Patent Reform in the 114th Congress

Despite recent years having witnessed the most extensive overhaul of U.S. patent law since the U.S.  Patent Act of 1952, it is clear more reform of U.S. patent law is on the horizon.  I recently had the privilege of leading a panel discussion on patent reform legislation at a meeting of university technology transfer professionals. Some proposals in the 114^th Congress could have significant impacts on university tech-transfer practice, but for now I want to give a more general summary of the bills making their way through Congress

There are three bills in the 114^th Congress considered “comprehensive” patent reform legislations, including major revisions such as to how we handle post-grant review proceedings, pleading requirements, demand letter practice, discovery, and willful infringement.  These include the Innovation Act (HR.9) and the corresponding Protecting American Talent and Entrepreneurship (PATENT) Act of 2015 (S1137), and the Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015 (S.632).

Both the Innovation Act and the PATENT Act appear to be headed to likely passage in their respective bodies, at least in some form.  The Innovation Act was introduced on February 5, 2015 by Representative Bob Goodlatte (R-VA) with a bi-partisan group of legislators (there are 12 democratic and 15 republican co-sponsors) and was recently passed out of the House Judiciary Committee on June 11 by a vote of 24-8.  The PATENT Act was introduced in the Senate on April 29, 2015 by Senator Chuck Grassley (R-IA) and cleared the Senate Judiciary Committee by a 16-4 vote on June 4. These bills are likely headed to full votes, and every indication is that the President will sign a patent reform bill if it gets to his desk.  There has been mounting concern on both sides of the aisle that the proposals, at least in their current form, will weaken all patents. Fortunately, the House leadership has decided to table a full vote on the Innovation Act until at least September.

The Innovation Act and the Patent Act, both, include heightened pleading requirements for parties asserting patent infringement under 35 U.S.C. § 281.  Under both bills a plaintiff alleging infringement must, where reasonably available, specify details of each claim and each patent being asserted; the product or process allegedly infringing; for each claim of direct infringement, the acts of the alleged infringer that are inducing a direct infringement; the identities of any assignees, licenses, and interested parties to the patents and the parent entities thereof; information detailing other assertion claims of the same patents; and whether there are specific licensing limitations imposed through agreements with standards setting agencies or the federal government.  Both bills would also instruct the Supreme Court to eliminate the model patent infringement complaint and direct the Judicial Conference to develop new discovery rules for patent litigation.

Both bills include fee-shifting provisions, often called “loser pays” provisions, although there are some distinct differences in how these provisions are worded.  Both bills include provisions requiring the asserting party, upon motion, to certify their ability to pay an award of attorneys’ fees.  Both bills also include provisions to make other interested parties to the suit responsible for awards of attorneys’ fees where the asserting party cannot do so.  The fee-shifting provision of the Innovation Act specifies “the court shall award, to a prevailing party, reasonable fees and other expenses incurred … unless the court finds that the position and conduct of the non-prevailing party or parties were reasonably justified in law and fact.” The PATENT Act specifies, ““if the court finds that the position of the non-prevailing party was not objectively reasonable in law or fact or that the conduct of the non-prevailing party was not objectively reasonable, the court shall award reasonable attorney fees to the prevailing party.” The Innovation Act would create a presumptive loser-pays system, and this has been a source of scrutiny. There remains a bigger question if the fee-shifting measures are even required. Following the 2014 decisions by the Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness and in Highmark Inc. v. Allcare Health Mgmt. Sys.., there has already been a marked increase in the awarding of attorneys fees fees to bad actors in patent litigation suites.

The STRONG Patent Act is arguably the most balanced and pro-patentee legislation being advanced through congress.  The legislation is also being supported by the biotech industry and by several small business, independent inventor, and university groups. The STRONG Patent Act was introduced by Senator Chris Coons (D-DE) back in March, but has been stalled in the Senate Judiciary Committee for months. The STRONG Patent Act includes proposals to deal with abusive patent demand letters similar to those found in the Targeting Rogue and Opaque Letters (TROL) Act of 2015 (discussed below) by empowering the Federal Trade Commission to combat senders of abusive demand letters. The STRONG Patent provisions also include several revisions to the post-grant review proceedings at the PTAB that have become the “death squad” of the majority of patents challenged, including extending the presumption of validity and claim construction standards currently applied to patented claims in district court litigation.  A major proposed revision would greatly limit standing of parties to petition for a post-grant challenge to eliminate those that would use the current proceedings to manipulate the market.  The provisions in the STRONG Patent Act also revise the standards for induced infringement in view of the Supreme Court decision in Limelight Networks, Inc. v. Akamai Technologies, Inc.

Both the Demand Letter Transparency Act of 2015 (HR.1896) and the  Targeting Rogue and Opaque Letters (TROL) Act of 2015 (HR.2045) are designed to address abusive patent litigation through demand letter reform. The bills, however, deviate quickly in how they would implement such reforms. The Demand Letter Transparency Act imposes several requirements on the content of a demand letter, including the details of the claims, patents, and alleged acts of infringement; details of any related litigations or interferences; the identity of any license agreements or pricing terms; and the identities of any interested parties to the litigation.  The Demand Letter Transparency Act further requires any party sending over 20 or more demand letters per year to report on these activities to the U.S. Patent and Trademark Office. Parties violating these provisions can be fined a fee and risk voiding the asserted patents. Interestingly, the Demand Letter Transparency Act defines demand letter broadly to include “any written communication directed to an unaffiliated third party stating or indicating, directly or indirectly, that the intended recipient or anyone affiliated with that recipient is or may be infringing a patent, or may bear liability or owe compensation to another because of such patent,” so would appear to apply to more communications than conventional demand letters. The TROL Act takes a different approach by empowering the Federal Trade Commission to enforce the provisions as violations of unfair and deceptive trade practice regulations. The bill would further preempt state laws related to patent demand letters passed across the country.

The Grace Period Restoration Act of 2015 (HR.1791) was introduced by Representative James Sensenbrenner (R-WI) to strengthen the 1-year grace period under 35 U.S.C. § 102(b). The patent office has narrowly construed the safe-harbor provision under AIA 35 U.S.C. § 102(b).  The proposal would expand the pre-filing disclosures that can be removed as prior art based on prior disclosure by an inventor or joint inventor or another who obtained the claimed invention from the inventor or a joint inventor.

Representative Theodore Deutch (D-FL) introduced the End Anonymous Patents Act (HR.2370) to increase transparency of patent ownership and enforcement.  The bill would require certain disclosures to be made by a patent owner regarding the identity of interested parties and parent entities with rights to enforce or control enforcement of a patent upon issuance and upon payment of maintenance fees. The bill would encourage transparency by limiting some damages to periods of compliance.

I won’t discuss it in detail, but Senators Orrin Hatch (R-UT) and Sheldon Whitehouse (D-RI) have again introduced a bill targeting the after-market car part industry.  The PARTS Act of 2015 (S.560) seeks to place limits on the infringement of certain design patents for the component parts of motor vehicles.

There remain a slew of patent-reform proposals in Congress. It seems one of the few topics on which both parties can agree. Let’s just hope they reach consensus soon that will further strengthen our protections for innovation. The uncertainty already imposed by the pending legislation is wreaking havoc on the technology marketplace.

* John S. Sears, Ph.D. is a second-year law student at Wake Forest University School of Law and a patent agent at Thomas Horstemeyer, LLP in Atlanta, GA.  He holds Bachelor of Science degrees in Chemistry and Mathematics from Sewanee: The University of the South and a Doctorate of Philosophy in Chemistry from Georgia Institute of Technology.  His practice is focused on mentoring university and startup clients in many high-tech industries. John is licensed to practice before the United States Patent and Trademark Office.