Obama Takes Action To Curb Frivolous Patent Lawsuits

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President Barack Obama took steps on Tuesday aimed at curbing what the White House called frivolous lawsuits over patent infringement, directing his administration to craft new regulations and urging Congress to pass new laws.

Barack Obama

President Barack Obama took steps on Tuesday aimed at curbing what the White House called frivolous lawsuits over patent infringement, directing his administration to craft new regulations and urging Congress to pass new laws.

The move - announced ahead of an Obama fundraising trip this week to Silicon Valley in California - comes at a time when U.S. lawmakers and courts also are looking for ways to reduce the number of unwarranted patent lawsuits.

The package of proposed legislation and rule-making takes aim at lawsuits brought by companies, disparagingly called "patent trolls," that do not make or sell anything but merely license existing patents and sue others for infringement.

Such lawsuits have ballooned in recent years, particularly in the technology sector.

Cisco Systems Inc, Apple Inc, Google Inc and other big technology companies have been pushing for legislation that would reduce the number of times each year that they are sued for infringement.

Among other steps, the White House called on Congress to pass legislation to make it easier for a federal judge to award legal fees to the winner of a patent case if the judge deems the lawsuit abusive.

It also asked lawmakers to take up the issue of companies going to the U.S. International Trade Commission to request sales bans for products made with technology that infringes upon an existing patent because that panel's standard for ordering such an injunction is lower than a U.S. district court's.

The disparity has led to a tidal wave of patent infringement complaints filed at the ITC.

Obama also asked lawmakers to require companies that sue for infringement to have updated ownership information on file with the U.S. Patent and Trademark Office. He urged the patent office to write a similar regulation.

Obama's actions were aimed at improving incentives for high-tech innovation, a major driver of economic growth, the White House said in a statement.

"Stopping this drain on the American economy will require swift legislative action, and we are encouraged by the attention the issue is receiving in recent weeks," White House spokesman Jay Carney said in a statement.

The patent office will also train examiners to try to prevent overly broad software patents from being granted, and provide clearer information for retailers and consumers who find themselves facing potential litigation, the White House said.

Companies specializing in patent litigation filed 2,921 infringement lawsuits in 2011, 62 percent of all such cases filed, Colleen Chien, who teaches patent law at Santa Clara University Law School, said in a blog post for PatentlyO.

Figures for this year and last year were not available.

Allowing judges to decide that certain lawsuits are abusive and requiring losers to pay the winners' legal fees would be key steps toward killing frivolous lawsuits, said Ed Reines, a member of an advisory panel for the U.S. Court of Appeals for the Federal Circuit, which hears most patent appeals.

Another important step would be to reform the ITC so companies cannot get a sales injunction not available in district courts, according to Reines, a lawyer with the firm Weil Gotshal & Manges.

LEGISLATION BREWING

Congress already is working on legislation. The heads of the judiciary committees in the Senate and House of Representatives - Democratic Senator Patrick Leahy of Vermont and Republican Representative Robert Goodlatte of Virginia - have put forward a draft bill.

Their measure would improve access to information about who owns patents, reduce discovery burdens in lawsuits and make other changes to make it easier for judges to identify abusive cases early in the process and, presumably, dismiss them.

The bipartisan proposal, once finalized, is considered to have a good chance to move through Congress.

Another bill - introduced in February by Representatives Peter DeFazio, an Oregon Democrat, and Jason Chaffetz, a Utah Republican - would require certain plaintiffs to pay all legal fees if they sue for patent infringement and lose.

Efforts are also underway in the courts to rein in abuses.

Randall Rader, who has been on the U.S. Court of Appeals for the Federal Circuit since 1990 and became chief judge in 2010, has circulated a four-point plan to stem abusive patent litigation. The plan overlaps with some of the new White House proposals and some of the planned legislation.

"The litigation abuse comes when a company is asserting a patent with a minimal value ... but they're asserting it for billions of dollars," Rader said in an interview. "That disproportionality is an abuse of the system."

Rader's plan calls for courts to restrict pre-trial discovery - gathering evidence in a case - to key terms and key people and would limit the number of patents in each case.

It also calls for courts to evaluate the value of any infringement early on and dispatch smaller cases quickly, and to consider making plaintiffs pay the legal fees of defendants if the judge concludes that the original lawsuit was unfounded.

The court within weeks will formally begin an effort to cut the number of patents in each case, Rader said. The other two issues are down the road, Rader added.

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