Effect of Election on Patent Litigation, Demand Letter, Other IP Legislation Weighed

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By Tony Dutra

Nov. 12 — Several bills related to intellectual property lost a sponsor either through resignation or a loss in the 2014 midterm election, but only one had proceeded beyond introduction.

Rep. Lee Terry (R-Neb.), sponsor of a bill to curb patent “demand letter” abuses, lost his bid for re-election. Stakeholders speaking with Bloomberg BNA Nov. 12 expressed regret at the loss of an “effective member of Congress and a smart lawyer,” but nevertheless predicted a “strong likelihood that someone else in the House Commerce Committee” will reintroduce the legislation in the next Congress.

The elephant in the room, however, is whether the switch to a Republican-controlled Senate will bode well for patent litigation legislation.

Nothing Likely in Lame Duck Session

For the post-election session, before the 114th Congress convenes on Jan. 3, only the House's Trade Secrets Protection Act (H.R. 5233) and the Senate's Defend Trade Secrets Act (S. 2267) appear to have any chance of moving forward.

The full House could conceivably vote on the bill reported out of the Judiciary Committee, but the Senate has not scheduled any action as yet, and it appears to have more Republican support in any case. Waiting for the changeover in January, then, might be the better course for its sponsors.

Bernard J. Knight, former Patent and Trademark Office general counsel and now with the Washington office of McDermott Will & Emery LLP, offered a similar thought about the patent litigation legislation. In an e-mail to Bloomberg BNA, he posed the question, “Why should the Republicans try to reach a compromise with Democrats now when they can completely drive the train in a few months?”

“If they wait, it will be easier to send a bill to the President for signature that includes the Republican priorities,” Knight said.

Except Criticism of PTO

That is not to say that Congress will leave intellectual property alone in the next couple of months.

Rep. Robert W. Goodlatte (R-Va.), chairman of the House Judiciary Committee, has already scheduled the last of his hearings—in 2014 at least—on topics that might find their way into a comprehensive update to the Copyright Act.

And while not related to a bill, the House has scheduled a session Nov. 18 to publicly scold the PTO for the telework abuses reported in July. Though Deputy Director Michelle K. Lee was already subject to criticism on that front in a July 30 oversight hearing in the House Judiciary Committee, Goodlatte and Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, scheduled the joint hearing to question purported efficiencies gained by teleworking.

Knight said that Lee—now nominated to head the agency—will have a difficult hearing.

“She has to walk a tightrope between being tough on time and attendance abuse to satisfy Goodlatte and Issa on the one hand and not upsetting the patent examiner union too much on the other,” Knight said.

Though the witnesses have not yet been identified, Knight guessed that Robert Budens, the president of the Patent Office Professional Association, might be asked.

“Basically, no changes can be made to the USPTO patent operation that involves the patent examiners and their work without union cooperation,” he said.

Lee's nomination is unlikely to move forward until the new Congress, in any case. “It is not even scheduled at the Senate Judiciary Committee yet,” according to Q. Todd Dickinson, a former PTO director and recent executive director of the American Intellectual Property Law Association. “I hoped it would, but it's a bit of a stretch to get it done before January.”

Two Key Losses

In addition to the loss of Terry, Rep. J. Howard Coble (R-N.C.), the most recent chairman of the Judiciary Committee's IP-focused subcommittee, has retired. Dickinson and Michael J. Remington of Drinker, Biddle & Reath LLP, Washington, remarked on the losses.

“The House is losing two effective members who are both smart lawyers and who were able to merge their positions on law, technology and issues that require legislative action,” Remington said. “Howard Coble was an excellent subcommittee chair, not only on intellectual property, but also court reform issues. He'll be sorely missed. Congressman Terry's loss is a loss for the Congress, irrespective of the impact on legislation.”

“If conservative groups weigh in to strengthen the patent system, it could affect the processing of [patent litigation] legislation in the Senate.”—Michael J. Remington, Drinker, Biddle & Reath

“The IP community lost one of its greatest friends and defenders when Howard Coble chose to retire,” Dickinson said in agreement.

Neither predicted who will be the new head of the House IP subcommittee, though. Rep. Thomas Marino (R-Pa.) is currently the vice chairman, but he will only be entering his second term in January, and at least three other members of the full committee—Reps. Lamar Smith (R-Texas), F. James Sensenbrenner Jr. (R-Wis.) and Issa—all have seniority and have been actively involved in IP-related legislation.

The identity of the subcommittee chair is probably not all that important, though, since Goodlatte is sponsor of the most important patent bill, the Innovation Act (H.R. 3309), and is leading the charge on copyright issues. “No matter who the subcommittee chair is, he will only be there with the blessing of Representative Goodlatte,” Dickinson said.

Impact on Patent Litigation Bill.

The Innovation Act passed the House, but Sen. Patrick J. Leahy's stripped down version of it fizzled in the Senate. 

“The Republican Congress can chalk-up patent reform as one of its accomplishments in the next Congress,” Knight, following up on his comments about the Republicans waiting until they have the majority, said. “The President seems poised to enact patent reform and this should be an easy win for the Republicans in the next Congress.”

Dickinson and Remington said they were not so sure.

It is common knowledge that high technology industry interests have pushed for more provisions directed to reducing the cost of litigation—and shifting attorneys' fees to the loser—against the views of “traditional constituencies” in patent law, as Dickinson put it. But Remington noted a Nov. 11 article in Forbes magazine written by Carly Fiorina that criticized her Silicon Valley colleagues and called for Congress instead to “strengthen [patent] property rights.”

“I'm not saying it's a deal-breaker, but this is from a former head of Hewlett-Packard, part of the Innovation Act's proponent group,” Remington said. “If conservative groups weigh in to strengthen the patent system, it could affect the processing of this legislation in the Senate. The outcome in the House, however, may be preordained.”

Dickinson said that the debate in the Senate revolved around which amendments to Leahy's bill to accept, with Sens. John Cornyn (R-Texas) and Orrin G. Hatch (R-Utah) in the forefront. Each had introduced bills that were pushed aside as Leahy moved forward with his own, and each of those bills had provisions that would bring the Senate version much closer to the one that passed the House.

“A comprehensive view [of Copyright Act changes] would be a pretty heavy political lift.”—Q. Todd Dickinson, former director of the PTO

Though those additions—now with a higher likelihood of success with a Republican majority—would please the high tech community, Dickinson still felt that the bill needed to get support of the other constituencies—the life sciences industries tend to like the status quo.

Dickinson asked, “Do you add things that other constituencies would like, to broaden the appeal?”

He said there have been calls for modifications to the Patent Act to clarify patent-eligible subject matter under 35 U.S.C. §101, a research exemption to infringement, funding for the patent judge pilot program and—particularly given criticisms of the way the Patent Trial and Appeal Board implemented the America Invents Act—modifications to provisions on post-grant oppositions that would address claim amendments and the claim construction standard.

“I would not be surprised to see a few more of those things come up in the legislation,” he said.

Modifications to Copyright Act Ahead?

With all stakeholders waiting to see whether Goodlatte's efforts regarding copyright law lead to a comprehensive makeover of the act or a collection of small changes, it is difficult to assess much weight to the election results.

“Chairman Goodlatte has made his intentions clear—and there's nothing in the election results that would change anything in his mind—that it's important to update or modify the Copyright Act to incorporate massive technological changes,” Remington said.

And again, the Senate Judiciary Committee will be pushing a Republican agenda.

“I do think with a Republican Senate, there may well be passage of some kind of an omnibus bill dealing with a limited number of topics,” former Register of Copyrights Marybeth Peters said in an e-mail.

But Dickinson characterized the multiple hearings Goodlatte has held as “testing the waters,” and he noted that the current Register Maria Pallante “has said a number of small issues might be brought together into a bill of small issues.”

“A comprehensive view would be a pretty heavy political lift,” Dickinson said. “The constituencies on each side are powerful and well-balanced against each other. Substantively, it's time. But whether politics will allow it is another question.”

Sponsor-Less Bills

The following bills will require a new sponsor in the next Congress.

• Terry had also sponsored a bill (H.R. 3167) that would deny preferential trade status to countries that fail to adequately protect U.S. intellectual property rights.

• Rep. Allyson Y. Schwartz (D-Pa.), sponsor of a bill that would set up a preferential corporate tax rate for patent-related profits (H.R. 2605), left the House to make a bid, which she lost, for governor of Pennsylvania.

• Rep. Cory S. Gardner (R-Colo.), co-sponsor of a bill that would repeal copyright retransmission consent and compulsory license provisions (H.R. 3720), left the House but was elected to the Senate, ousting Sen. Mark Udall (D-Colo.). The other sponsor of that bill, Rep. Steve Scalise (R-La.), won re-election.

• While a member of the House, Melvin Watt had introduced a bill to create a performance right for holders of rights in sound recordings (H.R. 3219), before accepting Obama's offer to lead the Federal Housing Finance Agency.

• Sen. Max Baucus (D-Mont.), now U.S. ambassador to China, sponsored the Trade Facilitation and Trade Reinforcement Act (S. 662). That bill would have established a national Intellectual Property Rights Coordination Center that would be housed within the Department of Homeland Security.

• Sen. Carl Levin (D-Mich.), chief sponsor of the Deter Cyber Theft Act (S. 884), retired, but the bill has three other sponsors who are still in office, Sens. John McCain (R-Ariz.), John D. Rockefeller IV (D-W.Va.) and Tom Coburn (R-Okla.).

“Whenever you have bipartisanship, you can see a ray of sunshine that the bill can move forward,” Remington said of this last bill, which would create a watch list of countries that gain access to U.S. trade secrets through cyber theft. “But with the filibuster rules in the Senate, you still have a high hurdle.”

Of Watt's bill, Dickinson said, “Performance rights comes up all the time; it will come up again.”

“The carryover issues will probably be looked at in terms of whether they create jobs and promote economic growth,” Remington said. “There's some empirical data that jobs and growth concern the public.”

“It's pretty clear the Allyson Schwartz bill addresses these concerns, for instance,” he added. “But these issues all have to have strong Republican leadership.”

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Tom P. Taylor at ttaylor@bna.com