On June 4, the Executive Office of the President issued a report entitled “Patent Assertion and U.S. Innovation.” The stated purpose of the report is to address challenges posted by “patent assertion entities” (PAEs), which the report defines as entities that”use patents primarily to obtain license fees rather than to support the development or transfer of technology.”
The report estimates that in the past two years, PAEs filed 62% of all patent infringement suits. It also cites to a “range of studies [that] have documented the cost of PAE activity,” but it provides no firm estimates of those costs, and it’s not clear whether those studies include the same definition of “patent assertion entities” that the President’s report uses.
Concurrent with the report, the White House issued a set of legislative recommendations and executive actions to address the costs that PAEs impose on U.S. industry. The legislative recommendations include:
- Legislation to require patent-plaintiffs to disclose the real party in interest in litigation;
- Implementing a “loser pays” program in patent litigation; and
- Expanding the USPTO’s “covered business method patents” program.
As noted in previous IP Spotlight posts, these recommendations are already pending in the SHIELD Act proposal and a bill recently introduced by Senator Charles Schumer.
The report’s executive action proposals include:
- USPTO rulemaking to require patent applicants to keep their ownership information up to date, including the ultimate parent entity of the owner. (As IP Watchdog astutely noted today, this proposal is already underway at the USPTO.)
- Training USPTO examiners to more closely scrutinize “functional claims” in patent applications.
- Expanding informational resources to businesses and patent litigation defendants.
- Reviewing International Trade Commission procedures regarding exclusion orders.
Although the report will get a lot of press, its impact is not at all clear. The legislative recommendations and executive orders descriptions mostly summarize initiatives that are already underway, rather than propose any new actions. In addition, other than the “loser pays” proposal, none of the initiatives propose any changes to actual patent litigation or prosecution practice.
Nonetheless, the report is certainly designed to provoke a conversation. Whether that conversation will lead to any substantive change remains to be seen.
The past few weeks have seen several new ways in which regulators are trying to address patent assertion entities (PAEs) – often referred to in the media as “patent trolls” — through legislation, regulation, and in one case litigation.
In March, Congress began to consider a new bill, know as the SHIELD Act, that proposes to allow defendants who prevail in patent lawsuits to recover costs from the plaintiff in certain situations. As noted in a previous IP Spotlight post, the SHIELD Act has some weaknesses that can hurt both patent holders and defendants, but it may be a first step in broader legislative action.
In April, the U.S. Department of Justice (DOJ) published a set of public comments on a joint DOJ / Federal Trade Commission (FTC) investigation of PAE activities. The comments followed a December 2012 workshop in which the FTC and DOJ explored the impact of PAEs on innovation and competition.
In May, the state of Vermont attacked PAEs on two fronts. First, the state Continue reading
A new “loser pays” bill aimed at reducing “patent troll” litigation is getting a lot of attention since its introduction last week.
The Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2013 proposes to allow defendants who prevail in patent lawsuits to recover costs from the plaintiff if the plaintiff is not: (i) the inventor or the original assignee; (ii) a party who made substantial investment through production or sale of an item covered by the patent; or (iii) a university or research institution.
According to co-sponsor Congressman Jason Chavetz (R-UT): Continue reading
A recent Federal Circuit decision permitted claims of patent infringement and trademark infringement may be brought in two separate lawsuits, even though the claims were filed by the same plaintiff and accused the same product of infringement.
The Court’s decision arose from a dispute between portable conveyor manufacturers Superior Industries, LLC and Thor Global Enterprises, Ltd. Superior originally brought a trademark infringement action against Thor, asserting that Thor infringed Superior’s registered “FB” trademark by using the FB mark in Thor’s press releases and point-of-sale displays for a portable conveyor system. That lawsuit ended with a consent judgment that enjoined Thor from using the mark in connection with certain products.
Approximately 14 months after the consent judgment, Superior filed a second lawsuit in which it accused Thor’s portable conveyor system of infringing three U.S. patents. Thor moved to dismiss the case, arguing that the claims were precluded by the earlier-filed trademark suit. The district court agreed with Thor with respect to two of the patents, stating that “[t]he only reason the earlier suit did not contain patent allegations is because Superior Chose not to make them.” (The third patent had not yet granted at the time of the trademark suit.)
On appeal, the Federal Circuit reversed. In Superior Industries, LLC v. Thor Global Enterprises Ltd. (No. 2011-1549, Nov. 27, 2012), the Court explained that the patent and trademark suits involved different causes of action, each with a different set of facts. ”Superior’s trademark claims arose from Thor’s use of the FB mark in advertising – not from actual sales or offers for sale of the [product].” In contrast, the patent infringement claims related to sales and offers to sale of the products themselves.
Accordingly, the Court found that the patent and trademark suits involved very different transactions. Notably, the Court did not address whether Superior could have brought its patent claim if the trademark suit had related to use of the mark on the products themselves. So, it’s not yet clear whether this case will have a broad impact, or whether its application will be limited to situations where the two lawsuits involve entirely different transactions.
At a high level, patent and antitrust laws may seem to be at odds with each other. Patent law grants inventors an exclusive right to make, use and sell their inventions. On the other hand, antitrust law is designed to encourage competition and restrict monopolies. This apparent tension is resolved because patents have a limited life (typically no more than 20 years from filing), and are granted as a reward for encouraging inventors to disclose the details about their inventions.
To avoid situations where undeserving “inventors” circumvent antitrust law by obtaining a patent through intentional fraud on the Patent Office, the U.S Supreme Court has long held that a patent holder who enforces a patent obtained through intentional fraud may be subject to antitrust liability. (see Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965)).
A Walker Process claim is not one to be brought lightly. Continue reading
A new study published by PriceWaterhouseCoopers reports that new patent lawsuit filings reached an all-time high in 2011, with a 22% increase over the number of patent lawsuits filed in 2010.
The study contains many useful data points. Interesting facts include:
- over the past five years, the annual median damage award for cases that reach a final a decision was approximately $4 million;
- average damage awards in favor of non-practicing entities were nearly double those for practicing entities over the last ten years;
- the average time to trial in a patent case is 2.5 years, although significant variations in speed exist among the District Courts.
The increased number of patent filings may be attributed in part to the passage of the America Invents Act, which limited patent holders’ ability to sue multiple defendants in a single lawsuit. After the law passed, patent holders were often required to file multiple lawsuits against single defendants, rather than a single lawsuit against multiple defendants. However, because the AIA took effect in September 2011 and thus only affected patent filings during the last four months of the year, the AIA alone is unlikely to be the sole factor that caused the spike.
The complete report is available on the PWC website.
The Federal Circuit recently made it easier for patent holders to address what the Court called “the problem of divided infringement,” i.e., a situation where a defendant induces several other parties to collectively perform all steps required to infringe a patent, but no single entity performs all of the steps itself.
In Akamai Technologies, Inc. v. Limelight Networks, Inc. (No. 2010-1291, Fed. Cir. Aug. 31, 2012), an en banc decision of the Court overruled its 2007 decision (BMC Resources, Inc. v. Paymentech) which held that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement. Continue reading
Today’s Pittsburgh Business Times includes an article discussing the Patent Pilot Program and the U.S. District Court for the Western District of Pennsylvania. The article begins by pointing out: ”Last year, 738 patent infringement suits were filed in U.S. District Court in Eastern District of Texas. The Western District of Pennsylvania had 14.” However, several attorneys (including yours truly) think that’s about to change. Patent cases don’t move as quickly as they used to in traditional patent jurisdictions such as the Eastern District of Texas. And while the parties may benefit from the experience of judges who carry a heavy patent caseload, the patent pilot program will help provide additional judges (including those in Pittsburgh) with similar experience.
The full article is available on the Pittsburgh Business Times website. (Subscription may be required to access the full article.)
This week I received a note from MaxVal, a company that serves patent attorneys and agents with a broad range of software and services for patent portfolio management.
One useful (and free) service that MaxVal offers is a page of free online patent tools, including:
- a Patent Widget that gathers information from multiple databases and presents bibliographic information, assignment data and maintenance fee data in one place;
- a Claim Chart Generator; and
- a IFW File Splitter that divides the PDF of a USPTO file history into individual documents based on bookmarks.
MaxVal is also offering a free one-year subscription to its daily IP litigation alert emails. To subscribe, click here.
This week fourteen U.S. District Courts were selected to participate in a patent pilot program that is designed to enhance those courts’ expertise in complex patent litigation.
The patent pilot program is a 10-year project in which judges who request patent cases will receive specialized patent law and case management training. When a new patent case is filed in a participating district court, after an initial random assignment the case may be reassigned to one of the specially trained judges.
Courts that will participate in the program are:
- Eastern District of New York
- Southern District of New York
- Western District of Pennsylvania
- District of New Jersey
- District of Maryland
- Northern District of Illinois
- Southern District of Florida
- District of Nevada
- Eastern District of Texas
- Northern District of Texas
- Western District of Tennessee
- Central District of California
- Northern District of California
- Southern District of California
Some of the courts (such as those in Texas and California) were selected because they were among the 15 courts in which the largest number of patent suits were filed in 2010. The other courts, including my local court of the Western District of Pennsylvania, were selected because they have already adopted (or will soon adopt) local patent rules. A press release from the Western District of Pennsylvania notes that a goal of the program is to study whether focused patent experience among judges will decrease reversal rates and disposition times of patent cases:
the Chief Judge of each participating court . . will report to Congress on a periodic basis during the ten-year Program with respect to whether the Program has succeeded in developing expertise and improved efficiencies in patent cases, and whether a court’s inclusion in the Program has affected the number of patent cases filed in that court.
The patent pilot program will begin in July 2011.