White House invites the crowd to fight patent trolls, but it won’t solve the problem

Patent trolls are a gaping wound on the innovation economy. Despite growing evidence about the trolls’ economic damage, the U.S. government is still grasping for ways to stop them, and to fix the country’s dysfunctional patent system.
On Thursday, the White House plunged forward with a new series of measures intended to curtail the troll plague that is siphoning money from productive companies while producing nothing of value. The plan is clever, relying on crowdsourcing tactics to expose trolls and bad patents. Unfortunately, it won’t kill the trolls.
Here’s an overview of the new troll-fighting tactics and what they will — and won’t — do to fix the patent problem.

Trolls and transparency

The details, set out in a fact sheet, includes an “online toolkit aimed at empowering consumers .. [that] will include information and links to services and websites.”
That toolkit will be powered in part by websites like Lex Machina, an analytics company that helps companies take a “Moneyball” approach to intellectual property litigation by providing data about troll behavior.
Specifically, the U.S. Patent Office will begin linking to a Lex Machina tool that lets troll victims upload and compare demand letters — which are the legal cudgel that trolls send out out by the thousands to threaten businesses. According to CEO Josh Becker, the tool will help correct what he describes as an information asymmetry that empowers the trolls.

“If you’re a troll, you know what people tend to settle for, while the start-up is the one who doesn’t know if the troll is serious or looking for a quick buck.”

While the demand letter tool will allow troll victims to get a better idea of who is trying to sue them, the White House also announced another tool intended to help kill trolls altogether. Namely, the patent office will provide a forum for people to share prior art — documents that can show a patent is invalid because an “invention” is obvious or exists already.

More broadly, the U.S. Patent Office will also partner with other websites that provide plain English explanations about patent litigation. This decision is significant because of the opaque nature of the patent process and because the USPTO’s own website has historically been hard to navigate. This may be changing, however, based on changes to the site unveiled today. Here’s a link and a screenshot:

UPSTO screenshot

Training and troll shaming

The White House announcement also included new executive orders, including one that will shine more light on the thousands of murky shell companies that giant trolls like Intellectual Ventures use to make legal threats.

The new order will require the “reporting of people or companies with ownership interests in a patent or application, called the ‘attributable owners.'” In practice, this will mean a troll using a name like “Innovation LLC” (trolls are fond of tech-y names) will have to disclose who owns the shares in the LLC — and expose themselves to a moral rebuke for engaging in a troll business that has been castigated by everyone from NPR to the New York Times to the Wall Street Journal.

The new executive orders also call for additional training for patent examiners and judges to assist them with the technical business of “evaluating functional claims and improving examination consistency.” This measure may, in theory, stanch the flood of bad patents that has given rise to the patent troll business in the first place.

Finally, the new White House executive orders also call for more pro bono assistance to help small inventors navigate the patent system, and new guidance for the Internal Trade Commission on patent-related import bans.

A fatal flaw

Remarks by President Obama during the State of the Union address, and by NEC director James Sperling at a patent discussion in Washington, show that the White House clearly understands the problems with the patent system and wants to fix it. The measures announced on Thursday, however, fail to do this.

The problem, and it’s a huge one, is that all of these measures will do nothing to prevent the most pernicious trolls from carrying on business as usual. While the transparency elements are nice, it’s hard to imagine that public shaming will cause the likes of  Intellectual Ventures or Erich Spangenberg — who boasted to the New York Times that he earns $25 million a year by “going thug” — to hang up their troll hat.

And while crowdsourcing prior art could be an excellent way to expose flawed patents, the new tool will be nearly useless without a practical way to invalidate those patents. As it stands, the only option for troll victims will be to use the prior art in federal court against a troll’s shell company. And even if they win, they are likely to be stuck with a million dollar legal bill — meaning it will still be cheaper to settle and pay the troll to go away. In short, the basic economics of trolling are the same as before.

This shortcoming is the not the fault of the White House, which can only do so much through executive orders. The real opportunity for reform is in Congress, which is expected a patent bill called the Innovation Act this spring.

Unfortunately, the most promising part of that bill, which would have expanded a low-cost method to knock out bad patents, was stripped out last fall in response to pressure from old guard companies. Meanwhile, the trolls are alive and well – they’re even branching out to tax new industries like pharma and biotech.

The bottom line is that, even though all three branches of government are now working to fix the patent system, the trolls will be with us for the foreseeable future unless Congress provides a stake to kill their patents.