The White House today introduced an executive order intended to combat “patent trolling,” in which companies buy up patents and use them to sue “infringing” companies that actually make things. Patent trolling is essentially a tax on innovation, and tech giants like Google hate it so much that they partner with other tech giants to create portfolios of patents they use solely to defend themselves against patent trolls.
The Obama administration’s efforts to combat patent trolling are admirable, but, contra what you may have read elsewhere, largely symbolic. To understand why, let’s first rewind the clock to 2011, when Congress passed the America Invents Act (AIA), another admirable but ill-fated attempt to combat patent trolls. As I wrote at the time, the act didn’t address the core problems with the US patent system, namely that it’s under-funded, under-staffed, and has a backlog of at least 700,000 unexamined patents. Obama’s executive order doesn’t address these issues, either.
But what about the provisions in the AIA and today’s executive order, which are designed to at least nibble at the edges of patent trolling? With the results of the AIA as our guide, we can see that history is not on the side of innovation. One provision of the AIA about which I had been hopeful was designed to prevent patent trolls from suing whole gobs of companies at once over the same patent—a machine-gun approach to legal action that is relatively easy to initiate and virtually guarantees that at least some companies (usually those least able to fight a suit) will settle out of court. The AIA makes this, in theory, much harder to do.
But according to patent attorneys writing for the Association of Corporate Counsel, a loophole in that provision of the AIA means that patent trolls have hardly been deterred from suing multiple defendants.
Today’s executive order, meanwhile, lacks teeth. Even assuming that, unlike the AIA, all of its provisions work as intended, here’s where they are lacking:
The press release announcing the order trumpets that the US Patent and Trademark Office (USPTO) will “tighten functional claiming,” by better training patent examiners to reject “overly broad” patents—like Apple’s infamous patent on the rounded corners of a smartphone. Leaving aside that better training might not be nearly as effective as adequate staffing, the issue here is that this only affects future patents, not existing ones. Patents have a life of 20 years, so there will still be plenty of abusive patents around for many years to come.
As I noted above, the USPTO has a huge backlog of unexamined patents, and it can’t hire enough examiners because Congress has to approve (and can mis-appropriate) its budget—even though the USPTO is funded by application fees and not by taxpayer dollars.
One of the first petitions to gain enough signatures to force a comment from the White House demanded that the administration cease issuing software patents and void all existing ones. Today’s measure to limit “overly broad” patents looks like a nod to this, since, as the White House has acknowledged, software patents are often overly broad.
But countries like New Zealand have never allowed software patents, and their own domestic software industry agrees this is the right course of action. Plenty of pundits and technologists are agitating for an outright ban on software patents. They argue, essentially, that patenting software is the same thing as patenting an idea, and most software patents are for things that would be obvious to a technologist of comparable skill. Indeed, given how these patents work, it may be literally impossible for a programmer to avoid violating someone’s patent.
After this executive order, companies must update the USPTO with current information about who owns a patent, and that owner can’t just be a shell company used by another company. This is meant to prevent patent owners from concealing their identities, a common tactic patent trolls use to hide the fact that they’re trolling.
This could certainly lead to more bad press for the likes of Intellectual Ventures, a company that has long insisted it is not a patent troll despite evidence to the contrary. (Nathan Myhrvold, the company’s co-founder, counters that its litigious tactics are no different from those of big tech firms like Microsoft or Apple—which is true, even if those firms have adopted many of the same tactics as a way to defend against trolling.)
But bad press, of which there has already been plenty, is unlikely to stop the company. Intellectual Ventures took on $5 billion in investment, which it must recoup by some means or other. It has many legitimate inventions of its own (laser for shooting down mosquitoes, anyone?), but nothing it has spawned so far looks likely to earn it enough revenue to justify that investment, other than patent lawsuits.
One interesting provision in today’s executive order is that US district courts will have more discretion to punish plaintiffs who bring “abusive” lawsuits by making them pay the defendants’ legal fees. But that doesn’t make the prospect of a lawsuit much less scary for the defendants. What if a small company decides to fight a case brought by Intellectual Ventures and racks up millions in legal costs, but the judge doesn’t ultimately decide that the lawsuit was abusive?
In any case, this only helps defendants in cases that get to court. Most patent lawsuits are settled out of court, precisely because of the money and time required to litigate them. So this provision is unlikely to slow down patent trolls much.
To sum up: What an act of Congress failed to accomplish—the blunting of the assault on innovation by patent trolls—the Obama administration is attempting to rectify with an executive order. But both efforts are misbegotten, and fail to address the core problems with the US patent system, among them the fact that it’s generally inadequate to the task before it and that some things—like software (and also business processes, but that’s a whole other discussion) probably shouldn’t be subject to patents in the first place.