Obama orders patent changes to combat the ‘trolls’
Royalties • Utahns OK with initiative that aims to protect high-tech innovators from lawsuits.
Published: June 4, 2013 09:58PM
Updated: June 5, 2013 09:36AM
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(AP Photo/Susan Walsh) A report from a commsission established by President Barack Obama said 100,000 companies are threatened with patent infringement by entities whose sole business is to obtain patents and use them to obtain royalties from businesses that make or use products and services.

President Barack Obama Tuesday announced a series of actions aimed at protecting technology, finance and retail companies from lawsuits and demands for fees by businesses that abuse the patent system.

In the Utah intellectual property and high-tech communities, the initiative was generally met with a mixture of support and the wish that more could be done for entrepreneurs that operate on a small-business level.

The crackdown on what critics have called patent trolls includes five executive actions and seven recommendations that require congressional action. A White House commission report said more than 100,000 companies were threatened with infringement through lawsuits last year by patent-assertion entities — companies whose sole business is to obtain patents and use them to obtain royalties from businesses that make or use products and services.

The announcement formalizes changes that have been considered by the Patent and Trademark Office, including making patent owners and applicants identify who benefits financially from the patent and improving application examinations. It also backs some legislation sponsored by members of both parties in Congress.

“The best thing that could be done is to better train patent examiners so that inappropriate patents are not approved,” said Everett Robinson, a registered patent attorney in Salt Lake City.

Added Kevin Richards, senior vice president of TechAmerica, a Washington-based lobbying group representing technology companies, “The strong support by the White House adds to the strong bipartisan support that reining in abusive patent litigation shares. Reforming the patent system to end frivolous lawsuits by bad actors will enhance the innovation ecosystem.”

Abusive patent lawsuits are a growing drain on companies and the court system, even though not all businesses that own patents without making products are trolls, according to a report released Tuesday by the White House Council of Economic Advisers, the National Economic Council and the Office of Science and Technology Policy. But it is the trolls who are being targeted.

“They are a nuisance, and it is great news to hear that this abuse is being addressed,” said Richard Nelson, who directs the Utah Technology Council, which fosters growth among the state’s more than 7,000 tech-related companies. “We’ve worked with [the congressional delegation] on reform, and I would think action on this would be a big priority for Congress.”

Efforts to reach U.S. Sen. Orrin Hatch, R-Utah, who has led reform efforts at the federal level, were not successful.

Key provisions of the White House effort seek to help businesses receiving letters demanding royalties for the use of products. The National Retail Federation has reported a number of lawsuits designed to get companies to either pay the patent owner or spend large amounts of money in litigation.

The patent office plans to educate retailers and end users of technology about their rights. Among the legislative proposals are ones that would provide better legal protection against liability for users of common products, make royalty demand letters public and give courts more discretion to sanction those who file abusive suits.

“One thing that has been missing is for small-business owners to be able to defend themselves without spending $100,000 on attorney fees,” Robinson said. “If the legislation had provisions for that and addressed that, it would be good.”

The attorney added, “Out of every presidential administration, some kind of initiative comes out to improve the patent process, but it’s usually not effective. Big business supports [the actions] because they get and have patents, and can afford to [protect] them. But smaller businesses don’t see the need or have the money.”

Sen. Patrick Leahy, D-Vt., who chairs the Senate Judiciary Committee, spoke of the importance of not accepting the status quo. “The United States patent system is vital for our economic growth, job creation, and technological advance. Unfortunately, misuse of low-quality patents through patent trolling has tarnished the system’s image.”

Vermont last month became the first state to allow the targets of demand letters to sue over a “bad-faith assertion of patent infringement.” The state Attorney General filed a consumer-protection lawsuit against one company that had sent letters to hundreds of businesses.

With many of the lawsuits being over software, the president directed the patent office to more closely monitor applications to ensure they don’t claim a broad use of technology. One proposal backed by the White House also would expand a new review program for finance-related business methods to also include computer-implemented technology.