Software Patents & Patent Trolls: Understanding Obama's Measures

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Software Patents & Patent Trolls
Understanding Obama’s Measures
2Q. 2013

©2013 TechIPm, LLC All Rights Reserved www.techipm.com 2
1. White House Measures
Recently, the White House announced measures to improve US patent
system to create jobs and economic growth (http://www.whitehouse.gov/the-pre
ss-office/2013/06/04/fact-sheet-white-house-task-force-high-tech-patent-issues)
The White House issued five executive actions and seven legislative
recommendations.
LEGISLATIVE RECOMMENDATIONS
1. Require patentees and applicants to disclose the Real Party-in-Interest.
2. Permit more discretion in awarding fees to prevailing parties in patent cases.
3. Expand the PTO‟s transitional program.
4. Protect off-the-shelf use by consumers and businesses.
5. Change the ITC standard for obtaining an injunction.
6. Use demand letter transparency to help curb abusive suits.
7. Ensure the ITC has adequate flexibility in hiring qualified Administrative
Law Judges.
*For issues regarding ITC, please refer http://www.slideshare.net/alexglee/smar
tphone-standard-essential-patent-frand-disputes-101

1. White House Measures -2
EXECUTIVE ACTIONS
1. Making “Real Party-in-Interest” the New Default.
2. Tightening Functional Claiming.
3. Empowering Downstream Users.
4. Expanding Dedicated Outreach and Study.
5. Strengthen Enforcement Process of Exclusion Orders.
One of the key issues is granting software patents in relation to Patent
Assertion Entities (PAEs) that are commonly known as “patent trolls:”
As the result of low cost for software inventions combined with abstract nature,
a large number of low-quality software patens can be produced. A large
percent of the produced software patens are end up being litigated more
frequently in the courts, especially, exploited by patent trolls.
*According to the recent research, titled „The AIA 500 Expanded: Effects of
Patent Monetization Entities,‟ patent trolls filed 56% of the patent lawsuits in
2012.

* Patent Privateering
Patent privateering is a new type of trolling practice that patent holders assign
a PAE to engage in exploiting their IPRs (for the origin of privateering, see
http://en.wikipedia.org/wiki/Privateer). This kind of outsourcing practice of
patent enforcement to PAEs can adversely affect to industries and consumers.
First of all, patent privateering can increase patent lawsuits significantly
because PAEs do not make products or services, and thus, they don‟t need to
worry about counter lawsuits. Second, patent privateering can harm consumers
directly because PAEs willingly sue consumers instead of manufactures or
service provides.
For examples of patent privater, please refer http://techipm-innovationfrontline.b
logspot.com/2013/06/innovative-sonic-patent-privateer.html

2. Justification for Software Patents
The fundamental goal of providing certain exclusive rights for a limited time to
one‟s invention is to create incentives which can maximize social welfare
(the difference between the economic benefits and costs) provided by the
patent system.
As the society changed from industrial economy to knowledge economy,
software, which is the fundamental technology for computer and internet, are
appeared as the most important building block for the economic development
of our society. Following the society‟s need for the development of software
technology, the patent system came to provide the exclusive rights to software
inventions.

3. Critiques about Granting Software Patents
The first critique is that software inventions will be made without providing
exclusive patent rights as an incentive because the first-mover advantage
given by an effective price differentiation provides sufficient incentive to
promote software inventions.
Ref. Stanley Besen & Leo Raskind, „An
Introduction to the Law and Economics of Intellectual Property,‟ Journal of
Economic Perspectives (1991).

3. Critiques about Granting Software Patents -2
The second critique is that strong patent protection is not needed for software
inventions due to cumulative innovation nature of software. A large number of
software inventions are sequential and iterative improvements of preexisting
inventive ideas and software codes. Therefore, the incremental improvement
characteristic of software invention process can suppress and limit the
widespread use of the software inventions without infringing the exclusive
rights.
Ref. Peter Menell, „Tailoring Legal Protection for Computer Software,‟ 39 Stan.
L. Rev. 1329 (1987).

4. Abstract Nature of Software Patents
The abstract nature can be refracted in the claim terms. Vague claim terms
make it hard to interpret them correctly. Thus, one cannot know the exact
boundaries of the invention. If one cannot know about the boundaries of the
rights, the right cannot provide a notice function anymore and lose their
property right characteristics.
Ref. James Bessen & Michael Meurer, „Patent Failure: How judges,
Bureaucrats, and Lawyers Put Innovations at Risk,‟ Princeton University Press
(2008).

5. Another Problem of Software Patents
Due to cumulative innovation nature of software inventions, a product could be
covered by many similar inventions with overlapping claims. This kind of patent
thickets can cause patent holdup problems: a patentee with a software patent
only cover a small port of the whole product can collect royalties far exceed the
reasonable royalties by using the lawsuit threat in the court.
Ref. Makr Lemley & Carl Shapiro, „Patent Holdup and Royalty Stacking,‟ 85
Tex. L. Rev. 1991 (2007).

6. Fixing Problems of Software Patents
A. Improving Patent Notice
The first option to cure the vague claim terms is to apply stricter standard of
indefiniteness specified in section 112 second paragraph of the Patent Act, 35
U.S.C during the prosecution or post-grant review processes in the USPTO.
The second option is the tightening for the allowance of functional claims.
The third option to cure the vague claim terms is to adopt an improved method
to interpret patent claims in the courts.
Ref. Mark Lemley & Dan Burk, „Policy Levers in Patent Law,‟ 89 Virginia L. Rev.
1575 (2003).
B. Mitigating Patent Litigation Problem
The first option to mitigate the patent litigation problem with the software
patents is to reduce the length of the patent term for software inventions.

6. Fixing Problems of Software Patents -2
The second option to mitigate the patent litigation problem with the software
patents is to adopt stronger requirements for software patent patentability in
USPTO.
The third option to mitigate the patent litigation problem with the software
patents is for courts to adopt several discretional measures. One example is
to shift legal costs to a party brought frivolous patent litigation.
(e.g. Make Patent Trolls Pay in Court: http://www.nytimes.com/2013/06/05/opini
on/make-patent-trolls-pay-in-court.html?_r=0)
C. Elimination of Software Patents
An extreme measure to cure the current patent system for the software
inventions is to abolish the software patent system entirely.
Ref. Michele Boldrin & David Levine, „The Case Against Patents,‟
Federal Reserve Bank of St. Louis Working Paper 2012-035A,
(http://research.stlouisfed.org/wp/2012/2012-035.pdf; last visited Nov. 10, 2012)

Thank you!
• If you have any questions
please contact Dr. Alex G. Lee
at alexglee@techipm.com

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References

Software Patents & Patent Trolls: Understanding Obama's Measures

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