By Stephen B. Schott
President Obama wants to vanquish patent trolls. His 2014 State of the Union address called for Congress to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.” Not satisfied with leaving reform in Congress’s hands, the White House recently announced executive actions targeting patents and patent trolls.
Stepping back for a moment in case this term is unfamiliar, “patent troll” is a colorful descriptor that is hard to define. Generally, a patent troll is an entity that asserts a patent for products that it does not itself make.
No party accused of being a patent troll accepts that pejorative mantle willingly, preferring instead to be called something more benign like a non-practicing entity. But the term patent troll persists due to its color and it’s not about to fall into the politically incorrect vernacular in the near future, so non-practicing entities are probably stuck with being called trolls.
Returning to the reforms, the White House Press Secretary Jay Carney recently released a fact sheet calling on Congress to pass legislation to curb patent trolls, summarizing its accomplishments since 2013, and announcing new executive actions.
The Patent Troll “Problem”
The problem of patent trolls is, as my friends across the Atlantic might say, a sticky wicket. A lot of people feel like there’s some kind of a problem but no one seems to agree on who’s an actual troll.
A few examples illustrate the difficulty of defining a patent troll. Let’s say that a major automobile manufacturer invests several million dollars developing a new diesel engine. Along the way, it secures 50 patents on the technology, but then decides not to pursue the diesel engine and instead focuses on hybrid engines. A few years pass and one of its competitors releases a diesel engine using the patented technology. Is our automobile manufacturer a troll if it pursues the competitor for patent infringement, just because it didn’t produce the diesel engines?
Another problem example that commonly arises is universities, which are petri dishes of innovation that rarely make any products. Most universities do, however, have a technology transfer office that secures patent protection for innovations. If a university sees a company using its patented technology and approaches the company seeking a royalty, is the university a troll that should be punished?
And a third category is also troublesome. Picture a small business that invents a new technology and secures a patent on it. Later, a multinational corporation starts using the technology. The small business doesn’t have millions of dollars to bring a patent infringement lawsuit so it sells its patent to a third party who has enough money to bring the lawsuit. In this David and Goliath scenario, small-business David needed a sling, and the third party provided it. The third party may be in the business of nothing more than collecting promising patents—but legislation attacking the third party patent collector harms the small business and stifles innovation.
At the other end of the spectrum is an example where a patent attorney purchased a patent from an inventor. The patent was for a consumer product. The patent-owner/attorney sued a manufacturer for infringement even though it was clear that there was no infringement. The manufacturer was faced with a terrible decision tree: Choice 1: Pay the patent-owner/attorney a small amount of money to settle the lawsuit, or Choice 2: Pay litigation costs (hundreds of thousands of dollars at least) to win the lawsuit and pray for the never-to-be-found Questing Beast that is judge-awared attorney’s fees for bringing a frivolous lawsuit. Choice 1, as painful as it is, is often the better business decision.
The other problem with patent trolls is that they may be less of a problem than they appear. The argument is that while patent trolls may be a problem, the widespread reforms to combat them will harm innovators, universities, and small businesses and thus sweeping patent reform legislation is not necessary.
The outcry against patent troll reform has reached enough of a pitch that Congress seems to have slowed its troll hunt and while it will probably pass something in the next couple of years, it may be carefully crafted to target the more egregious offenders.
2013 White House Patent Reform
The White House fact sheet summarizes its 2013 goals and achievements:
- Promote Transparency — The United States Patent and Trademark Office (USPTO) recently published a draft rule to ensure patent owners accurately record and regularly update ownership information when they are involved in proceedings before the USPTO. This effort is aimed at improving the quality of patents issued, enhancing competition, facilitating technology transfer, and making it harder to hide abusive litigation tactics behind shell companies. After receiving input from the public, the USPTO aims to issue a final rule in the coming months.
- Make Patents Clear — The USPTO has developed and implemented a training program to help its examiners rigorously examine so-called “functional claims” to ensure claims are clear and can be consistently enforced. In the coming weeks, the USPTO will launch a pilot program that uses glossaries in patent specifications to promote patent clarity.
- Protect Main Street from Abuse — To help ensure consumers and main-street retailers know their rights before entering into costly litigation or settlements, the USPTO is today launching an online toolkit aimed at empowering consumers with answers to common questions, information about patent suits, and details about specific patents. The toolkit will include information and links to services and websites that can help consumers understand the risks and benefits of litigation or settlement, and pick their best course of action.
- Expand Outreach and Focused Study — Today, the USPTO is announcing the expansion of its Edison Scholars Program, which brings distinguished academic experts to the USPTO to develop and make available to the public more robust data and research on issues bearing on abusive litigation. USPTO will also continue to expand its engagement with stakeholders—including patent holders, researchers, advocates, and others—and build on the successful roundtables the agency hosted across the country over the past year on high-tech patent issues.
- Strengthen Exclusion Order Enforcement — To make the enforcement of exclusion orders issued by the International Trade Commission more transparent, effective, and efficient, the Office of the U.S. Intellectual Property Enforcement Coordinator launched an interagency review and will, in the coming months, deliver its recommendations on refining that process.
- Innovation For Global Development — In addition, today, the Administration is committing to sustain, going forward, the Patents for Humanity Program, which creates business incentives for using patented technology to address global humanitarian needs.
2014 Executive Actions for Patent Reform
The White House’s fact sheet also describes what it is doing this year through executive action.
- Crowdsourcing Prior Art — To help ensure that U.S. patents are of the highest quality, the USPTO is announcing a new initiative focused on expanding ways for companies, experts, and the general public to help patent examiners, holders, and applicants find relevant “prior art”—that is, the technical information patent examiners need to make a determination of whether an invention is truly novel.
- More Robust Technical Training — The USPTO is expanding its Patent Examiner Technical Training Program to help patent examiners keep up with fast-changing technological fields by making it easier for technologists, engineers, and other experts to provide relevant technical training and guidance to patent examiners. To make the most of these changes, the Administration is calling on innovators to volunteer their time and expertise to help ensure that USPTO training is robust and reflects the state of the art.
- Pro Bono and Pro Se Assistance — To increase the accessibility of the patent system, the USPTO will dedicate educational and practical resources to assist inventors who lack legal representation, appoint a full-time Pro Bono Coordinator, and help expand the existing America Invents Act pro bono program to cover all 50 states. The Administration is calling on members of the patent bar to participate in the program.
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