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Obama takes action to curb frivolous patent lawsuits

Reuters/ AFR | June 5, 2013
US President Barack Obama took steps on Tuesday intended to curb lawsuits brought by companies and asked for new federal regulations and action from Congress.

Allowing judges to decide that certain lawsuits are abusive and requiring losers to pay the winners' legal fees would be key steps toward killing frivolous lawsuits, said Ed Reines, a member of an advisory panel for the US Court of Appeals for the Federal Circuit, which hears most patent appeals.

Another important step would be to reform the ITC so companies cannot get a sales injunction not available in district courts, according to Mr Reines, a lawyer with the firm Weil Gotshal & Manges.

Two companies often accused of being trolls are Eolas Technologies and Innovatio IP Ventures. Both argued on Tuesday that allowing companies that specialise in legal strategy to handle infringement lawsuits makes sense.

"The idea that because you're not actually making things, you shouldn't be able to get a return on your investment, I think that's wrong," said chief executive Mark Swords of Eolas, which has sued companies ranging from Facebook to Walt Disney over patents for interactive technology.

Matthew McAndrews, who represents Innovatio, urged lawmakers to consider requiring companies that fight infringement lawsuits and lose to pay the plaintiff's legal fees.

"Why shouldn't there be a balanced provision that says in the case of a large entity willfully infringing a non-practising entity that all of the fees should be shifted in that case?" McAndrews asked. "Who gets to define an abusive patent litigation claim? It (Obama's proposal) places way too much emphasis on non-practising entity."


Congress is already working on a variety of bills. The heads of the judiciary committees in the Senate and House of Representatives - Democratic Senator Patrick Leahy of Vermont and Republican Representative Robert Goodlatte of Virginia - have put forward a draft bill.

Their measure would improve access to information about who owns patents, reduce discovery burdens in lawsuits and make other changes to enable judges to identify abusive cases early in the process and, presumably, dismiss them.

The bipartisan proposal, once finalised, is considered to have a good chance to move through Congress.

Another bill - introduced by Representatives Peter DeFazio, an Oregon Democrat, and Jason Chaffetz, a Utah Republican - would require certain plaintiffs to pay all legal fees if they sue for patent infringement and lose.

And efforts are under way in the courts to rein in abuses.

Randall Rader, who has been on the US Court of Appeals for the Federal Circuit since 1990 and became chief judge in 2010, has circulated a four-point plan to stem abusive patent litigation. The plan overlaps with some of the new White House proposals and some of the planned legislation.

"The litigation abuse comes when a company is asserting a patent with a minimal value . . . but they're asserting it for billions of dollars," Judge Rader told Reuters in an interview. "That disproportionality is an abuse of the system."


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