Pending Executive Actions to Curb Patent Abuses

Thursday, September 24, 2015

Patent law was conceived to spur innovation and incentivize original ideas. But in the age of technology, several factors have led to congestion of the court system, sometimes suppression of innovation and, in some instances, dubious assertions of patent infringement.  

To understand the cost/benefit predicament of litigating a patent infringement action, it’s useful to understand that in 2011, the average total cost per case for patent litigation, from discovery through trial, was estimated to be about $2.8 million. It also has been estimated that roughly 90 percent of patent infringement actions are settled out of court, frequently to avoid the high cost of litigation. Given this landscape, a patent holder having a relatively weak case for asserting patent infringement will nevertheless sometimes bring a lawsuit in hope of obtaining a quick settlement.

The White House recently acknowledged the flaws in the system and issued five Executive Actions to address some of the problems:

  • Problem: Shell companies bringing suits without revealing the precise patent owned or the true owner.
    Executive Action: The implementation of rules by the Patent and Trademark Office (PTO) requiring patent applicants and owners to designate the real party-in-interest, including the “ultimate parent entity” in control of the patent or application.
  • Problem: Patents containing overly broad claims, particularly for software.
    Executive Action: New training for Patent Office examiners, closer scrutiny of functional claims, and improvement of claim clarity.
  • Problem: Companies indiscriminately suing technology users, including retailers, consumers, and other end users.
    Executive Action: Public education, including a plain-language website, so end users can know their rights when facing patent litigation.
  • Problem: Companies using litigation to shut down innovation.
    Executive Action: Expanded outreach and study by distinguished academic experts to do research and make recommendations for improving the patent system.
  • Problem: Ineffective and unclear exclusion orders issued by the U.S. International Trade Commission (ITC); difficulty determining whether imported articles fall within the scope of exclusion orders.
    Executive Action: Interagency review of existing procedures of ITC and Customs and Border Protection (CBP), and strengthening of the enforcement process of international exclusion orders.

The White House has also published legislative recommendations which, if adopted, would grant district courts greater discretion to award attorneys’ fees for abusive court filings; expand PTO post-grant challenges against so-called business method patents; make it easier for consumers to obtain litigation stays; apply the eBay Inc. v. MercExchange injunction standard to ITC cases; incentivize public filing of demand letters; and increase the hiring of Administrative Law Judges.
Berenato and White will stay current on this issue and bring you more reports on the various bills aimed at reforming patent laws.

See the full text of the Executive Actions and Legislative Recommendations.
Read the National Economic Council and the Council of Economic Advisers’ report, “Patent Assertion and U.S. Innovation.”