Executive Action On Patent Trolls At The Federal And State Levels

At the federal and state levels, the executive branches of government show signs of willingness to take steps to clip the wings of patent assertion entities (a/k/a patent trolls). With signs of legislative action at the federal and state levels as well, we may be witnessing a turning of the legal tide.

White House Proposes Reforms. In February, President Obama expressed concern about the activities of patent assertion entities, commenting that “patent reform only went halfway to the point where we need it to go.” Today, the White House Task Force on High–tech Patent Issues issued a report (reproduced below) recommending seven legislative reforms and proposing five administrative actions to take reform the distance in combating the business threat posed by patent trolls, which, in the President’s words, “‘don’t actually produce anything themselves,” but instead develop a business model ‘to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.’”

The Fact Sheet recommends that Congress enact legislation to do the following:

1. Require patentees and applicants to disclose the “Real–Party–in–Interest”;
2. Permit more discretion in awarding fees to prevailing parties in patent cases;
3. Expand the PTO’s transitional program allowing challenges to certain business method patents;
4. Protect off–the–shelf use by consumers and businesses—a proposal of particular interest to e–commerce firms accused of infringing patents asserted against third–party software they use on their websites;
5. Change the International Trade Commission standard for obtaining an injunction to bring it in line with Supreme Court case law;
6. Use demand letter transparency to curb abusive lawsuits; and
7. Ensure the International Trade Commission has adequate flexibility in hiring administrative law judges.

The Administration also announced a number of executive actions:

1. Making “Real–Party–in–Interest” the new default—a PTO rule–making process that will require patent applicants and owners to update ownership records;
2. Tightening functional claiming—a new targeted training program for patent examiners;
3. Empowering downstream users—new education and outreach tools for consumers targeted by patent trolls;
4. Expanding dedicated outreach and study—high–profile public engagement over six months with stakeholders in the patent system; and
5. Strengthen enforcement process of exclusion orders—an inter–agency review of the scope and implementation of International Trade Commission exclusion orders.

Vermont Files Suit. In the meantime, The New Yorker reports on a lawsuit recently filed by Vermont Attorney General Bill Sorrell accusing MPHJ Technology Investments and its affiliates of violating state consumer protection laws by sending threatening letters to Vermont businesses accusing them of patent infringement. The complaint alleges that MPHJ and its affiliates made misleading statements in those letters in order to induce recipients to settle, thus engaging in unfair and deceptive trade practices.

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