Microsoft exec on patent reform: Fix What’s Broken, Don’t Break What’s Working

In a blog post on Thursday, Microsoft executive VP and general counsel Brad Smith urged government, the courts, and industry to work together to help improve the US patent system, but also cautioned against breaking those aspects of the system that do work.

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“There is no question that the U.S. patent system has tremendous strengths but also significant weaknesses. All of us – private companies, the USPTO, Congress and the courts – share responsibility for taking steps to improve the operation of the patent system.” Smith wrote.

Outlining the specific areas of reform Microsoft would support, Smith cited Transparency, Standards-Essential Patents, Loser Pays, and Improved Patent Quality through strengthening the review processes at the US Patent and Trademark Office (USPTO).

“One of the main functions of patents is to provide notice both of the invention and who owns it. Disclosure of the real party in interest for a particular patent reduces the likelihood of opportunistic behavior and gamesmanship, helping to facilitate licensing.” Smith said.

The executive VP and general counsel also stated that Microsoft is” committed to transparency” and that by “April 1 of this year” Microsoft will “publish on the web information that enables anyone to determine which patents we own.”

Calling for legislators to institute a "loser pays" system for patent litigation, in which the losing party is required to pay the cost of the winner's legal fees, Smith wrote, “Much frivolous litigation is driven by patent assertion entities (PAEs) – companies that lie in wait, exploiting the lack of transparency in the patent system to “hold up” others. As PAEs do not make products of their own and obtain litigation financing from third parties, they often face no disincentive to filing suit. A technology-neutral “loser pays” system for patent cases would force companies to internalize the strength of their case beforehand, deterring frivolous litigation.”

Smith acknowledged that the USPTO has been” taking steps to improve patent quality”, but said, “more can be done”. He pointed out that USPTO examiners needed “expanded access to prior art and more time to examine each application,” which, would allow them “to compare the claims to the specification to ensure a patent’s scope reflects what has actually been invented.”

Citing the importance of companies that hold patents but do not actually create products based on the patented inventions Smith wrote, “a well-functioning secondary market in patents fosters innovation by enabling companies to access to the IP they need to bring new products and services to market, while at the same time fairly compensating inventors and preserving incentives for further innovation.”

“Consumers benefit, too,” he said, “both from the availability of new products and services and from the avoidance, through licensing agreements between responsible companies, of conflicts that can disrupt the dissemination of technology and distribution of products.”

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