On June 4, the Obama administration issued a press release announcing several legislative and executive initiatives aimed at reducing abusive litigation by Patent Assertion Entities (PAEs), otherwise known as patent “trolls.” This announcement comes on the heels of anti-troll activity in Congress and elsewhere and just before President Obama leaves for a fundraising trip to Silicon Valley, where his announcement will no doubt be well received by tech heavyweights such as Google, HP and others, who have long complained about the trolls. The Administration’s press release has sparked a variety of reactions, but it makes one thing very clear – the political climate is not favorable for trolls so that the chances of significant anti-troll legislation are on the rise.
Obama’s proposals include legislative and executive actions designed to:
1. Require patentees and applicants to disclose the “Real Party-in-Interest;”
2. Give courts more discretion to award fees to prevailing parties in patent cases;
3. Expand the PTO’s program for post-grant review of patents to include computer enabled patents;
4. Immunize consumers and businesses from patent liability when they purchase off-the –shelf products and use them for their intended use;
5. Make it more difficult to obtain an injunction at the ITC;
6. Require that demand letters be made public; and
7. Tighten requirements for software patents.
In my view, two of these proposals, the immunization of consumers and businesses who merely purchase off-the-shelf products for their intended purposes, and the additional focus on software patents, have the greatest chance of significantly alleviating abusive patent troll practices.
One of the most objectionable practices of patent trolls is their strategy of accusing small businesses and consumers of infringement in order to force cost of defense settlements. For small consumers accused of infringement, such as the numerous real estate firms and other businesses accused of using a patented system that combines a scanner and an email system, the payment of a several thousand dollar settlement or license can be better than the cost of fighting the claim. This strategy has several benefits for the troll – they not only make a tidy sum collecting settlements from a large number of relatively small targets, they avoid litigation on the merits with manufacturers who would have a greater interest and ability to contest the validity of the patent and infringement by the product at issue. Under the new proposal from the Obama administration, consumers and businesses who purchase ”off-the-shelf” products and use them for their intended purposes would be protected against liability for infringement, thereby forcing the patentee (troll or otherwise) to bring the fight to the proper defendant – the manufacturer, distributor or retailer who is selling the allegedly infringing product or system. This proposal would seem to have a good base of political support (there are many businesses and consumers who have been subjected to licensing demands or outright lawsuits based on their use of ordinary staples of commerce) and it would effectively eliminate an abusive practice while still allowing effective enforcement of legitimate patents, which leads to the second key part of the Obama administration proposals.
The key issue in much of the patent troll litigation debate is whether the “trolls” are enforcing “legitimate” patents. If they are, then it is difficult to argue that the patents should not be enforced and that those who infringe them should not be held fully accountable. The difficulty is that the patents enforced by trolls are disproportionately controversial software and business method patents. According to one study, 82% of all troll defendants were sued on the basis of software patents. Finding the right balance for the evaluation of software patent applications is not easy, but it is an essential goal. The Administration now says that it will initiate new targeted training that will focus on aspects of software patent applications that can result in overly broad claims. While this initiative is not a revolution, it will likely have the effect of raising the bar for software patents and thereby reducing the number of vague or questionable patents.
Ultimately, the new Obama proposals are another indication that the political climate for patent trolls has continued to deteriorate. While their precise form is not at all clear at this point, it now appears likely that some anti-troll policies will be adopted in the near future.