White House Targets Abusive Patent Litigation Through PTO Orders, Legislative Recommendations

The White House announced a series of executive actions and legislative recommendations Tuesday that a senior administration official said were “specifically designed” to deal with abusive patent litigation. The White House’s actions follow the introduction of four bills in Congress -- including three in the last month -- that would address patent litigation abuse caused by patent assertion entities (PAEs). The discussion draft of a fifth bill, crafted by the House Judiciary Committee, is circulating through industry and legislative circles (CD June 3 p7).

The Obama administration’s actions are meant to target “the explosion of abusive litigation by patent trolls where there are threatening claims made -- often based on ... shaky patent claims -- designed to extract settlements simply by those seeking to avoid the cost of patent litigation,” the senior White House official said. Abusive litigation “is hurting economic growth and distracting some of our greatest innovators from their core economic mission,” the official said. “To be clear, this is not designed in any way to make it harder to pursue legitimate property rights or vigorously defend valid patents.”

The administration has been encouraged by the bipartisan approaches to patent reform led by Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., and House Judiciary Committee Chairman Bob Goodlatte, R-Va., the official said. “We see this as an encouraging avenue for bipartisan legislation in an area that is important to innovation and job growth,” the official said. New legislation is required to bolster the provisions in the America Invents Act because the language in that bill was crafted “before people had fully digested the exploitation of problematic behavior of PAEs,” he said.

The White House asked Congress to consider seven legislative provisions it believes would immediately target patent litigation abuse, including a legislative version of the new RPI disclosure rules the White House is directing PTO to develop. The legislative version would require updated ownership and RPI disclosure when a party sends out a demand letter, files a patent infringement lawsuit or seeks a PTO review of a patent. That legislation would give the PTO and courts the authority to impose sanctions on parties that don’t comply, the White House said.

The administration also recommended Congress give courts more leeway in awarding attorney’s fees as a way of punishing parties that file abusive patent litigation -- a standard similar to what is allowed in copyright infringement cases. The White House also called for an expansion of PTO’s post-patent grant review program for business method patents so it would include more computer-related patents and allow for a wider range of parties to ask for reviews before the Patent Trial and Appeals Board. The administration also recommended Congress enact legal protections to protect them against liability in patent infringement lawsuits when a consumer uses the product off the shelf for its intended function.

The legislation should also stay current proceedings against end-users when a plaintiff is also suing the product’s manufacturer or retailer, the White House said. The administration also wants Congress to incentivize the public filing of a demand letter, which the White House said would curb abusive litigation. The administration also asked Congress to enact reforms that would make the U.S. International Trade Commission (ITC) a less attractive venue for patent litigation, including ensuring the ITC has enough flexibility in hiring qualified administrative law judges and changing the ITC’s standard for obtaining an injunction. The White House would like the ITC to use the four-factor test used in eBay v. MercExchange.

Goodlatte is “pleased” the White House committed to curbing patent litigation abuse, he said, saying the House Judiciary’s draft bill addresses many of the administration’s legislative recommendations. The bill doesn’t address the issue of ITC reform because the House Finance Committee has legislative jurisdiction over the ITC, he said during a Software & Information Industry Association (SIIA) event Tuesday. There is certainly interest in instituting reforms, Goodlatte said, and he’s “pressing our case” with House Finance. House Judiciary’s bill is meant to be a “ balanced approach” that focuses “on abusive patent litigation behavior rather than specific entities,” Goodlatte said. “Taken as a whole, the bill is designed to positively help reshape the current environment surrounding patent troll-type behavior and abusive patent litigation. Each of the sections work together to reduce the costs of frivolous litigation, increase patent certainty and in the end, promote job creation and innovation.” House Judiciary is continuing to seek stakeholder input on the bill before it formally introduces it so it can avoid the multi-year legislative process that bogged down AIA during the 112th Congress, he said.

Leahy shares Obama’s “objective of reducing the drain on our economy caused by patent trolling,” Leahy said in a written statement. Leahy has been working closely with Goodlatte on the House Judiciary bill, and he’s working closely with Sens. Mike Lee, R-Utah, and Sheldon Whitehouse, D-R.I., to “find the best solutions that are achievable,” said Aaron Cooper, Leahy’s senior counsel-intellectual property and antitrust, during the SIIA event. Intellectual property legislation is “inherently bipartisan,” and the White House’s actions aren’t going to impede Republican support for a solution this Congress, Cooper said. It’s important that legislators communicate with all stakeholders during the process so there is “minimal resistance” once a final bill comes to the floor, he said.

The White House’s actions are another sign “that the momentum for action on patent reform is growing by the day,” said SIIA President Ken Wasch during the event. “We believe the progress towards an effective solution will come quickly.” CEA President Gary Shapiro said the White House is “on the side of innovation and job creation and against the spineless parasites of society who ruin American businesses. ... The President’s actions are appropriate and necessary given the rise in threats of lawsuits and actual suits against millions of American businesses who have done nothing wrong other than use common Web tools or try to create and sell products incorporating common technology.” Application Developers Alliance President Jon Potter said “the White House plan shows app developers and entrepreneurs that they have an ally in the White House in the fight against trolls. Along with several Congressional proposals, this multi-faceted slate of reforms will go a long way to curbing abusive patent litigation.” The White House’s support “adds to the strong bipartisan support that reigning in abusive patent litigation shares,” said Kevin Richards, TechAmerica senior vice president-federal government affairs. “Protecting innovators intellectual property is a key component to maintaining the competitive advantage the U.S. has over the world.” Public Knowledge is “encouraged by the groundswell of bipartisan support for curbing abusive practices in the patent system, reflected both in the administration’s statement and in the numerous pieces of proposed legislation,” said Charles Duan, PK’s director-Patent Reform Project.