Obama's patent troll proposals: Long on talk, short on walk

And Congress won’t play ball

Comment The White House has issued five executive actions and seven legislative recommendations to act against patent trolling. but while the president has done what he can within the limited scope of the executive's powers, it's nowhere near enough and relies on Congress to try and stop the problem.

Executive orders (EO) are limited in scope, but what the White House is proposing will have some palliative effects on dealing with patent trolls. Most importantly they give new instructions to the Patent and Trademark Office (PTO) requiring it to crack down on abuse of the system and change its internal practices.

The EO "Tightening Functional Claiming" will have the greatest effect. Patent examiners are to get extra training on scrutinizing claims, and within six months the PTO should have a glossary in place to set precise software-specification terms that are currently being twisted into complex legal arguments.

The PTO has also been instructed to require the naming of a "ultimate parent entity" to help defendants see through layers of shell companies used by unscrupulous legal teams to confuse ownership. Setting up shell companies in specific regions is a good way of staying under the radar of regulators, and the rules will show who is behind a plethora of lawsuits.

On the palliative side, the PTO has also been told to get a public information campaign started, with a "plain-English web site" explaining options to members of the public who are approached by a patent troll. The PTO has also been instructed to get academics on board for a detailed study of the trolling issue and to get some kind of estimate of the damages involved.

The latter move is only semi-useful. The damage that patent trolls are doing is already well-documented, and patent-troll lawsuits already make up the majority of US patent lawsuits. Asking for more study isn't really going to help matters – although it should make for some interesting reading.

The final EO may actually make some patent problems worse. "Strengthen Enforcement Process of Exclusion Orders" orders the US Intellectual Property Enforcement Coordinator to set up a review with the International Trade Commission and the Customs and Border Protection to enforce patent-inspired product bans.

This isn't really a trolling issue. These kinds of product-exclusion orders come from companies like "rounded-corners" Apple as a legal tactic in royalties cases, and increasing their scope will only make these a more powerful tool.

Trolls generally don't go after such big game, but Google, Microsoft, Apple, IBM, and other royalty-squeezers will be happy, although not so much with Obama's legislative proposals for the ITC.

Congress of dunces

The only thing that's really going to help beat down the trolls is legislative action. The White House legislative proposals are good, but El Reg suspects Satan will ride to work on a snowplow before Congress passes them.

Most importantly for the bulk of us are proposals that recommend a law to protect people using off-the-shelf products in their day-to-day businesses. This is designed to protect a company that is being hit by thousand-dollar demands from a troll for using a fax machine, and will require the trolls to go after the manufacturer of the product instead, who will be better equipped to handle such a claim.

The PTO also needs legislative reform to cut down on the number of overly broad patents and enforce patent-holder identification. These are going to be key to fighting trolls, but how quickly the PTO can move to cut down on the orgy of overly broad patents it has granted remains to be seen – there's no sign of any sense coming so far.

Federal judges should also be given much more leeway in assigning patent damages, the White House suggests. As we've seen in the recent Motorola/Xbox case, a sensible judge can help make royalty litigation not worth the bother and cut down on some ludicrous multi-billion dollar damage claims.

Reform of the ITC is suggested, including a welcome and painfully obvious idea that it be allowed to hire investigators who actually know what they are doing in the patent field. A law is also suggested to codify the terms for issuing an ITC ban on sale of products or services to reflect the 2006 Supreme Court judgment on eBay Inc. v. MercExchange.

"That test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction," that judgment reads.

All of these legislative proposals depend, however, on the compliance of Congress in getting legislation passed. While there have been some interesting moves in the area (notably the SHIELD Act) there's no way in the current political climate that the House and Senate will work together on the issue, despite the pressing need.

On the Democratic side of the equation, most legislators will follow the president's lead, but enough to make life difficult will follow the money instead. Last year, legal firms contributed $207,177,743 to Congressional members – two-thirds of that to Democratic candidates. Certain legal firms won't be keen on reform and will bribe use lobbying techniques to persuade regulators.

For a certain subset of the Republican legislators, any suggestions that come from the White House are automatically a target to be shot down. While there are a few voices of reason in that party, they are becoming increasingly marginalized by the partisans, and as a result Congress is going to be deadlocked for the foreseeable future.

Not bad, but not enough

The White House proposals will do something to deal with the abuse of the patent system by trolls, but nowhere near enough, and in some cases may make the problems worse.

Possibly the biggest hole is not asking for some kind of requirement for patent litigants to actually produce something related to the patents they are contesting. Two lawyers operating out of a New Mexico strip mall can claims huge damages simply because they own a patent – instead there needs to be a requirement that you are actually involved in the business you are launching legal action into.

Some moves on limiting the amount that can be claimed in patent damages would also have been welcome – and the same should also be applied to copyright in the media industry. Some litigators are tossing around huge claims for damages on very little legal evidence, and many judges aren't equipped to sort out the wheat from the chaff.

Finally, legislators need to sort out the mess of overly-broad and loosely-worded patents that are out there. Since 1994, the PTO has been passing patents with all the taste and discernment of a crazed magpie, and it needs to be reined in and ordered to sort out the mess it has created. Prior art protections need to be much stronger and the crop of patents needs to be cut down to size.

Reform of the patent system is desperately needed, and it's hurting the US economy to the tune of billions of dollars a year. Even worse, much of this money is being funneled back into filing more and more lawsuits, ensuring that the problems will be ever-growing.

The White House proposals are a start, but they don't go anywhere near far enough. ®