White House Issues Executive Actions and Legislative Recommendations for High-Tech Patent Issues

On June 4, 2013, the White House issued a press release through the Office of the Press Secretary identifying five executive actions and seven legislative recommendations primarily directed at reducing or discouraging the litigation activities of patent assertion entities (PAEs), pejoratively referred to as “patent trolls,” and modifying aspects of the U.S. International Trade Commission (ITC). While the proposals do not appear to have any immediate impact for either PAEs or other entities in the high-tech patent arena, they do provide insight on the direction the executive branch is trying to steer the patent system and the potential ramifications for patent litigation and prosecuting patents before the U.S. Patent and Trademark Office (USPTO).

Following up on the modifications to the U.S. patent system effected by the America Invents Act (AIA) (a summary of which may be found here), the White House issued a report and press release announcing proposals to further refine the U.S. patent system. Several of the proposals are similar to those proposed by the Federal Trade Commission (FTC) in a 2011 pre-AIA report to improve the patent enforcement system. The report and press release also addressed the role of innovation, or the stifling thereof, on the economy, and the purportedly expanding role and impact of PAEs on the high-tech sector. In particular, several of the proposals appeared to directly target PAEs in a manner similar to the pending and controversial SHIELD Act (H.R. 845, available here).

Proposed Executive Actions

The press release identified five proposed executive actions to “help bring about greater the transparency to the patent system and level the playing field for innovators.” In an attempt to address the use of shell patent holding companies, the executive order that may be most impactful would have the USPTO “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.” The rulemaking would likely be a lengthy process, drawing comments both from those entities favoring limited disclosure of ownership and from those entities favoring complete transparency.

Another proposed executive action that may also have an impact is one to have the USPTO provide additional training to examiners in scrutinizing functional claims, particularly regarding software. It is unclear whether such additional training will have any immediate impact on the prosecution of software patents or other patents before the USPTO.

Other proposed executive actions include having the USPTO provide additional educational materials and a “web site offering answers to common questions by those facing demands from a possible troll,” expanding the USPTO’s Edison Scholars Program, and launching an interagency review of procedures that the U.S. Customs and Border Protection and ITC use to evaluate the scope of exclusion orders.

Legislative Recommendations

While the press release identified five proposed executive actions that President Barack Obama can unilaterally order, the press release also identified seven proposed legislative recommendations. The legislative recommendations will likely not have any immediate effect, as they must first be passed by Congress. Accordingly, it is unclear which, if any, would have any impact.

The legislative recommendations include:

• “[R]equiring 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” 
• “[P]roviding district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings” 
• Expansion of the USPTO’s transitional program for covered business method patents to include other computer-enabled patents 
• Provide protection for consumers and businesses against patent infringement liability for using off-the-shelf products 
• Modifying the ITC standard for obtaining an injunction to the four-factor test of eBay v. MercExchange 
• Incentivize public filing of demand letters 
• Add flexibility to the hiring of Administrative Law Judges for the ITC

Similar to one of the legislative recommendations, the currently pending and controversial SHIELD Act (H.R. 845) provides for an award attorney’s fees under 35 U.S.C. § 285 against certain PAEs under certain circumstances. The bill was previously referred to the Subcommittee on Courts, Intellectual Property and the Internet on April 8, 2013, though it is unclear whether the bill will advance further.

Conclusion

Though several proposed executive actions and legislative recommendations were announced by the White House, none appears to have any immediate impact. Two proposed executive actions — to begin rulemaking to require patent applicants and owners to regularly update ownership information, including an ultimate parent entity, and to provide additional training to examiners in scrutinizing functional claims — may eventually have an impact, but it is too early to determine the extent of the impact. The legislative recommendations will likely not have any immediate effect, as they must first be passed by Congress.

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Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this Alert or would like to discuss the topic further, please contact your Foley attorney or the following:

Jeffery J. Mikrut
Associate
Intellectual Property Department
Chicago, Illinois
312.832.5118
[email protected]

Matthew A. Smith
Partner and Chair, Patent Office Trials Practice
Washington, D.C.
202.295.4618
[email protected]