White House proposal on patents

For a minute, let’s lay aside all the rhetoric about who and what a “troll” is. Let’s look at the Administration’s actual proposals. According to the Fact Sheet: White House Task Force on High-Tech Patent Issues, there are seven legislative recommendations and five Executive actions. Here they are one by one, with my annotated comments:

Legislative recommendations:
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. [Comment: Is anyone against transparency? Not that I can tell — at least not in public.]
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). [Comment: Is there something wrong with the copyright legal standards that would preclude their adoption in patent cases? If not, this sounds fine.]
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). [Comment: OK, this might be controversial if the intent is to restrict software patents.]
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. [Comment: This goes after the recent tactic of targeting downstream end users, which is what I define as an example of abusive litigation.]
5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. [Comment: The argument against this seems to be that it takes away the litigators work-around the eBay decision. From my point of view, shutting down the dual system is a good thing. We need to change how ITC deals with IPR violations as an unfair trade practice.]
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. [Comment: Again, transparency good.]
7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. [Comment: so, what’s the criticism? We should hire unqualified Administrative Law Judges?]
Executive actions:
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. 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. [Comment: Again, is anyone against transparency?]
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. [Comment: Are we against better training and guidance on claim clarity for examiners? Or is the concern that the examiners might make it harder to get software patents?]
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. 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. [Comment: Is anyone against providing educational information?]
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. 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. [Comment: When in doubt about how to strongly confront a problem, call for more studies.]
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. [Comment: Is the real criticism of this proposal that the interagency review might find that limited exclusion (rather than the current blanket “nothing comes in” order) is more appropriate?]

So, what is the bottom line? When I look at all the proposals, I come away the same conclusion as others (for example, see here and here): probably a step forward but doesn’t get at the heart of the problem. The heart of the problem is patent quality.
That is not to say that litigation isn’t an issue (see “How patent trolling went mainstream” and “Tactical Shift Put Patent Firms on Political Radar.” But some have argued that the solution is already in place. According to a recent op-ed in the New York Times (“Make Patent Trolls Pay in Court“): “Section 285 of the Patent Act, as well as Rule 11 of the Federal Rules of Civil Procedure, give judges the authority they need to shift the cost burden of litigation abuse from the defendant to the troll.” Using these tools and the Administration’s proposals will alleviate some of the problem.
But the real key comes back to the patents themselves. We need to make sure that we have the IP equivalent of South Beach waterfront property rather than Everglades swampland.

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