Sept. 23 --Rep. Robert W. Goodlatte (R-Va.) released on Sept. 23 a second
discussion draft proposing legislation to address abusive patent
The text presents significant differences from a May 23 first
draft , incorporating proposals from other bills that have already been
introduced and are now likely to be subsumed under Goodlatte's broader
The new draft retains, however, a number of controversial
provisions addressing issues unrelated to abuses by so-called “patent
The original draft
contained a section titled “Incentivizing settlement in patent litigation” that
would shift attorneys' fees and costs if a party offered a settlement, was
rebuffed and later won. Goodlatte deleted that provision and replaced it with a
section titled “Patent infringement actions,” with multiple parts:
35 U.S.C. §281A would specify “Pleading requirements for patent infringement
actions.” This section is a partial copy of similar proposals in the Patent
Abuse Reduction Act (S. 1013) introduced May 22 by Sen. John Cornyn III
(R-Texas) and H.R. 2639, the Patent Litigation and Innovation Act, sponsored by
Reps. Hakeem S. Jeffries (D-N.Y.) and R. Blake Farenthold (R-Texas) and
introduced on July 10.
also adopted for the most part Cornyn's approach to awarding attorney's fees and
costs, a court requirement except in “exceptional circumstances” or if “the
position and conduct of the non-prevailing party were objectively reasonable and
subsection on “Joinder of Interested Parties” allows alleged infringers to force
joinder of patent assignees and parent companies, addressing the alleged patent
troll abuse of shell subsidiaries bringing patent infringement lawsuits. The
draft goes beyond S. 1013 and H.R. 2639 in defining the parties that may be
35 U.S.C. §299A on “Discovery in patent infringement action” suggests that
district courts limit discovery until after claim construction.
The title of Section 4 of the
draft remains “Transparency of Patent Ownership” but it is completely rewritten,
and it does not mirror another bill on the same point, H.R. 2024, the End of
Anonymous Patents Act, introduced by Rep. Theodore E. Deutch (D-Fla.) on May 16.
The alleged abuse addressed here is that of patent trolls hiding the real party
in interest to a patent or to a litigation award.
The first draft would
have triggered a requirement to identify--by updating records held by the Patent
and Trademark Office--the real party in interest to a patent after an entity
sent 20 “demand letters” to alleged infringers. That provision is deleted and
replaced by modifications to 35 U.S.C. §290, “Notice of patent suits.”
The new Section 290 would require updating the PTO's records as to the real
party in interest upon filing a complaint in court and would generally require
the information defendants would need to join parties, according to the draft's
Section 4 joinder subsection noted above.
The draft's Section 5 is on a
“Customer-suit exception,” addressing the abuse of a patent troll suing
customers using an allegedly infringing product rather than the manufacturer
that makes it. The proposed solution--allowing the customer to join the
manufacturer and requiring the court to stay the action against the customer--is
unchanged from the original draft, but Goodlatte modified the procedure in the
Finally, as to troll-related provisions, the draft would
force the Judicial Conference of the United States to implement “rules and
procedures” for such litigation, rather than add sections to the Patent Act
requiring district courts to conduct litigation in a particular way.
Thus, the draft's Section 6, “Procedures and Practices to Implement and
Recommendations to the Judicial Conference,” identifies broad patent litigation
concepts rather than specific rules. For example, Goodlatte's draft identifies
“core” and “additional” categories of discovery and distinguishes e-discovery,
as does S. 1013. But while Cornyn's bill left it to the parties to negotiate the
“discovery sequence and scope,” the Goodlatte draft would put the burden on the
Judicial Conference to set out the rules and procedures to meet related
Goodlatte's first departure
from a focus on patent trolls comes at the end of Section 6, in a subsection
titled “Protection of Intellectual-property Licenses in Bankruptcy.” The issue
arose in the context of recent litigation on Section 365(n) of the U.S.
Bankruptcy Code, 11 U.S.C. §365(n).
Licensees do not want to lose rights
to use patented technology if a patent licensor files for bankruptcy. A 1985
case rejected a licensee's attempt to retain its rights. Lubrizol Enterprises
Inc. v. Richmond Metal Finishers Inc., 756 F.2d 1043, 226 U.S.P.Q. 961 (4th
Congress subsequently modified Section 365(n) to state that
“the trustee, subject to the court's approval, may assume or reject any
executory contract or unexpired lease of the debtor.” But issues remained in
light of a German bankruptcy court's action in In re Qimonda A.G., No.
09-14766 (SSM) (Bankr. E.D. Va. Oct. 28, 2011).
Goodlatte's proposed bill
would make clear that “section 365(n) applies to intellectual property of which
the debtor is a licensor or which the debtor has transferred.”
also puts more burdens on the PTO in Sections 7 and 8, deleting nothing from the
May 23 draft even though the PTO is now subject to sequestration
the PTO to “develop educational resources for small businesses to address
concerns arising from patent infringement;
the agency's “ombudsman” role to deal with abusive litigation practices as
its website to provide information on patent cases in federal court;
a study related to “patent transactions occurring on the secondary market”;
a study on patents owned by the U.S. government; and
the Government Accountability Office in its conduct of “a study on patent
examination at the Office and the technologies available to improve examination
and improve patent quality.”
Finally, Section 9 of the discussion draft, “Improvements and Technical
Corrections to the Leahy-Smith America Invents Act,” went even farther beyond
patent troll issues, with a varied selection of issues mostly cut out of the
bill that passed as the America Invents Act in 2011. Goodlatte made some
modifications to the text but otherwise did not delete any provision suggested
in the first draft's Section 9.
The proposed legislation would repeal 35
U.S.C. §145, which allows patent applicants who face rejections by the PTO to
file a civil action in federal district court, rather than appeal to the U.S.
Court of Appeals for the Federal Circuit, under 35 U.S.C. §141.
controversy on this topic arose in light of the U.S. Supreme Court's decision in
Kappos v. Hyatt, 132 S. Ct. 1690, 2012 BL 95452, 102 U.S.P.Q.2d 1337
(2012). The PTO was trying to limit the evidence that the applicant could
present in court, but the high court held that Section 145 allows evidence
subject only to usual evidence and civil procedure rules.
With the civil
action option erased, all appeals would go to the Federal Circuit, which reviews
only those facts in the record established during patent prosecution at the PTO.
The intent, therefore, is to encourage full disclosure at the PTO, though
arguably Goodlatte could have addressed that by limiting Section 145 rather than
9(b) of Goodlatte's draft was an expected AIA amendment. Since the AIA's
enactment, several stakeholders have argued that there was a “scrivener's error”
in the provision on the estoppel effect of post-grant review, in 35 U.S.C.
Both of the AIA's sponsors--Sen. Patrick J. Leahy (D-Vt.) and
Rep. Lamar S. Smith (R-Texas)--pledged to correct the error, but they have been
challenged by other stakeholders who say the language reflected the patent
Specifically, under the provision, a PGR challenger
“may not assert either in a civil action … that the [patent] claim is invalid on
any ground that the petitioner raised or reasonably could have raised during
that post-grant review.”
Goodlatte's draft would strike “or reasonably
could have been raised.” The effect would be to give an accused infringer more
options in court to challenge patent validity.
A second amendment to both
PGR and the AIA-enabled inter partes review related to how the PTO is supposed
to construe claim terms: “as such claim has been or would be in a civil action
to invalidate a patent under section 282, including construing each claim of the
patent in accordance with the ordinary and customary meaning of such claim as
understood by one of ordinary skill in the art, the prosecution history
pertaining to the patent, and prior judicial determinations and stipulations
relating to the patent.”
A third AIA-related amendment was a
“Codification of the Double-patenting Doctrine for First-inventor-to-file
Patents.” The AIA moved the United States to a FITF system for patent
applications submitted on or after May 16, 2013, changing the definition of
prior art under 35 U.S.C. §102 accordingly.
Goodlatte's draft clarified
prior art determinations, according to a May 23 “talking points” memo, “to ensure that patentees
do not obtain multiple patents for what is basically the same invention and then
sell those patents to different parties, requiring others to obtain multiple
licenses from multiple parties to use the invention.”
Another amendment addressed the AIA's post-grant
opposition to a “covered business method,” which is the subject of yet another
bill that arguably addresses patent troll behavior and has already been
introduced in Congress.
Sen. Charles E. Schumer (D-N.Y.) introduced S.
866 ostensibly aimed at trolls, but really addressing the kinds of patents--“the
practice, administration, or management of an enterprise, product, or
service”--trolls tend to favor.
The Schumer bill would make permanent the
option to bring a CBM challenge, also with an expanded business method
Unlike the first bill, Goodlatte now agrees with Schumer to
make the provision permanent--it was set to expire in 2019--but he does not go
as far as Schumer in expanding the definition.
The CBM petition that has
gone farthest in the new Patent Trial and Appeal Board is SAP America Inc. v.
Versata Development Group Inc., No. CBM2012-00001. Early in the case,
though, on Jan. 9, the PTAB released Paper 36, which analyzed in detail Versata's arguments
that its patent claims were not directed to “covered business methods” per the
definitions provided in Section 18(d)(1) of the AIA.
draft bill simply stated that the Paper 36 analysis was correct. But, according
to the PTAB paper, “the plain language of § 18(d)(1) is consistent with the
legislative history and Senator Schumer's commentary” during the patent reform
debate. And Schumer's commentary at that time was contested as being too
In the second draft, Goodlatte only went so far as to clarify
that “inventions in the natural sciences or computer operations” are not subject
to CBM challenges, but it remains unclear exactly how far Paper 36 strays from
Schumer's preferred definition.
To contact the reporter on
this story: Tony Dutra in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Naresh Sritharan at email@example.com
Text is available at http://pub.bna.com/ptcj/GoodlatteDD13Sep6.pdf.
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