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White House moves to curb 'patent trolls'

world Updated: Jun 04, 2013 22:35 IST

The White House moved on Tuesday to crack down on companies that make money by suing other firms over patents, especially in the tech sector, rather than actually providing goods or services.

These so-called patent trolls, which take other companies to court with an eye to collecting license or royalty fees, are seen as stifling innovation. The US government has been under pressure to stem such abusive litigation.

The White House said President Barack Obama issued five executive orders and called for new legislation to update a reform enacted in 2011.

"Innovators continue to face challenges from patent assertion entities (PAEs), companies that, in the president's words 'don't actually produce anything themselves,' and instead develop a business model 'to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them,'" a White House statement said.

"Stopping this drain on the American economy will require swift legislative action... We stand ready to work with Congress on these issues crucial to our economy, American jobs, and innovation."

The White House said new action is needed in the face of a flood of recent patent litigation, particularly in the smartphone sector, and because "several major companies spend more on patent litigation and defensive acquisition than on research and development."

One of the signed orders calls for patent holders to have by default a "real party-in-interest" in a patent. This is aimed at creating more transparency, and disclosing the true owners of patents, to prevent the use of secretive "shell companies" holding patents.

The president also signed measures aimed at ensuring "overall patent quality" to reduce the number of vague or broad patents which can be used to sue inventors.

The move drew praise from TechAmerica, a major US technology lobby group.

The White House action will help in "reigning in abusive patent litigation," said TechAmerica's Kevin Richards.

"Protecting innovators intellectual property is a key component to maintaining the competitive advantage the United States has over the world," Richards said.

"With the bipartisan support this issue enjoys, those great minds who are creating the next disruptive technology in their basement or dorm room can look forward to a system that preserves their idea."

A number of activist groups have been pressing for action to curb patent trolls and stem a flood of patent litigation against tech firms.

The Electronic Frontier Foundation has argued that the patent system is "broken" and that "patent trolls buy too many of these patents and then misuse the patent system to shake down companies big and small."

But Robert Stoll, a Washington patent lawyer who was formerly commissioner for patents at the US Patent and Trademark Office, urged a more cautious approach.

"The people who say the patent system is broken have another agenda," Stoll said.

"The patent system is probably the best in the world, it is functioning. There could be some tweaks."

Stoll said even the definition of patent troll is vague, because some holders including researchers or universities may legitimately want to hold the patents without manufacturing or selling anything.

"We need to look at these issues carefully," Stoll said.

"We want to get rid of the bad actors but not the legitimate patent holders."

Stoll said efforts to improve transparency are good, but noted that in view of the 2011 law enacted, "I think we need time for some of that to work."