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Microsoft today proposed a series of reforms for the U.S. patent system — asking the U.S. Patent Office to increase its standards for patent reviews, suggesting a “loser pays” system for curbing frivolous lawsuits, and calling for an end to the common practice of patent owners shielding their true identity.

Brad Smith, Microsoft general counsel. (File Photo)

Brad Smith, Microsoft’s general counsel, outlined the proposals during an event in Washington, D.C., and in a related blog post. In addition to the items above, Smith also reiterated the company’s call for companies to pledge not to seek injunctions on standard-essential patents, an issue at the crux of Microsoft’s ongoing legal dispute with Google’s Motorola division.

The call for more transparency about patent ownership will put Microsoft at odds with many patent owners that commonly hold patents through affiliates, or shell companies, with names that differ from their actual corporate identities.

Examples of companies that do this include Intellectual Ventures, the patent holding company led by Nathan Myhrvold, the former Microsoft chief technology officer.

Smith writes, “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. … With transparency, we can help bring additional sunlight to the patent system.”

He notes that Microsoft by April will publish information on the web to make it clear which patents it owns, and he calls on other companies to follow its lead.

On the “loser pays” proposal, he writes, “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.”

And on the issue of patent quality, he says patent examiners need more time to consider each application, with better access to prior art. “Applicants should use standard terms in their claims where they exist, and define non-standard terms when they do not. Together, these steps will help avoid overbroad patents and clarify the metes and bounds of the patent grant.”

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