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Obama administration announces initiative to target patent trolls, protect consumers


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The White House announced an initiative today to curb the use of patents by patent holders as a tool for "frivolous litigation," and to protect "Main Street retailers, consumers and other end-users of productions containing patented technology." The initiative's inception is composed of legislative recommendations to Congress and a handful of executive actions being carried out directly by the White House -- it's essentially an initiative targeting patent trolls. Administration officials wouldn't say which congressional representatives might propose bills carrying the White House's recommendations; they characterized today's announcement as part of the administration's ongoing effort to reform patent law.

Though the terms are broad, a senior Obama administration official told Engadget that today's announcement is "specifically designed to deal with abusive patent legislation" rather than sweeping patent reform, and is, "not designed in any way to pursue legit patent rights holders."

The executive actions (five in total) range from making sure that patent holders are clearly identified -- meant to target patent trolls that intentionally confuse litigation with myriad "shell" companies -- to providing more clear information on patent use to consumers who may be targeted by patent trolls. The legislative recommendations list includes many of the same provisions as the executive actions, and adds even more protections for individual consumers (a stay in suits that target consumers when "an infringement suit has also been brought against a vendor, retailer, or manufacturer," for instance).

In 2011, the US Senate passed a patent legislation bill that President Obama later signed into law -- the America Invents Act. It's unclear how, if at all, support has changed for patent reform in the Senate since, but it's a hopeful sign that some of today's announcement may actually become law.

Michael Gorman contributed to this report.

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Office of the Press Secretary
June 4, 2013
Today the White House announced major steps to improve incentives for future
innovation in high tech patents, a key driver of economic growth and good
paying American jobs. The White House issued five executive actions and seven
legislative recommendations designed to protect innovators from frivolous
litigation and ensure the highest-quality patents in our system. Additionally, the
National Economic Council and the Council of Economic Advisers released a
report, Patent Assertion and U.S. Innovation, detailing the challenges posed and
necessity for bold legislative action.
In 2011, the President signed the Leahy-Smith America Invents Act (AIA), a
landmark piece of legislation designed to help make our patent system more
efficient and reliable. As technology evolves more rapidly than ever, we must
ensure our patent system keeps pace. As President Obama said in February,
"our efforts at patent reform only went about halfway to where we need to go.
What we need to do is pull together additional stakeholders and see if we can
build some additional consensus on smarter patent laws."
The AIA put in place new mechanisms for post-grant review of patents and other
reforms to boost patent quality. Meanwhile, court decisions clarifying the scope
of patentability and guidelines implementing these decisions diminish the
opportunity to game the patent and litigation systems. Nevertheless, innovators
continue to face challenges from Patent Assertion Entities (PAEs), companies
that, in the President's words "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 some money out of them." These entities are
commonly known as "patent trolls." Likewise, the so-called "Smartphone Patent
Wars" have ballooned in recent years and today, several major companies spend
more on patent litigation and defensive acquisition than on research and
Stopping this drain on the American economy will require swift legislative
action, and we are encouraged by the attention the issue is receiving in recent
weeks. We stand ready to work with Congress on these issues crucial to our economy, American jobs, and innovation. While no single law or policy can
address all these issues, much can and should be done to increase clarity and
level the playing field for innovators.
In that spirit, the Administration recommends that Congress pursue at least
seven legislative measures that would have immediate effect on some major
problems innovators face. These measures would:
1. Require patentees and applicants to disclose the "Real Party-in-Interest," by requiring that
any party sending demand letters, filing an infringement suit or seeking PTO review of a
patent to file updated ownership information, and enabling the PTO or district courts to
impose sanctions for non-compliance.
2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing
district courts with more discretion to award attorney's fees under 35 USC 285 as a sanction
for abusive court filings (similar to the legal standard that applies in copyright infringement
3. Expand the PTO's transitional program for covered business method patents to include a
broader category of computer-enabled patents and permit a wider range of challengers to
petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).
4. Protect off-the-shelf use by consumers and businesses by providing them with better legal
protection against liability for a product being used off-the-shelf and solely for its intended
use. Also, stay judicial proceedings against such consumers when an infringement suit has
also been brought against a vendor, retailer, or manufacturer.
5. 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.
6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of
demand letters in a way that makes them accessible and searchable to the public.
7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.
Today the Administration is also announcing a number of steps it is taking to
help bring about greater transparency to the patent system and level the playing
field for innovators. Those steps include:
1. Making "Real Party-in-Interest" the New Default. Patent trolls often set up shell companies
to hide their activities and enable their abusive litigation and extraction of settlements. This
tactic prevents those facing litigation from knowing the full extent of the patents that their
adversaries hold when negotiating settlements, or even knowing connections between multiple trolls. Today, the PTO will begin a rulemaking process to require patent applicants
and owners to regularly update ownership information when they are involved in
proceedings before the PTO, specifically designating the "ultimate parent entity" in control of
the patent or application.
2. Tightening Functional Claiming. The AIA made important improvements to the
examination process and overall patent quality, but stakeholders remain concerned about
patents with overly broad claims - particularly in the context of software. The PTO will
provide new targeted training to its examiners on scrutiny of functional claims and will, over
the next six months develop strategies to improve claim clarity, such as by use of glossaries
in patent specifications to assist examiners in the software field.
3. Empowering Downstream Users. Patent trolls are increasingly targeting Main Street
retailers, consumers and other end-users of products containing patented technology - for
instance, for using point-of-sale software or a particular business method. 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. Today, the PTO is
announcing new education and outreach materials, including an accessible, plain-English
web site offering answers to common questions by those facing demands from a possible
4. Expanding Dedicated Outreach and Study. Challenges to U.S. innovation using tools
available in the patent space are particularly dynamic, and require both dedicated attention
and meaningful data. Engagement with stakeholders - including patent holders, research
institutions, consumer advocates, public interest groups, and the general public - is also an
important part of our work moving forward. Roundtables and workshops that the PTO,
DOJ, and FTC have held in 2012 have offered invaluable input to this process. Today, we are
announcing an expansion of our outreach efforts, including six months of high-profile events
across the country to develop new ideas and consensus around updates to patent policies
and laws. We are also announcing an expansion of the PTO Edison Scholars Program, which
will bring distinguished academic experts to the PTO to develop - and make available to the
public - more robust data and research on the issues bearing on abusive litigation.
5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade
Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the
importation of infringing goods, Customs and Border Protection (CBP) and the ITC are
responsible for determining whether imported articles fall within the scope of the exclusion
order. Implementing these orders present unique challenges given these shared
responsibilities and the complexity of making this determination, particularly in cases in
which a technologically sophisticated product such as a smartphone has been successfully
redesigned to not fall within the scope of the exclusion order. To address this concern, the
U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of
existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and
work to ensure the process and standards utilized during exclusion order enforcement
activities are transparent, effective, and efficient.

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