Thursday, 6 June 2013

Washington Catches “Troll Fever” – Multiple Strategies Proposed For Addressing NPEs

After years of grumbling about the adverse effects of patent infringement actions filed by plaintiffs who acquire their patents in order to generate licensing revenues through aggressive litigation tactics (variously called non-practicing entities (“NPEs”), patent assertion entities (“PAEs”), or trolls), several new proposals have been put forward in the U.S. to deal with the problem.

In May, New York Senator Charles Schumer introduced legislation entitled the "Patent Quality Improvement Act of 2013" (S. 866). In essence, the bill would expand the transitional program for covered business method patents ("TPCBM") provisions of the America Invents Act to cover a wider range of computer-implemented technologies. The TPSBM currently allows members of the public to oppose newly-issued patents by seeking post-grant review of certain business method patents in an administrative proceeding before the USPTO, rather than litigating patent validity in federal court. The TPSBM is an eight-year program for patents that claim a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service. Schumer's bill would remove the eight-year limit and expand eligibility to inventions used in any "enterprise, product or service[.]”

On June 4, the White House announced a series of initiatives to at least chip away at the NPE/PAE/Troll problem. The White House issued a report entitled “Patent Assertion and U.S. Innovation,” detailing the extent of the NPE litigation problem and its effects on innovation. The report concluded that 62% of patent lawsuits commenced in 2012 were filed by PAEs. The full report is available HERE.

The White House also challenged Congress to draft legislation to make it harder for PAE’s to conduct business by:

  • Requiring patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking USPTO review of a patent to file updated ownership information.
  • Permitting 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. (Incidentally, on this very point Chief Judge Randall Rader of the Federal Circuit just published an Op-ed piece in the New York Times this week encouraging judges to get tougher on abusive litigation tactics in patent cases.).
  • Expanding the PTO’s transitional program for covered business method patents, similar to Sen. Schumer's proposed bill.
  • Protecting off-the-shelf use by consumers and businesses by providing protection against liability for an off-the-shelf product being used as intended.
  • Changing the International Trade Commission ("ITC") standard for obtaining an injunction to better align it with the traditional four-factor eBay test.
  • Creating a system of public filing of demand letters to make them searchable and accessible to the public; and 
  • Increasing ITC flexibility in hiring qualified Administrative Law Judges.

Finally, the White House announced a series of Executive Orders aimed at making it more difficult for companies to employ patent assertion as a business model:

1.         Ordering the USPTO to begin the rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the office, specifically designating the “ultimate parent entity” in control of the patent or application. 
2.         Ordering the USPTO to initiate new targeted training to examiners on the review of functional claims and develop strategies to improve claim clarity, such as by using glossaries in patent specifications to assist examiners in the software field. 
3.         Developing new USPTO education and outreach materials for businesses threatened by NPEs, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll. 
4.         Planning a nationwide series of roundtables and workshops organized by the USPTO, Department of Justice, and Federal Trade Commission to develop new ideas and consensus around updates to patent policies and laws. 
5.         Expanding the USPTO Edison Scholars Program, which would bring distinguished academic experts to the office to research issues bearing on abusive litigation. 
 6.         Launching an interagency review of existing procedures relating to the scope of ITC exclusion orders to ensure that the process and standards used during exclusion order enforcement activities are transparent, effective, and efficient.

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