IP Groups Seek Balanced Approach on Curbing Abusive Patent Litigation

FTC Chairwoman Edith Ramirez’s remarks Thursday in favor of a possible FTC investigation into the business practices of patent assertion entities (PAEs) are “obviously going to have some impact” in the federal government’s ongoing debate over how to best address the issue of abusive patent litigation, said American Intellectual Property Law Association (AIPLA) Executive Director Todd Dickinson, former director of the U.S. Patent and Trademark Office (PTO). “It keeps the iron in the fire,” he told us.

Ramirez’s support for an investigation followed up on White House actions earlier this month that directed PTO to institute new rules aimed at increasing disclosure of patent ownership information and improving patent claim clarity, as well as to increase public education on patent-related issues. The White House also issued its own recommendations on possible legislative remedies, aimed at influencing debate over existing bills on Capitol Hill that address abusive patent litigation (CD June 5 p12). Dickinson and Herb Wamsley, executive director of the Intellectual Property Owners Association (IPO), told us their groups generally believe some reforms are needed to address patent litigation abuse, but they hope the government takes a balanced approach.

The White House’s focus on curbing abusive patent litigation increases the issue’s de facto importance in the national debate, Dickinson said. AIPLA favors solutions that define the problem in terms of bad actors’ behavior, rather than solutions that define it in terms of the actors involved, he said. IPO, which represents members as varied as Apple and Caterpillar, is concerned about problems posed by abusive patent litigation, but the focus should be on the conduct of parties, Wamsley said. “We need to proceed carefully,” he said. For instance, the group supports identifying the real party in interest (RPI) as part of patent ownership disclosure, but only to the extent that “what we're talking about is just identifying the ultimate parent corporation,” Wamsley said. “That will be a useful move toward transparency.”

The merits of the White House’s legislative recommendations are not yet clear simply because detailed legislation specifically based on those recommendations hasn’t been introduced, Dickinson and Wamsley told us. It’s difficult for AIPLA to take a position on those recommendations “until we can see some details about what’s being proposed, particularly in an area like this where details make a big difference,” Dickinson said.

IPO believes the White House’s legislative recommendations will ultimately have a more significant impact than its executive actions, but it’s also waiting for more detailed information on those recommendations to circulate, Wamsley said. He said he believes PTO has limited authority under existing law to adopt changes on its own that would make meaningful progress on combating abusive patent litigation. The White House executive actions are likely to have more of a long-term impact on issues like RPI disclosure and patent claims language than as a short-term solution, Wamsley said. “Education is always good, but it’s less powerful than Congress” changing the law, he said.

AIPLA opposes the Saving High-Tech Innovators from Egregious Legal Disputes Act (HR-845) because its fee-shifting rules are defined in terms of the actors involved, rather than their behavior, Dickinson said. The “general consensus is that that’s probably not the correct approach,” he said. Other legislation -- as well as the White House’s executive actions -- focus their solutions around bad actors’ behavior, Dickinson said. The draft bill being circulated by House Judiciary Committee Chairman Bob Goodlatte, R-Va., for instance, would require the plaintiff in a patent infringement lawsuit to provide detailed information on the claims in the suit and information on the identities of the patent’s owner and any real parties in interest. That requirement would go into effect when a plaintiff sends out at least 20 cease-and-desist letters per patent in a year. Although AIPLA would prefer the threshold be 100 letters per patent, it still sends a message to bad actors that “you are basically self-identifying your behavior in a negative way,” Dickinson said. “Your business model has to almost assuredly be that you're trying to glean a nuisance license or very small settlement from lots of different people."

Congress needs to find a mechanism to allow courts to issue a stay on patent infringement lawsuits against customers, Dickinson said. “You're starting to see PAEs going beyond the traditional tech and manufacturing sectors and sending cease-and-desist letters to retailers, coffee shops, people who have no experience dealing with this,” he said. “That’s stressing the system out."

Fee shifting is another “hot-button” issue that Congress will need to address, Dickinson said. Section 285 of the Patent Act currently gives judges the authority to shift fees in exceptional cases, but legislation of abusive patent litigation would loosen those requirements to varying degrees. The Patent Abuse Reduction Act (S-1013) would “loosen up” Section 285; other bills would institute rules that would always require the losing party in a case to pay the legal fees, Dickinson said. Full “loser pays” rules would be significantly more difficult to pass because they get into larger litigation reform issues that tend to cause a more pronounced partisan split, he said.

Provisions that seek to change the discovery process in patent litigation issues would be better handled within the courts themselves, Dickinson said. “There’s a feeling that perhaps courts should be given a chance to work with the America Invents Act,” he said. “Judges routinely do not like to be told by statute how they should manage their courtrooms. Trial judges in particular tend to feel that’s very burdensome."

IPO’s focus has remained on the bills already formally introduced in Congress, Wamsley said. IPO believes any changes in patent law should be structured in a way that serves all industries; the group is “cautious about endorsing too many changes too quickly,” he said. IPO’s board believes it’s important that Congress address fee shifting, with the Patent Abuse Reduction Act providing the best fee shifting solution, Wamsley said. Although IPO believes RPI disclosure is important to combating abusive patent litigation, it also believes some of the disclosure proposals in the bills currently being considered are too complex and require disclosure at too many points during the life of the patent, Wamsley said. IPO also supports the concept of a provision that stays infringement lawsuits against customers, but needs to study how it would work in practice, he said. IPO also endorses a provision in Goodlatte’s draft that would require the PTO to adopt the same interpretation guidelines on patent claims that district court use, as this would simplify PTO proceedings, Wamsley said.

IPO is optimistic that Congress will be able to enact a bill that provides a balanced approach, Wamsley said. “You don’t want to overreact and make it so difficult for legitimate patent owners that incentives to innovate are weakened,” he said. Because patent law is complex, it could take until next year for legislation to clear Congress, Wamsley said. There does appear to be a developing consensus on ways to address abusive patent litigation, and it’s likely that some legislation on the issue will move forward during the 113th Congress, Dickinson said. Congress is not going to see a “huge pushback” on legislation, except on provisions the group feels are “particularly unhelpful,” he said.