Full Senate to Take up Patent Reform Bill After Six Years of Debate in Committee

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After six years of committee consideration, negotiation, and compromise, the full U.S. Senate has finally scheduled debate on a patent reform bill, S. 23, for the week of Feb. 28, after it returns from a week-long recess. The scheduling was announced as the Senate adjourned Feb. 17.

“I am pleased that the Senate will consider the Patent Reform Act after the recess,” the bill's lead author, Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.), said in a Feb. 18 press release. “It is a critical part of our jobs agenda,” he said.

“Hundreds of thousands of patent applications are stalled at the Patent and Trademark Office,” Leahy said. “Among those is the application for the next great invention. Addressing the needs of the Patent and Trademark Office will unleash innovation and promote American invention, without adding a penny to the deficit. This is commonsense, bipartisan legislation, and its consideration by the Senate is long overdue.”

While the bill is scheduled for consideration on the afternoon of Feb. 28, the lawmakers have other pressing business, most notably funding the government after March 4, that may push debate on S. 23 back on the agenda.

Leahy Identifies Key PTO-Related Provisions.

The Patent Reform Act of 2011, S. 23, was introduced Jan. 25 by Leahy and seven co-sponsors (81 PTCJ 369, 1/28/11). The bill marks the fourth attempt at a comprehensive patent reform bill in the last six years. The Judiciary Committee approved a slightly amended version of S. 23 by a 15-0 vote Feb. 3 (81 PTCJ 451, 2/11/11).

In his press release, Leahy identified a number of key features and benefits of the bill. Notably, all but one of the provisions he mentioned are directed to activities at the PTO and not to judicial reform.

• Transition to First-Inventor-to-File System. The bill would bring the U.S. patent system in line with the rest of the world by switching from a first-to-invent to a first-inventor-to-file system. Inventorship fights would be simplified and those filing the same patent application in multiple countries would, according to proponents, have fewer priority concerns.

• Improving Patent Quality. Leahy said that other provisions in the bill allowing additional challenges to patents are directed to improving patent quality. One provision would allow third parties to submit prior art for consideration and inclusion in the record of a patent application after it is published but before an examiner has made a decision on its patentability. Another provision would add a nine-month “first window” post-grant opposition, “to allow challengers to weed out patents that should not have been issued,” he said.

• Improves Administrative Challenges of Patent Validity. S. 23 would also make changes to reexamination procedures that, Leahy said, “would create a more meaningful alternative to litigation by establishing an adversarial inter partes review, conducted by Administrative Patent Judges; and would also curb harassment of patent owners.”

• Provides More Certainty in Damages Calculations. The only provision Leahy discussed that implicates court proceedings was a sticking point previously, but appears to be a non-issue now (81 PTCJ 484, 2/18/11). The bill's provision on a procedure for determining infringement damages would require the parties, the judge, and the jury to consider “only those methodologies and factors relevant” to making reasonable royalty calculations. Leahy described it as “a rigorous gate keeping role for the court, under which judges will assess the legal basis for the specific damages theories and jury instructions sought by the parties.”

• Creates a Supplemental Examination Process. The bill does not directly address inequitable conduct jurisprudence, as had prior bills. Instead, it proposes a new procedure called “supplemental examination,” allowing the patent owner to make pre-litigation submissions to the PTO to potentially correct mistakes in disclosures during prosecution. Submissions of the patent owner taking advantage of that option could not then be used to support an inequitable conduct defense.

• Provides PTO Fee Setting Authority. The bill would allow the PTO to set patent and trademark application and maintenance fees without Congress's prior approval, “to ensure the PTO is properly funded and can reduce the backlog of patent applications,” Leahy said. The bill also creates a new “micro-entity” category eligible for a 75 percent reduction of most PTO fees.

• Bans Tax Patents. “The Patent Reform Act will benefit tax payers directly by prohibiting patents on tax strategies, which often lead to additional fees on taxpayers who are simply complying with the tax laws,” Leahy contended. The bill would give the PTO a means of automatically rejecting applications for such patents.


Additional Provisions of Interest.

The bill contains a number of additional provisions not mentioned in Leahy's press release. Most notable are the following:

• Bifurcation at trial. A “sequencing” provision would require that a district court grant any party's request to bifurcate a trial, deciding questions of the patent's infringement and validity first, and then, if necessary, addressing damages and willful infringement.

• Patent marking. The bill would effectively eliminate qui tam complaints of false patent marking under 35 U.S.C. §292(a).

• Best mode. The bill would eliminate an alleged infringer's ability to argue that the patent owner did not identify the best mode for enablement in the patent specification.

• Venue transfer. Another provision attempts to make it easier for a defendant to transfer a case out of venues chosen by the plaintiff because of a patent-friendly reputation, such as the U.S. District Court for the Eastern District of Texas.

At Least Two Amendments Anticipated.

Two amendments received preliminary support by the Senate Judiciary Committee but were not acted upon when the committee approved S. 23 on Feb. 3. The proponents of those amendments--Sens. Thomas A. Coburn (R-Okla.), Charles E. Schumer (D-N.Y.), and Jon L. Kyl (R-Ariz.)--have vowed to bring their amendments to the full Senate floor.

The Coburn amendment would challenge the Senate Appropriations Committee's control over the funds collected by the PTO. The amendment would require that any fees collected over planned expenses remain in a fund for the PTO's later use, thus ending the appropriators' practice of diverting those fees for other governmental purposes.

The proposed amendment by Schumer and Kyl would instigate a tougher review at the PTO of patents issued on business methods. The amendment defines a business method patent as follows: “a patent that is a member of the group of patents for inventions that are a method or corresponding apparatus for performing data processing operations utilized in the practice, administration, or management of an enterprise or financial product, except that the term shall not include patents for inventions in a technological field.” The provision would further require that the PTO director define “a technological field.”

Still Work to Do With House.

Should the Senate pass S. 23, the Senate bill will have to be reconciled with the approach to patent reform in the House.

At a Feb. 11 hearing of the House Judiciary Committee's Subcommittee on Intellectual Property, Competition, and the Internet, the full committee's Chairman Lamar S. Smith (R-Texas) said that he is developing a House version of the legislation, and he gave some hints that it would not include a damages provision (81 PTCJ 484, 2/18/11).

There are also likely to be differences between the House and Senate on post-grant opposition procedures, including not only the new post-grant first-window review, but also limitations on the availability of inter partes proceedings. The Feb. 11 House subcommittee hearing exposed a continuing divide between patent reform factions on those procedures, and the lawmakers in attendance appeared sympathetic to a call for leaving current inter partes practice unchanged.

Nonetheless, Smith seemed optimistic that the House and the Senate can come to an agreement. “I'm absolutely convinced we're going to be able to find common ground,” he said.

By Tony Dutra