Obama vs. the Patent Trolls

Assailing “abusive patent litigation designed not to reward innovation but to threaten inventors and companies based on questionable claims,” the White House this week announced it had made several moves toward patent reform, including one aimed at stemming the tide of frivolous lawsuits filed by so-called patent trolls.

The Obama Administration urged the U.S. Patent and Trademark Office (USPTO) to make changes in its rules that would require identification of an attributable owner of a patent when lawsuits are filed for alleged patent violations. Currently the trolls—or Non-Practicing Entities, as they are officially known—hide behind shell corporations when filing suits and shield the names of the actual plaintiffs from public view. Defendants, very often marketing companies that are sued for such generally defined practices as one-touch payment systems or specific QSR code uses, often settle rather than incur huge legal fees.

USPTO published the proposed rule change in the Federal Register in late January and will hold a public meeting on the subject on March 13. The Patent Office seeks to require that the attributable patent owner be identified on the filing of an application, when there is a change in ownership, and when a patent is involved in a supplemental examination or a proceeding before the Patent Trial and Appeal Board.

The Patent Office also launched an online toolkit this week to help unwitting defendants choose courses of action to fight patent infringement actions. It contains legal background and resources to call in on patent infringement and presents advice in immediate courses of action. The USPTO, for instance, suggests that companies may not want to ignore demand letters they receive from patent trolls since a judge can later deem that to be reckless behavior and thereafter order payment of treble damages. Another page provides access to sites that contain information about related cases and demand letters, as well as links to sites that offer legal aid and advice.

The Direct Marketing Association applauded the White House’s initiatives to offer advice to companies on how to beat back the patent trolls. “We also agree with the President’s call to pass legislation in this area to help stop abusive patent litigation and curb the practice of sending vague and misleading demand letters to unsuspecting businesses,” said Peggy Hudson, DMA’s senior vice president of government affairs.

Cameron Bellamy, president of GrayHair Software, which is in the midst of battling a suit filed against its customers, also praised the White House’s efforts. “The administration has laid out the proper set of actions to deal with a major issue to any company who is an innovator in an industry, not just GrayHair as an innovator in the postal industry,” said Cameron Bellamy, owner and president of GrayHair Software.“Patent trolls and their current operational tactics are blackmail and I am glad to see a hard line being pushed to solve this issue that can not only damage individual businesses but entire industries.”

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