Canada: White House Proposes Measures To Deter Frivolous U.S. Patent Troll Litigation And Improve Patent Quality

Last Updated: June 17 2013
Article by Robert Irani

On June 4, 2013, United States President Barack Obama announced in a White House press release, five executive actions and seven legislative recommendations aimed at deterring frivolous patent litigation and ensuring the "highest-quality patents in our system".

The White House announcement coincided with the release of a report by the National Economic Council and the Council of Economic Advisers, entitled Patent Assertion and U.S. Innovation, which detailed the need for legislative action.

While acknowledging the improvements to U.S. patent law achieved by the Leahy-Smith America Invents Act, the press release described the problems of continued challenges arising from patent assertion entities.

The America Invents Act

On September 16, 2011, the U.S. President signed into law historic patent reform legislation designed to help make the U.S. patent system more efficient and reliable.

The America Invents Act marked the first comprehensive reform to the U.S. Patent system in nearly 60 years and made some significant changes to the patent law impacting the way patents are obtained, enforced and defended against in the United States.

The America Invents Act includes provisions for changing to a first-to-file patent system, new mechanisms for post-grant review of patents and other reforms aimed at boosting patent quality and reducing patent litigation.

Nevertheless, challenges arising from patent assertion entities continue to increase. According to the NEC-CEA report, suits initiated by patent assertion entities in the U.S. had tripled in the last two years, rising from 29 percent of all infringement suits to 62 percent. Estimates suggest that such entities may have threatened over 100,000 companies with patent infringement last year alone.

Patent Assertion Entities or Patent Trolls

Firms that own patents but do not make products with them, can play an important role in the economy, such as connecting manufacturers with inventors. Patent assertion entities, commonly referred to as "patent trolls", instead focus primarily on aggressive litigation.

Patent trolls do not practice their patents, in that they do not do research or develop any technology or products related to their patents.  Instead, they acquire patents solely for the purpose of extracting payments from alleged infringers, often waiting until after irreversible investments have been made before asserting their claims. Common tactics of a patent troll include threatening to sue thousands of companies at once, without any specific evidence of infringement; creating shell companies that make it difficult for defendants to know who is suing them; and asserting that their patents cover inventions not even imagined at the time they were granted.

In the words of U.S. President Obama, patent trolls "don't actually produce anything themselves," but instead develop a business model "to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them."

In acknowledging the drain on the U.S. economy, the press release stated that swift legislative action was required to increase clarity and level the playing field for innovators.

Accordingly, the Administration recommended that Congress pursue legislative measures that would have immediate effect on some of the major problems faced by innovators, while announcing steps it was taking for bringing about greater transparency to the patent system.

Executive Actions

The Administration announced a number of steps aimed at bringing about greater transparency to the U.S. patent system and levelling the playing field for innovators. Those steps include:

  1. Making Real Party-in-Interest the New Default. Patent trolls often set up shell companies to hide their activities and enable their abusive litigation and extraction of settlements. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements, or even knowing connections between multiple trolls. The U.S. Patent and Trademark Office (USPTO) will put rules in place that require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the USPTO, specifically designating the "ultimate parent entity" in control of the patent or application.
  2. Tightening Functional Claiming. The America Invents Act made important improvements to the examination process and overall patent quality, but stakeholders remain concerned about patents with overly broad claims—particularly in the context of software. The USPTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months, develop strategies to improve claim clarity, such as by use of glossaries in patent specifications in order to assist examiners in the software field.
  3. Empowering Downstream Users. Patent trolls are increasingly targeting Main Street retailers, consumers and other end-users of products containing patented technology—for instance, for using point-of-sale software or a particular business method. End-users should not be subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement. The USPTO will publish new education and outreach materials, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll.
  4. Expanding Dedicated Outreach and Study. Engagement with stakeholders—including patent holders, research institutions, consumer advocates, public interest groups, and the general public. The USPTO is announcing an expansion of its outreach efforts, including six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws. The USPTO is also announcing an expansion of the Edison Scholars Program, which will bring distinguished academic experts to the USPTO to develop, and make available to the public, more robust data and research on the issues bearing on abusive litigation.
  5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product, such as a smartphone, has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient.

Legislative Recommendations

The Administration also recommended that Congress pursue at least seven legislative measures which would:

  1. Require patentees and applicants to disclose the "Real Party-in-Interest". Such legislation would require any party sending demand letters, filing an infringement suit or seeking review of a patent by the USPTO to file updated ownership information, and enable the USPTO or district courts to impose sanctions for non-compliance.
  2. Permit more discretion in awarding fees to prevailing parties in patent cases. Such legislation would provide district courts with greater discretion in awarding attorney's fees under 35 USC 285 as a sanction for abusive court filings, similar to the legal standard that applies in copyright infringement cases.
  3. Expand the USPTO's transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB). Such legislation would allow a broader category of patents to be challenged and enable the USPTO to weed out bad covered business method patents absent litigation in district courts.
  4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer. As patent assertion entities or trolls have increasingly targeted consumers and end-users, such legislation is intended to enable more efficient resolution of patent litigation and better protect consumers and small businesses from abusive patent litigation.
  5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. Such legislation is designed to make the standards applied at the ITC and the district courts consistent and reduce potential abuse of the ITC by patent trolls.
  6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public. As presently there is no easily accessible and searchable repository of demand letters, such legislation is intended to allow a more coordinated defense and attack on the validity of suspect patents.
  7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. Such legislation is aimed at allowing the ITC more flexibility in hiring qualified Administrative Law Judges to fulfill increased demand for Section 337 Investigations.


The White House's initiatives are aimed at improving patent quality, increasing the transparency around the U.S. patent system, improving the processes at the International Trade Commission, expanding outreach and study, empowering and educating downstream users, and ultimately curbing litigation by patent assertion entities or patent trolls.

While the recent announcement is unlikely to have an immediate impact on present litigation, it should at the very least create more dialogue and attention regarding this issue and may ultimately emanate further legislative action in the United States.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Robert Irani
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.