Telecom and Tech Industries Urge Further Agency Action on Patent Abuse

Other telecom, software and Internet companies also urged the FTC and Justice to do an in-depth investigation of PAEs and take further action to mitigate harmful effects of litigation abuse. The companies also urged the U.S. Patent and Trademark Office (PTO) to institute proposed reforms to real-party-in-interest (RPI) information collection and disclosure and improve patent examination standards, with several also urging Congress to pass the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act or similar legislation that institutes a “loser pays” rule, which would require a PAE to pay the legal costs of a company it sues if the PAE loses.

FTC and Justice should urge the courts "to prevent subsequent acquirers of RAND-encumbered patents from extracting the hold-up value of those patents,” Verizon and USTelecom said, referring to reasonable and nondiscriminatory license obligations. The agencies should also urge the courts to take actions that would “reduce the costs of patent litigation in order to foster the public good of private challenges to questionable patents,” Verizon and USTelecom said (http://1.usa.gov/YdWXpk).

Antitrust agencies should monitor patent acquisitions made by PAEs that hold “disproportionately large patent portfolios,” MetroPCS said. The carrier said it agrees with the FTC and Justice that the PTO should institute proposed RPI information collection changes. RPI disclosure “will strengthen the ability of alleged infringers to raise antitrust defenses or counterclaims in appropriate circumstances,” as well as aid agencies and the courts in “safeguarding industries from PAEs,” MetroPCS said. Companies targeted by PAE-initiated patent infringement lawsuits should also be able to more readily use patent misuse and antitrust defenses in their court cases, MetroPCS said. Those defenses are “often blunted, if not altogether unavailable” under current U.S. law, the carrier said (http://1.usa.gov/16K1y3C).

Microsoft doesn’t believe antitrust agencies are “the most appropriate or effective tool for addressing most of the challenges posed” by PAEs, it said. The company said it supports increasing patent ownership transparency, with reforms coming from “reasonable regulatory measures by Congress” and the PTO. Microsoft said it also wants others in the industry to “join us in voluntarily disclosing patent ownership information relating to their own portfolios,” noting the launch of the company’s “Patent Tracker” tool, which lists all of its patents. Microsoft said it wants the PTO to require applicants to include clearer claim terms in their patent applications and to more rigorously enforce its requirements on written descriptions and enablement. Microsoft also encouraged the adoption of a loser-pays rule. The rule would “create appropriate incentives to carefully assess the merits of a claim before engaging in litigation,” Microsoft said. Any reforms should “not seek to disadvantage or discriminate against PAEs, but rather should focus on removing existing incentives to engage in undesirable ‘hold up’ behavior while preserving sufficient incentives for them to continue performing these valuable functions,” Microsoft said (http://1.usa.gov/XAEhAJ).

Dell, Hewlett-Packard and Adobe said the agencies should investigate PAE activities that “likely violate current law,” including patent misuse, manipulation of standard-setting processes that create “hold-up” and evade fair, reasonable and nondiscriminatory obligations, and antitrust violations. The agencies should also engage in “amicus participation” in patent litigation in the courts and before the U.S. International Trade Commission (ITC), the Dell-led coalition said. Justice should engage in competition advocacy, as well as work with the PTO and other agencies on patent-related policy initiatives, the coalition said. The FTC should use its information collection authority to aid industry study efforts, the coalition said. The agencies should also encourage a “sound interpretation” of Section 337 of the Tariff Act of 1930, which sets out the ITC’s mandate, to defuse PAEs’ use of the ITC as its “forum of choice,” the coalition said. PAEs have gone to the ITC because the agency’s role has been misinterpreted both under the domestic industry requirement and the “public interest” inquiry set out in the statute, the coalition said (http://1.usa.gov/16LIyji).

The agencies should investigate and ban patent suits against end-users who “do not have effective notice,” online hosting company Rackspace said. The agencies should also work with the ITC to exclude licensing activity as a domestic industry that falls under ITC jurisdiction, Rackspace said. The agencies should prioritize open innovation “over narrow reforms that do not take into account the primary purpose of promoting the progress of science and the useful arts” (http://1.usa.gov/ZjT7Wq). Rackspace said it also supports comments made in a joint filing by Google, BlackBerry, EarthLink and Red Hat. That group of companies said the FTC and Justice should investigate “patent privateering” -- operating companies’ outsourcing of patent enforcement to PAEs.

The CEA said the agencies should craft “appropriate and balanced solutions” to address patent abuse. Congress should “move expeditiously” to pass the SHIELD Act, and courts should “insist that only truly novel and useful ideas receive protection,” CEA said. The PTO should require software patent applications be written in plain language, and should require applications to include sufficient detail on the invention being patented, CEA said (http://1.usa.gov/10J8QAw).

The Computer & Communications Industry Association (CCIA) and the Software & Information Industry Association (SIIA) said in separate comments that the FTC should use its subpoena power under Section 6(b) of the FTC Act to study the business practices of PAEs and their associates. That information could be used to generate a report that would assist FTC and Justice in crafting competition policy, reworking enforcement priorities and updating public guidance, CCIA said. The agencies should also take action against PAEs that violate prior patent commitments and target patent privateering, CCIA said (http://1.usa.gov/Z5mgZt). The FTC should continue to advocate for reforms that address oversized patent damages awards, asymmetry in patent litigation costs, “rampant functional claiming” in high-tech patents and flaws in the patent assignment system, SIIA said (http://1.usa.gov/10Od8Ha).

The agencies should thoroughly scrutinize PAEs’ patent acquisitions, agreements involving hybrid PAEs and “anticompetitive patent assertion practices,” the Internet Association said. It said it supports “strong and continuing” public disclosure of RPI information, as well as efforts to reduce litigation costs caused by patent abuse (http://1.usa.gov/YekGWf).

The Application Developers Alliance (ADA) said the FTC should use its subpoena powers to do an “informational investigation” of major PAEs that would help policymakers and antitrust enforcers “formulate appropriate responses” to the patent abuse problem. FTC and Justice could then take antitrust enforcement actions against monopolistic PAE patent acquisitions, operating companies that contract with patent privateers to harm competition and “sham litigation,” ADA said (http://1.usa.gov/16KaV3f). The Electronic Frontier Foundation also said the FTC should issue a report on PAEs, saying in a separate filing that the report “could include input from individual inventors, small start-ups, larger companies, and, indeed, patent licensing outfits -- all of who have varying opinions and experiences” with PAEs (http://1.usa.gov/YIeOUr). ADA said it supports PTO’s efforts to reform RPI reporting requirements, and also encouraged the agency to “rigorously” review software patent applications using software experts. ADA said it also supports passage of the SHIELD Act.

The American Intellectual Property Law Association (AIPLA) said patent reforms included in the America Invents Act are “just beginning to unfold,” and any further reform efforts “must be undertaken with a view to remedying abuses without undermining basic features of a patent that are at the core of its value.” The group said it’s not currently taking a position on possible legislative remedies the House Judiciary Committee is considering, but “we urge that any attempt to pursue them should carefully consider their impact on the entire patent system and not just their potential impact on PAE activity. In addition, AIPLA believes that reforms that would help reduce uncertainty and excessive costs of patent litigation and would have an impact early on in the litigation process are most likely to be most effective in reducing specious PAE activity and are worthy of further consideration.” While AIPLA said it believes the PTO’s proposed RPI disclosure reforms are “unduly burdensome from a practical point of view,” it also believes new procedures for disclosure of RPI information could help solve some of the agencies’ concerns about PAE activity, saying “it might be useful for parties accused of infringement to obtain some information about the RPI in order to better assess the litigation risks that they might be facing” (http://1.usa.gov/10K7x4m).

The Innovation Alliance, whose members include Dolby Labs and Qualcomm, urged the FTC and Justice not to “change the law based upon anecdotes and assumptions that certain business models are harmful or anti-competitive.” The group said it “supports measures to curb the assertion of frivolous claims and defenses in patent litigation, provided such measures are based upon sound data and narrowly targeted at frivolous activity so that highly innovative, job-creating entities are not inadvertently harmed” (http://1.usa.gov/Yb2EzV).