Patent Reform: A Waiting Game

By | September 15, 2013

Patent-Tug

This past February, less than two years after the America Invents Act (AIA), the first piece of legislation on the Patents in sixty years, President Obama commented that efforts at patent reform “only went about halfway” . In June, Obama took action and announced his five executive actions and seven legislative recommendations to further reform the US patent industry.

In the recently announced plan,  increased transparency in the patent system is a main priority, as well as helping prevent crippling by patent trolls.  The purpose of a patent is to give an inventor exclusive rights to develop an idea. Trolls  stop innovators by obtaining patent rights with no intention of developing the idea, and then initiate a suit against other developers, preventing fruition and tying up court resources.

Transparency is only the first step in curbing abusive litigation.  Obama recommended legislation that would give the court more discretion to award fees to prevailing parties, discouraging wrongful claims.  Because patent infringement suits are so expensive, a defendant will take a non-meritorious settlement and walk away with hundreds of thousands of dollars, which certainly doesn’t discourage abusive filings.  If “loser-pays” legislation goes through, it would drastically increase the stakes, diminishing illegitimate claims.  Though this model is similar to the legal standard for copyright infringement, it is the most controversial recommendation in the plan.

Several major companies actually spend more on their defense for these civil suits than they do on research and development.  Instead of moving forward on new ideas, building strong development teams, or creating more jobs, companies are burning money on patent infringement suits; the average costs start at $1 million and can easily double or triple that, if neither side settles during the proceedings.

Obama’s objectives would require a higher level of filtration on patent applications, deter abusive case filings, inform the public about the patent system and one’s rights within it, and institute an outreach program for researching and educating others about current and future reforms.  While some welcome these changes,  a few of  the Administrations’ goals have received some speculation.

Many remain skeptical over Obama’s changes expected of the Patent and Trademark Office (PTO).  Several parts of his plan demand more transparency from innovators and patent owners, which would require even more processing, more frequently, by the already overloaded PTO.  Moreover, another reform states that the PTO will undergo training to use more scrutiny in reviewing patent applications.  Intellectual Property litigators are especially dubious of this expectation, citing 2012’s 576,763 patent applications that were handled by only 8,000 officers.

If successful, these changes could fuel economic growth and expand our opportunities for innovation, not to mention benefit big companies like Apple Inc. and Google Inc.- they have been pushing for these types of reform for years and welcome Obama’s plan.

However, the most polemic aspects of his announcement are simply legislative recommendations, so there are yet to be any extreme changes.  Obama took the first step in introducing the plan, but now we’re waiting on Congress to make the next move.

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