White House Announces Action Against “Patent Assertion Entities”

On June 4, 2013, the White House issued legislative recommendations and executive actions directed to curbing activities of “Patent Assertion Entities.” The legislative recommendations, which provide more substantial changes to the patent system, have no impact unless Congress passes laws that incorporate the recommendations.

The executive actions, however, may more directly dictate the operating procedures of the United States Patent and Trademark Office (“USPTO”) without Congressional approval. As a result, they may more swiftly and directly impact the patent process. The executive actions recited by the White House include:

  1. Making “Real Party-in-Interest” the New Default.

    According to the White House, Patent Assertion Entities often set up shell companies to obfuscate the actual party litigating and managing their patent portfolio. To combat this practice, the executive action requires the USPTO to develop rules that require applicants and owners to designate the “ultimate parent entity” that controls their patent or application. This may place a heavier burden on applicants and owners to identify parties that have an interest in the patent process. Applicants may be advised to begin recognizing parties that have an interest in their patent, such as parent business entities, particularly when those parties are different from inventors or owners.

    When rules take effect, owners may need to regularly update their applications and issued patents to ensure the “ultimate parent entity” remains accurate. This could conceivably require additional periodic filings with the USPTO after a patent issues.

  2. Tightening Functional Claiming.

    The White House indicated that USPTO is to provide greater scrutiny towards functional claim language, particularly in the software field. The White House does not, however, provide any additional new rules or standards governing the prosecution of functional claims. Accordingly, this action gives little guidance to applicants aside from hinting that functional claims in software-based applications may be more commonly rejected.

  3. Empowering Downstream Users.

    The White House indicates that Patent Assertion Entities are increasingly targeting end-users of products rather than manufacturers of allegedly infringing devices. The action immediately directed by the White House is to provide additional educational materials to end users on the USPTO website. It is unlikely that the White House or USPTO could do much more in this regard without Congressional approval.

  4. Expanding Dedicated Outreach and Study.

    The White House identified the need for the input of interested parties in developing patent laws. According to the White House’s statement, such interested parties may include patent holders, research institutions, consumer advocates, public interest groups, and the general public. The USPTO, along with the Department of Justice and Federal Trade Commission, hosted a series of roundtables and workshops expanding its outreach to these groups. In particular, the White House announced that it will conduct six months of “high-profile events” across the country to develop new policies and laws governing the patent system. While this may not have an immediate effect on applicants’ and patentees’ rights, it may provide them an opportunity to provide input to make the system  fulfill their needs.

  5. Strengthen Enforcement Process of Exclusion Orders.

    After investigating allegations of intellectual property violations, the International Trade Commission may issue “Exclusion Orders” that instruct Customs and Border Protection to bar importation of infringing goods. The White House notes the challenge of implementing these exclusion orders. In particular, parties implementing such orders may not be able to recognize products that have been redesigned to avoid an exclusion order or underlying patent. The White House indicates that exclusion order procedures will be evaluated, but does not indicate what will be done in light of the research.

In terms of practical impact to applicants and patent owners, the White House’s action may require additional disclosure of parties with interests in patents and applications. Further, applicants may expect greater scrutiny of their functional claim language, particularly in software based applications. Companies importing products in the United States may additionally see changes in the way their products are investigated upon import, but it is not yet clear the shape these changes will ultimately take.


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