Wall Street Firms Offer Rare Approval of White House Patent Move (CSCO, JPM, RAX)

It doesn’t happen often, but for once Wall Street and the White House see eye to eye. Wall Street firms applauded the Obama administration’s move to reign in the flood of patent-related lawsuits The Wall Street Journal reported, Wednesday.

Technology companies claim that the number of lawsuits and countersuits being filed ultimately hurts innovation. The suits are often initiated by patent-holding firms, often referred to as “patent trolls” who buy patents for the sole purpose of going after licensing contracts or winning awards in court.

Congress, observers believe, will have to act in order for any real progress to take place.

Ed Reines, a patent attorney at Weil, Gotshal & Manges LLP said, "The core of the initiative is the legislative proposals. The executive orders alone just aren't going to move the needle."

There is also concern about possible unintended consequences of Congressional action – for example, making it harder for colleges and universities to protect their creations.

At any rate, The Wall Street Journal said, Congress is considering proposals similar to the ones made by the White House Tuesday.

Behind the willingness of a normally reluctant White House to become involved in the matter, was substantial lobbying by members of the technology, financial and retail sectors. Moreover, the lobbying was fruitful.

"We learned that some of the nation's most well-recognized companies have spent more money defending patent lawsuits than they have on R&D," said a senior administration official.

The American Intellectual Property Law Association said litigation costs cover a wide range. Small cases average around $650,000 and larger ones come in at $5 million a case, or more.

These costs do not improve products, efficiency, or a company’s bottom line. They are an expense – and one most companies would like to see controlled by Congressional action.

Among the more popular suggestions being considered is a “fee-shifting” provision that would give judges discretion to order an "abusive” litigator to pay the other side’s legal fees.

On the other side of the argument, some believe patent-holding firms are being singled out and that inventors might be hurt under some of the suggested legislation.

"You don't want to punish the inventor who comes up with the cure for cancer but doesn't have the means or motivation to put it to use on his own," said Matthew McAndrews, a lawyer in Chicago who represents a number of patent-holding firms.

Among the firms named in The Wall Street Journal article that applauded White House attempts to stem the tide of patent litigation are: Rackspace Hosting (NYSE: RAX), Cisco Systems, Inc. (NASDAQ: CSCO), and J.P. Morgan Chase (NYSE: JPM).

As of this writing, Jim Probasco had no position in any named securities.