama listed five executive actions and seven legislative reforms to protect high-tech patent owners from the “challenges” posed by non-practising entities (NPEs).

Patent trolls “don’t actually produce anything themselves”, Obama said, 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”.

Among the executive actions taking immediate effect are new rules requiring patent owners to regularly update ownership records when acting before the US Patent and Trademark Office (USPTO), along with stepping up the USPTO’s efforts to educate “downstream users” about NPEs.

The legislative reforms, which Obama wants Congress to implement swiftly, include allowing district courts to award attorneys’ fees as a sanction for “abusive court filings” and better protecting consumers’ and businesses’ against legal claims covering ordinary, “off-the-shelf” patent use.

There is some overlap between a number of the executive actions and legislative recommendations, including making patent ownership clearer – which features at the top of both lists.

Tuesday’s announcement largely represents a gathering and repackaging of a number of initiatives already contained in pending legislation introduced in Congress over the past few months, said Peter Schechter, partner at Edwards Wildman Palmer LLP.

“However, there are some new and interesting things mentioned. For example, protecting individual consumers from infringement suits for their ‘off-the-shelf use’ of a product for its intended purposes seems fair enough,” he said.

Peter Kunin, partner at Downs Rachlin Martin PLLC, said he was “thrilled” that the White House has weighed in against patent trolls – and it has made some “very helpful” recommendations.

Two of the main benefits of the White House’s new approach, Kunin said, will be increased transparency and “levelling the playing field” between small and medium-sized enterprises (SMEs) and NPEs.

The official statement doesn’t single out any particular industry, other than hi-tech patent owners, but Kunin said patent trolls mainly have an impact on four industries – IP services, software, telecoms and (to a lesser extent) finance – so these recommendations would probably benefit them.

While the statement is positive, there is nothing that will “radically change the landscape” said Jeff McMahan, attorney at Dinse, Knapp & McAndrew PC, noting that the president’s proposals are largely incremental steps in the fight against patent trolls.

“By and large, this is a game played by wealthy NPEs and they have more wherewithal to press litigation than the recipients have to defend against it ... It’s still going to be difficult for SMEs for dealing with NPEs.”

Bad NPEs do exist but there are also some “very bad large corporations that use and misappropriate technology that they didn’t come up with themselves”, said Daniel Papst, managing director at Papst Licensing, a patent licensing company in Germany.

“The other side of the story is that the NPEs serve a purpose by helping SMEs and single inventors to reap [rewards] from their inventions, which, in the US judicial system, would otherwise have no chance of being compensated for their contribution to technology,” he said.

“In general, I believe the president has been badly advised. Evidently, there is a strong influence of hi-tech corporations [in US politics] and the use of many strong terms only shows one side of the story.”

Obama signed the America Invents Act in 2011, but said in February this year that “our efforts at patent reform only went about halfway to where we need to go”.

Since then, the state of Vermont has passed legislation aimed at reducing “bad faith” patent infringement claims, in what is believed to be the first anti-patent troll US legislation.

The latest official statement appears to be the strongest sign yet that the White House is committed to legislating against NPEs, with Tuesday’s statement saying that “we stand ready to work with Congress on these issues crucial to our economy, American jobs, and innovation”.

“In sum, however,” Schechter said. “This announcement seems to be more about changing attitudes than accomplishing concrete actions, at least in the short-to-medium term.”

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