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Obama Administration Targets ‘Patent Trolls’

White House issues executive actions, legislative recommendations to curb patent abuse

The White House today issued five executive actions and seven legislative recommendations designed to protect U.S. companies and their products from spurious litigation from Patent Assertion Entities — commonly called “patent trolls.”

The issue is of interest to radio because of the long-standing patent litigation involving several broadcasters and MAD/DigiMedia over music automation and storage software.

Innovators face lawsuits from companies that, President Barack Obama has said, “don’t actually produce anything themselves,” and instead develop a business model “to essentially leverage and hijack somebody else’s idea and see if they can extort money out of them.”

Patent trolls threaten to sue thousands of companies at once, without specific evidence of infringement against any of them, create shell companies that make it difficult for defendants to know who is suing them and assert that their patents cover inventions not imagined at the time they were granted, according to the National Economic Council and the Council of Economic Advisors.

Suits brought by patent trolls have jumped by nearly 250% in just the last two years, rising from 29% of all infringement suits to 62% of all infringement suits, according to the councils, which add that estimates suggest that patent trolls may have threatened over 100,000 companies with patent infringement last year alone.

The administration is taking several steps to curb patent abuse. The U.S. Patent & Trademark Office is beginning a rulemaking to require patent applicants and owners to regularly update patent ownership information when they are involved in patent proceedings before the PTO, specifically naming who controls the patent. Saying that stakeholders remain concerned about patents “with overly broad claims,” the PTO will give more training to its patent examiners “on scrutiny of functional claims” according to the administration, and develop strategies to improve claim clarity.

Noting that patent trolls are increasingly targeting retailers, consumers and other end-users of products containing patented technology — especially software — the PTO is releasing education and outreach materials, including a website offering answers to common questions by those facing demands from a possible troll. “End-users should not be subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement,” according to the White House.

The Obama Administration says it stands ready to work with Congress to enact legislation to curb patent abuse. We’ve reported on several such bills in Congress that generally that seek to make it more clear who controls a patent and would make the losing party in such a lawsuit responsible for paying attorney and other fees for both sides.

CEA President/CEO Gary Shapiro enthusiastically applauded the action, calling patent trolls “spineless parasites.”

He said the president’s actions are appropriate and necessary, given the rise in threats of lawsuits and actual lawsuits 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.”

Companies must take each lawsuit seriously, adds Shapiro, noting that the cost of fighting these suits comes directly off of a company’s bottom line and requires time and resources to be taken away from R&D and hiring.