Advocating for Principled Patent Licensing

Efforts to promote transparency and other responsible practices within the patent licensing industry continue to gain strength following Conversant’s announcement last November of its 10-point set of guidelines for principled patent licensing.

Finjan Inc., a developer and licensor of patented cyber security software, last week committed itself to a series of licensing best practices aimed at ensuring “candid, transparent, and consistent business practices” in the licensing field.  According to Finjan president Phil Hartstein, the company’s licensing best practices are aimed at combatting the abusive practices of “patent trolls” who threaten America’s patent system and unnecessarily raise costs for innovators, especially small businesses. Hartstein, who has had a long career in the patent industry, emphasized that Finjan also hopes to foster more dialog within the industry about ethical business practices.

Conversant agrees completely with the need for more discussion and debate within the patent industry over best practices.  As I argued in a national law journal article last week, “it’s time for patent licensors to take the lead in reform. It is simply bad strategy for industry leaders to remain silent about the patent troll issue for fear that some will try to tar responsible licensors with the same brush.”

Support for the Patent Fee Integrity Act

Last week, California Democratic Senator Dianne Feinstein introduced the “Patent Fee Integrity Act,” a bill that would prevent the diversion of user fees from the United States Patent and Trademark Office (USPTO) to general government accounts.

Conversant supports this legislation. As we shared in an open letter to Senator Feinstein:

We believe that strong, reasonable and ethical licensing of high-quality patents is healthy for knowledge-based economies.  Intellectual property enables innovation—it does not stifle it.  And patents exist to encourage, reward and protect the inventions that improve our lives.  Accordingly, a strong and properly functioning USPTO is vital to the interests of Conversant, our partners, and all inventors.

 Despite years of Congressional debate and discussion about the importance of a fully-funded USPTO, the agency still has neither full funding nor access to all of the user fees it collects. The “Patent Fee Integrity Act” would end fee diversion, thereby enabling the USPTO to improve patent quality and support in interests of inventors.  It would do all of this without adding to the deficit. 

What do you think of the Patent Fee Integrity Act? Do you agree that this important measure promotes the interests of inventors and innovation? Join the conversation in the comments below.

Voicing concerns about patent reform

As the U.S. Senate considers new legislation aimed at curbing patent litigation abuses, voices are being raised in opposition. In February, a group of more than 150 businesses and organizations representing high-tech startups, independent inventors, and university researchers  sent a letter to Senate Judiciary Committee co-chairs Senator Patrick Leahy and Charles Grassley urging caution lest the resulting legislation inadvertently undermine the patent system that is so crucial to American economic growth.

Senators Leahy and Grassley also received a letter and 2,099-signature petition from the Independent Inventors of America, expressing “alarm at the current rush toward patent legislation that could cripple invention in America” by raising the “barriers to justice even higher than they already are.”

Consider the heartfelt article by independent inventor Randy Landreneau in the February 10, 2014 issue of the IP Watchdog blog.  Mr. Landrenaeu writes of the ways in which the just-passed House version of patent reform, known as the Innovation Act, would harm America’s startups and independent inventors.  He cites the Innovation Act’s “loser pays” provision, noting that this provision could put small businesses who seek to defend their patent rights from encroachment by big corporations at a distinct economic disadvantage in any court battle. In fact, it may make it financially too risky for them to stand up for their legitimate rights in court.

Mr. Landrenau also states  that the whole patent troll issue has been obfuscated in a fog of propaganda by certain Big Tech multinationals willing to weaken the patent system itself — and therefore future generations of American startups — if it means that by doing so they can reduce their own company’s litigation costs. Indeed, Mr. Landreneau rightly points out that this propaganda campaign is “based on highly questionable data” such as the claim that “the number of patent infringement lawsuits has risen dramatically due to the so-called ‘patent trolls.’”

Today’s patent litigation rate actually is less than one-half what it was during the golden age of American invention in the 19th century Industrial Revolution. Patent and legal records from that time show that the patent litigation rate at that time — defined as the number of patent suits filed in a decade divided by the number of patents issued in that decade — reached 3.6 percent. In contrast, figures show the patent litigation rate during the last decade was only about 1.57 percent. Today’s patent litigation rate is actually less than it was throughout the entire 70 years from 1790 to 1860 when it averaged 1.65 percent.

All of us who urge caution when enacting further patent reform must acknowledge, however, that there is a patent troll problem. As thousands of main street small businesses and Mom and Pop coffee shops can sadly attest, these ambulance chasers of the patent world are as real as they get, and have victimized thousands of small businesses in recent years (see my previous post “States Step Up Fight Against Patent Trolls”).

The issue here is that both claims are true. Patent trolls are real and a serious problem for small businesses across the United States and key provisions of the recently-enacted Innovation Act will unfortunately only harm legitimate inventors, not the patent troll bad actors who should be stopped.

For too long, many responsible patent owners have sought to avoid any discussion of the growing scourge of patent trolls, fearing it would only give ammunition to those who seek to eviscerate the entire patent system for their own business interests. But denying the truth because it might be employed wrongly is bad strategy. Better for legitimate patent owners to stand up publicly against patent trolls and support actions that will truly limit their abuses.

US Administration Takes Smart Steps to Strengthen the Patent System

In a recent blog post, I wrote about the growing numbers of state legislatures and attorneys general who are pushing for the use of consumer protection laws to curb the widespread extortion of small businesses by patent trolls.  Now the White House has unveiled new initiatives to further curb patent litigation abuse and strengthen the patent system. At a public roundtable event February 20, the White House announced three new executive actions to be implemented by the USPTO:

1] Crowdsourcing Prior Art: To improve the quality of patents issued and reduce overbroad or invalid patent claims, the USPTO is undertaking a new initiative to help companies and interested citizens find relevant “prior art” (information showing whether an invention is truly novel or not) and make it available to patent office examiners. Private sector crowdsourced prior art research firms such as Article One Partners have already proven effective in helping companies invalidate patents after they are issued. Creating ways for companies and private citizens to locate such prior art and make it available to the USPTO early in the examination process could help better patents issue in the first place.

2] Better Technical Training for Patent Examiners: The USPTO will expand its program to provide better technical training to patent examiners by enabling volunteer engineers and technologists from industry and academia to provide their expertise to examiners. As retired Chief Judge of the U.S. Court of Appeals for the Federal Circuit Paul Michel told Federal Lawyer magazine last October, improved training could have a significant effect in reducing the number of vague and low-quality patents issued.  “Thirty years ago, the examiner corps was older and far more experienced,” Judge Michel told the magazine. “Many of them went to law school at night, paid for by the patent office — a program, by the way, that the patent office unwisely dropped a decade ago. [But today], examiner training is not what it needs to be. Few examiners [understand the] requirement for claim definiteness, enablement, and that the claims be no broader than the written description. This, just as much as inadequate review of the prior art for novelty and non-obviousness, is responsible for many of the poor-quality patents issued.”

These first two measures are intended to address patent quality.  Many, including the United States General Accountability Office point to patent quality as a major underlying problem behind patent trolls.

3] Pro Bono and Pro Se Assistance: To help make the patent system more accessible to independent inventors and small businesses, the USPTO will provide educational and practical resources to inventors who lack legal representation and appoint a full-time Pro Bono Coordinator to oversee the program. The USPTO also launched an online toolkit designed to help consumers and small businesses know how to respond to patent troll demand letters.

One clear benefit of these Administration moves is that they address the abusive behavior of patent trolls and weaknesses in patent issuance without risking the harm to the innovation system that could arise from overly-aggressive changes to patent law itself.  Gene Sperling, assistant to the President for economic policy, said that, while the administration “had no choice but to take action on patent trolls,” the White House also does not agree with all the features of the recently-passed Innovation Act in the House, which many believe include several draconian – and arguably less effective – changes to patent law.

For the full text of the White House press release on the new initiatives, click here.