FTC Proposes Innovation and Reform Ideas that Benefit Consumers

The Federal Trade Commission has prepared a report The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition, highlighting concerns and providing solutions to assist in the redefinition of the U.S. Patent system where innovation will benefit consumers. The report presents its objectives for two areas of patent law: improving the clarity of claims to provide clear technology boundaries, as well as remedies for improving patent infringement.

“This new report provides valuable insights on how courts can reform the patent system to best serve consumers, and it complements the Commission’s 2003 report on improving patent quality. These reports, combined with the hard work by many leaders in Congress to improve a troubled system, will help ensure that patents continue to serve America’s innovators and consumers,” said FTC Chairman Jon Leibowitz.

The FTC’s recommendations to improve patent notice include:

• making patent claims more definite and improving the utility of descriptions in patents for delineating their boundaries;
• enhancing the patent examination record as a source for interpreting claim scope; and
• more fully incorporating consideration of third parties’ ability to predict the potential breadth of evolving claims into the administrative and judicial review of the written descriptions of patent applications.

The FTC’s recommendations to courts to improve patent remedies law include:

• capping reasonable royalty damages at the amount a willing licensee would pay, which may be determined by the value of the invention over alternative technologies;
• increasing the role of district courts in excluding unreliable expert testimony on damages from trial; and
• incorporating concerns into the injunction analysis about the leverage that an injunction may give a patentee to obtain royalties exceeding the economic value of an invention.

The new report recognizes that patents play a critical role in encouraging innovation. At the same time, it observes that some strategies by patent holders risk distorting competition and deterring innovation. This is especially true, the report concludes, for activity driven by poor patent notice, and by remedies that do not align the compensation received by patent holders for infringement with the economic value of their patented inventions.

Read the Press Release and the Report