Why the Obama Administration’s Actions Against Patent Trolls Should Make a Difference

(Cross-posted on DisCo)

This is a very big day: the Obama Administration has just entered the fray to help deal with patent trolls, and it’s taking steps that have the potential to be a major part of the solution to the patent troll problem.

The early press reports on the Administration’s efforts have missed the real story: the President and the Administration are publicly recognizing that the problem with patent trolls stems from the problems with software patents. You cannot deal with patent trolls without dealing with software patents.

The President’s Executive action to tighten functional claiming does exactly that.  It recognizes that in order to stop issuing bad and overbroad patents that wind up in the hands of patent trolls, we need to specifically address software patent applications.

Functional patent claims are the claims that drive us all crazy, where a patent just claims a general idea, like, say, filtering files that might be spam, or scanning documents and sending by email, or backing up your computer over a network.

As an example, suppose I came up with an idea for a car with a gas-electric hybrid engine, but where the battery for the engine is recharged by a passenger pedaling a built-in stationary bicycle. But my patent claim is broader than that; I claim “A motor vehicle with a gas-electric hybrid engine comprising a storage battery, wherein the storage battery is recharged using a mechanically-powered generator.” It’s an accurate description, although it doesn’t include the specifics of what I invented. By describing the invention in terms of its functions, that is, its general features, my patent omits what should be an important limiting detail: my invention is impractically pedal-powered.

As a result, this hypothetical patent would cover nearly all hybrid cars, even though I only invented one (fairly silly) type of hybrid car, because all commercially available hybrids recharge the battery using some sort of mechanical generator. I could make a fortune suing car manufacturers, even though I wasn’t the first to come up with a hybrid car, and my design is totally impractical. That’s because the patent system strongly favors patent owners; once a patent issues, it’s very difficult to prove the patent is invalid. And once a company is sued for patent infringement, it’s nearly impossible to get out of the case quickly and cheaply, no matter how bad the patent is.

The hybrid car patent I described is ridiculous. And yet that’s exactly what has happened with software patents for years.

No more. The Administration is going to work with the PTO to develop guidelines for examiners to make sure that inventors can’t claim more than they invented, focusing on computer-implemented (that is, software) patents. The flow of crazy software patents should stop at last, or at least slow to a trickle.

The Administration deserves huge praise for this — many of us have been pushing for just this change for a long time. Obviously, it will take time to implement, but it is clear that the Administration is committed to making this commonsense reform happen.

We have to work with the Administration and Congress in a bipartisan way to get this done right, because there will be naysayers among certain legacy special interests.

But Wait, There’s More!

If that were the only thing the Administration announced, it would still make my day. But there is also a newly-released study, four more Executive Actions, and legislative proposals, and there’s a lot of good stuff included.

First, the White House has released a study showing patent trolls are a huge problem that wreak damage to the economy. Not a big surprise, but it’s nice to have data backing us up.

In addition to the action on functional claiming, here’s a quick summary of the other four Executive Actions announced today:

  • There will be no more hiding who owns a patent from the PTO. The real party of interest will have to be disclosed on every application and when maintenance fees are paid.

  • End users, who have been the most vulnerable victims, will get support from the PTO to help deal with demand letters.

  • There will be more academic experts brought into the PTO to study and research patent troll litigation.

  • And finally, the Administration is going to work to better enforce exclusion orders issued by the International Trade Commission (ITC). The ITC has the power to issue an exclusion order barring importation of goods that infringe a U.S. patent, and Customs and Border Protection (CBP) carries out the order. The problem is that even if a company redesigns its product to get around a patent, exclusion orders can be so broad that CBP bars the redesigned product as well. The Administration is going to work with the ITC and CBP to try to fix this problem.

The President is also calling on Congress to pass legislation to address patent trolls. There are a few proposals he makes that are particularly good:

  • Expand the Covered Business Method patent review program — The Administration is proposing to expand the Covered Business Method post grant review. This seems to be along the lines of Senator Schumer’s bill, and it’s a very good idea.
  • Protect end users — The Administration is proposing some sort of immunity or reduced liability if a consumer or company buys a product and uses it as intended. There would also be an automatic stay of infringement suits against end users if there’s also an infringement suit against an upstream (e.g., the manufacturer) company. We need to see the details, but this looks promising.
  • Fee shifting — Another important piece that CCIA has long supported is shifting the defendant’s legal fees to the plaintiff in troll patent litigations. The Administration is supporting a type of fee-shifting similar to what is done in copyright now; basically, a judge would have the discretion to award fees to the winner. This doesn’t go as far as the SHIELD ACT, but it is definitely a step in the right direction.

Overall, we are very pleased with the Administration’s announcement. We look forward to continuing to work with the Administration and with Congress on addressing the patent troll problem.