White House unmasks patent trolls via executive action

Josh Peterson Tech Editor
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Companies engaged in patent lawsuits before the Patent and Trade Office (PTO) can no longer hide their identities behind shell companies, the White House announced Wednesday, inspiring the praise of DC-based technology groups representing Silicon Valley.

A bane of the technology community, patent trolls are companies or individuals who purchase patents and file aggressive lawsuits against companies or individuals that make products that use the patents.

Patent trolls, formally called “non-practicing entities” or Patent Assertion Entities (PAE), are generally not themselves content producers or inventors. They are instead generally seen as using the courts against inventors for financial gain.

The Obama administration announced five executive actions on Wednesday, in addition to making seven legislative recommendations, to address the problem.

Patent litigation is often waged by larger companies through shell companies in the form of patent trolls.

“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,” said the White House press office Tuesday.

“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,” it said.

Also included in the plan are also measures to: improve training for PTO examiners to better understand broad patent claims, protect consumers and retailers from lawsuits for “using a product as intended” and limit financial incentives for patent attorneys.

The plan also looks to bring consistency between the standards used by the International Trade Commission (ITC) and U.S. district courts.

The ITC is an “independent, quasi-judicial federal agency that provides trade policy advice to both the legislative and executive branches of government.”

Technology groups like TechAmerica, the Internet Association and the i2Coalition all commended the White House for its plan.

ITC Working Group executive director Matt Tanielian also applauded the White House’s move, due to concerns that patent trolls have tried to use the ITC as a forum for their tactics.

“The White House clearly recognizes that patent trolls are increasingly using the ITC as a parallel, and sometimes primary, venue for going after businesses operating in the U.S.,” said Tanielian.

“In order to truly stem the tide of abusive patent litigation, Congress must address the abuse problem both in the courts and at the ITC,” he said.

The ITC Working Group comprises “more than a dozen companies” “focused on preventing abusive patent litigation before the ITC.”

A 2012 study by Boston University found that patent litigation cost tech companies $29.2 billion in 2011, rising from a $12.6 billion price tag in 2008.

Congress has previously tried to take on patent troll abuse.

In February, Oregon Democratic Rep. Peter DeFazio and Utah Republican Rep. Jason Chaffetz re-introduced the Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act as part of an effort to combat patent trolls.

The SHIELD Act would require companies filing lawsuits to prove that they are actually using the patents and not just leveraging them against innovators for financial gain. It would also apply to all patents.

The bill, first introduced in August 2012, is currently pending before the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet.

A hearing on the concerns the SHIELD Act is meant to address was held by the subcommittee in March.

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