US President Barack Obama recently announced initiatives as an attempt to combat activities that the White House considers to be abuses of the US patent system. These activities include threats of patent infringement proceeding particularly against retailers and end-users and frivolous litigation.
The initiatives include recommendations that the US Congress pursue a number of measures. It remains to be seen whether these measure will become law. The measures include a requirement to disclose the ‘real party in interest’ in dealings with the patent office and with alleged infringers. This is intended to prevent the use of shell companies to hide the identity of parties. Another of the proposed measures is to allow more discretion for awarding costs as a sanction for abusive court filings.
The proposals also include measures to provide better legal protection for end users. One proposal is to stay proceedings against consumers when an infringement suit has also been brought against a supplier such as a vendor, retailer, or manufacturer. There is also a proposal to incentivise the publication of letters demanding payment of license fees.
In addition to the proposals several legislative actions were also announced. These mainly relate to changes to practices at the US Patent Office. One change is an increase on the scrutiny that Examiners at the US Patent Office will apply to functional claim language particularly in patent applications relating to software. The US Patent Office will also publish new materials aimed at assisting parties receiving threats of patent infringement proceedings or demands for licence fees.
The proposals are intended to supplement the changes to US Patent Law introduced in the America Invents Act which introduced new procedures for challenging US patents.
The US administration has outlined the measures in an attempt to reduce the impact of so called ‘patent trolls’, that is companies which acquire patents and then aggressively pursue companies for licence fees. These activities are believed by the White House to be detrimental to innovation and economic growth. Such practices are prevalent in the software sector and in particular in relation to patents involving business methods.
It remains to be seen whether the measures will all enter into law. One issue that the proposals highlight is that while the activities of parties which are referred to as ‘Non-Practising Entities’, ‘Patent Enforcement Entities’, and ‘patent trolls’ are considered to be bad, it is difficult to define exactly what these entities are. There are many organisations that innovative ideas but do not commercially exploit the ideas themselves, for example universities. These are generally acknowledged to be good for innovation.