Obama declares war on trolls, but all patent owners will be affected 04 Jun 13
The White House Taskforce on High-Tech Patent Issues has released details of the Obama administration’s legislative priorities and executive actions that are “designed to protect innovators from frivolous litigation and ensure the highest-quality patents in our system”.
My initial thoughts on this are that following Obama’s statements in February during a Google-organised event, it was always going to be the case that “trolls” would come under the administration’s microscope. However, what we have yet to get is a definitive definition of what a “troll” actually is. The President seems to believe that they are “folks” who “don’t actually produce anything themselves”; instead : “They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.” However, if the “enemy” really is deemed to be people who seek to assert patents they do not practise on, then you are going to find a large number of entities targeted, many of which will not be the kinds of bottom-feeding outfits that use the threat of litigation as a means of extracting relatively low sums from their targets that the President may wish to discourage.
Until we know what a “troll” actually is, we cannot hope to quantify any damage that “trolls” may be doing to US companies, innovation or the economy. At the moment, we have a selection of academic studies using different definitions, conflating terms and sometimes coming up with highly dubious conclusions which just happen to make for great headlines and suit the agendas of certain big corporate players. What we do not have is anything close to a definitive analysis which looks at the patent marketplace as a whole, assesses the impacts the actions of various players may have and then assesses the benefits and potential downsides of restricting certain behaviours.
Furthermore, abuse of the patent system is not restricted to a narrow sub-set of actors. For example, what is more abusive: enforcing patents you do not practise on (perhaps having bought or licensed them from the inventor) or deliberately infringing patents in the hope that you will get away with it because you are big and deep-pocketed and the patent owner is neither? As anyone who works in the patent space will tell you, both happen; and the latter scenario could well be far more common than the former. It would be nice to see an academic study or two looking at this, but funnily enough we do not seem to get any. I cannot for the life of me think why …
Then let us ask ourselves why overly-broad patents may be granted by the USPTO in the first place. Is it not because examiners are under an increasing amount of time pressure, thanks in no small part to the growing number of applications they are being asked to handle – mostly from a relatively small set of entities, the vast majority of which are operating companies, and quite a few of which would like to see significant changes made to the patent system because it suits their corporate agendas? If you want to find a solution to overly-broad patents, these companies and their IP strategies have to be a big part of it. And yes, long-term staff training programmes would be great, so would sustainable recruitment drives and retention incentives. But to do that, the USPTO needs to be sure of its income. So why do President Obama and Congress allow for diversion and sequestration?
All that said, at first sight the document produced by the Taskforce today does not seem to contain anything too horrific. We already knew about the USPTO’s efforts to increase transparency. As discussed on here previously, the good of knowing which entities own what patents far outstrips any potential problems this may cause to some players. What’s more, if some kind of loser pays regime is to become part of the US patent litigation system, it is surely the case that it should apply to everyone and not just to certain types of actor – as envisaged by the horribly flawed SHIELD Act. These points, and more, are dealt with in draft legislation that has been submitted for discussion by the chairs of the House and Senate Judiciary Committees, Bob Goodlatte and Patrick Leahy. The chances of this moving onto the statute books must now be pretty good.
The most controversial part of the legislative programme the White House would like implemented – and something that I have not seen (or may have missed) in all of the bills that have been put before Congress – looks to be a proposal to: “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.” Given that the eBay decison severely restricted the ability of those that do not practise on the patents they assert to get injunctions, should the White House gets its way it would mean that in almost all cases an NPE – except perhaps a research institution or a university – would be unable to go to the ITC to prevent the importation of allegedly infringing goods from overseas. This would effectively remove the ITC as a venue for most types of NPE. Were that to happen, the ability of NPEs ever to get any kind of injunction in the US would be severely curtailed, if not, to all intents and purposes, done away with. That could be quite a serious issue for companies which do a lot of research, but which then license the resulting IP to third parties. There are bound to be ways round it – there always are – but they will take time to find. I can see this being a hot item of debate.
The bottom line with patent trolls – whatever they are – is that they use a system created and perpetuated by US governments, legislatures and courts. What they do is not illegal. We don’t know how harmful they are, or indeed whether they are harmful at all, and we certainly do not know if more damage will be done unintentionally by restricting their actions. However, in the great scheme of things, if we have got to the point where “something must be done” – and it looks as if we have – what has been outlined today (and what is contained in the Goodlatte and Leahy draft legislation) is probably as good as it gets in terms of not hanging a patent system that has been so beneficial to the US for 200 plus years out to dry. It's also worth remembering that although the taskforce's brief is to look at patents in the high-tech sector and although it talks about trolls being the target, most of what is set out will affect all patent owners in all industries. Let’s see how they respond.
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