Dec. 5 --The House approved the Innovation Act (H.R. 3309) by a vote of 325-91 on Dec.
The legislation is aimed at so-called patent trolls but essentially
is focused on specific abusive behavior--by any patent owner--in patent
infringement litigation. The bill's main provisions would create a “loser pays”
scheme in most cases, require greater transparency in patent ownership, enhance
the requirements for pleading patent infringement and dictate litigation
discovery timing and content.
The bill approved was only slightly
modified from the version reported out of the Judiciary Committee on
Nov. 30 (226 PTD, 11/22/13). Amendments seeking to delete the main provisions
were defeated or had been barred Dec. 2 by the Rules Committee's
decisions on which amendments to move forward.
equivalent bill in the Senate, the Patent Transparency and Improvements Act (S.
1720) (224 PTD, 11/20/13)is stripped down considerably from the House version,
and is proceeding at a slower pace.
An amendment in the form of a
substitute, the Deceptive
Patent Practices Reduction Act proposed by Reps. John Conyers Jr. (D-Mich.)
and Melvin L. Watt (D-N.C.), was the last amendment considered. It would have
more closely mapped to the Senate version, but it was defeated by a vote of
Committee published on Dec. 2 its report on the bill, including:
views” by Conyers, Watt, and Reps. Robert C. ''Bobby'' Scott (D-Va.), Sheila
Jackson Lee (D-Texas) and Henry C. ''Hank'' Johnson Jr. (D-Ga.) opposed to the
bill because “it has been considered pursuant to a rushed and unfair process,”
views”--by Reps. Stephen I. Cohen (D-Tenn.), Luis V. Gutierrez (D-Ill.), Cedric
L. Richmond (D-La.) and Jose A. “Joe” Garcia Jr. (D-Fla.)--expressing concerns
that certain provisions of the bill “would impact the independence of the
federal judiciary, impose limits on pleadings and discovery, and place
intrusive mandates on the court system.”
All those legislators
are Democrats, and partisan voting predominated--except for the final vote--in
the Judiciary Committee markup session. However, support from the White House
appeared to counter the concern that--contrary to recent history--intellectual
property legislation might succumb to the partisan divide in Congress.
The Obama administration announced on June 4 a set of executive actions aimed
at curbing litigation abuses. The announcement also called on Congress to pass
seven related legislative measures.
In a Dec. 3 statement, the White
House said, “The Administration appreciates the inclusion of many of these
measures in H.R. 3309.” The statement said that the President “supports the
bill's provisions to require disclosures in patent infringement cases,
streamline actions involving end-users, and provide educational resources for
The administration tempered its support, though,
particularly with respect to the litigation case management provisions.
“The Administration supports the effort to discourage abusive court filings,
but hopes that, as final legislation is crafted, appropriate recognition is
given to the importance of judicial discretion in balancing competing
interests,” the statement said.
It became clear in opening statements on the floor of the House
on Dec. 5 that H.R. 3309 had opponents and proponents in each party. For
example, Republican Reps. Thomas H. Massie (R-Ky.) and Dana T. Rohrabacher
(R-Calif.) spoke against the bill; Democrat Rep. Suzan K. DelBene (D-Wash.)
spoke in support, while Rep. Jerrold L. Nadler (D-N.Y.) tepidly supported the
bill but he “encourage[d] our friends in the Senate to do a better job” and
later rose in support of the Conyers/Watt substitute.
were considered. Goodlatte's manager's amendment, which passed by a vote of 341-73,
made minor changes:
Section 3(d) of the bill would add new 35 U.S.C. §299A on “Discovery in patent
infringement action.” It suggests that district courts limit early discovery
and delay more costly discovery “if the court determines that a ruling relating
to the construction of terms used in a patent claim asserted in the complaint
is required.” In the face of complaints that this goes too far in telling the
judiciary how to handle cases, the amendment adding an exclusion saying, “The
parties may voluntarily consent to be excluded, in whole or in part, from the
limitation on discovery.”
rights in bankruptcy. Section 6(d) of H.R. 3309 would reverse a court's
opinion that can cause a licensee to lose rights to use patented technology if
the patent licensor files for bankruptcy. The Goodlatte amendment makes
clarifying changes intended to ensure that foreign courts cannot terminate
small business efforts. The amendment made clarifications to Section 7,
which calls for PTO outreach and education to small businesses focused on
“concerns arising from patent infringement and abusive patent litigation
Section 8 of the bill calls for multiple studies by and reports to Congress
from the Patent and Trademark Office and the Government Accountability Office.
The amendment extends the time required by the agencies to submit the reports,
but also clarifies that Congress would give no additional funds to either
agency to conduct the studies.
patenting. Obviousness-type double-patenting is a judicially created
standard. Section 9(d) would codify it for patent applications submitted on or
after May 16, 2013, but the original text was criticized for failing to
properly reflect the standard. The amendment makes changes intended to reflect
PTO examination standards.
Three other amendments passed, two of which Goodlatte
• Demand letters. The media's attention to patent
troll abuse has typically focused on “demand letter” practices, whereby patent
owners send vague or ambiguous letters by the thousands to small businesses,
consumers and Internet application developers, asserting patent infringement
and seeking royalty payments, threatening litigation otherwise. Section 3(f) of
H.R. 3309 addresses that practice only in the sense that such a mailing would
limit remedy options to the patent owner in any subsequent litigation.
Rep. Jared S. Polis (D-Colo.) presented an amendment to that section that would find a
“nonconforming” demand letter unless the sender “identifies the ultimate parent
entity of the claimant.” The members of the House agreed to the amendment on a
• Impact report. Rep. Sheila Jackson Lee (D-Texas)'s
amendment called on the PTO to study the effects of this
bill on small businesses and report on it two years after enactment. After a
voice vote approving the new study, it now is added to six other studies in
Section 8 that must be performed by administrative agencies “using existing
• Section 145 Repeal. Section 9(a) of H.R. 3309 would
have repealed 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 Federal Circuit, under 35 U.S.C. §141.
Rep. Dana T.
Rohrabacher (R-Calif.)'s amendment deleted Section 9(a), thus leaving Section 145
intact. Goodlatte opposed this amendment, but it passed by a vote of
Three other amendments would have made significant changes to
two H.R. 3309 provisions. Goodlatte opposed them and they were rejected.
• Loser pays. Section 3(b) would shift attorneys' fees and costs to
the prevailing party “unless the court finds that the position and conduct of
the nonprevailing party or parties were reasonably justified in law and fact or
that special circumstances (such as severe economic hardship to a named
inventor) make an award unjust.” Watt's amendment would have further limited fee shifting
by “[a]llowing a judge to consider dilatory or other abusive tactics by the
prevailing party in determining whether to reduce or deny a fee award.” It was
defeated by a vote of 266-156.
• Customer-suit exception. Section
5 of the bill addresses the abuse of a patent troll suing customers using an
allegedly infringing product rather than suing the manufacturer that makes it.
The provision allows the customer to join the manufacturer and requires the
court to stay the action against the customer. Massie introduced an amendment to delete Section 5 in its entirety. The
House defeated that amendment by a vote of 296-119, with both parties
Jackson Lee's amendment would keep Section 5, but would limit the
customers who would be able to get the stay to small businesses with “an annual
revenue of $25,000,000 or less.” That amendment was defeated 266-144 in a
slightly partisan vote.
House considered the Conyers and Watt amendment in the nature of a substitute
bill, as they had tried in the Judiciary Committee without success. The
amendment essentially represented a last opportunity for opponents to stop H.R.
The dissenting views to the committee report complained that H.R.
3309 “excludes the single most important step we can take to improve patent
quality and protect against abusive litigation--ending US Patent and Trademark
Office (PTO) fee diversion.”
Conyers has introduced a separate bill to
end fee diversion (H.R. 3349) on Oct. 28, but Goodlatte opposed his attempts to
add it to H.R. 3309 during committee markup and did so again here.
Sen. Patrick J. Leahy (D-Vt.)
introduced a bill (S.
1720) in the Senate Nov. 18 to address patent litigation reform, following
the House's lead but with key provisions missing.
The most significant
difference between the bills is that S. 1720 does not include the provisions
that would force patent infringement case management rules and procedures as to
pleading, discovery timing and limits, cost-shifting related to discovery and
loser-pays fee shifting.
Goodlatte has repeatedly defended Congress's
authority to tell the Judicial Conference what a district court's rules and
procedures should look like, but members of the Judicial Conference wrote
letters to Goodlatte and Conyers expressing its concern that the provisions
conflict with the 80-year-old Rules Enabling Act. The Federal Circuit Bar Association built on the concerns
expressed by the Judicial Conference, citing the unintended consequences of
specific provisions, however “well intentioned,” in a Dec. 4 letter to the
Leahy's bill also does not include the Section 145 repeal, which
now was deleted from H.R. 3309 after Rohrabacher's successful challenge on the
Other differences in S. 1720 compared to its H.R. 3309
• Recording real party in interest. Section 3 of
S. 1720, titled “Transparency of Patent Ownership,” matches Section 4 of H.R.
3309, intended to address the alleged abuse of patent trolls hiding the real
party in interest to a patent or to a litigation award, including the “ultimate
parent entity.” Penalties for nondisclosure would apply to court proceedings,
generally in a limitation on damages recoverable.
But whereas H.R. 3309
would require recordation at the PTO only just before filing a civil action, S.
1720 would require recording any change in the ultimate parent entity of a
patent within three months of the change, even absent litigation.
• Demand letters. Leahy's bill goes further than the House approach.
Section 5 of S. 1720 would expand Section 5(a)(1) of the Federal Trade
Commission Act, 15 U.S.C. §45(a)(1), making it an unfair or deceptive practice
“to engage in the widespread sending of written communications that state that
the intended recipients or any affiliated persons are infringing or have
infringed the patent and bear liability or owe compensation to another.” The
contents of the letter would have to “falsely threaten,” “lack a reasonable
basis in fact or law” or be “likely to materially mislead a reasonable
Polis and Rep. Thomas A. Marino (R-Pa.) sponsor a
comparative bill in the House, the Demand Letter Transparency Act (H.R.
3540) that goes even further (224 PTD, 11/20/13). It requires that the PTO,
after receiving notice of a noncompliant letter, “notify the patent owner that
the patent will be voided unless a fee is paid not later than 3 months after
the date on which the notification is sent.”
Two other provisions have been the subject of some controversy since
Goodlatte first introduced them in an early “discussion draft” of the bill, but
remain in both H.R. 3309 and S. 1720:
• Post-grant procedure
changes. Section 7(a) includes a fix to a purported “scrivener's error” in
the AIA's provision on the estoppel effect of post-grant review, in 35 U.S.C.
§325(e)(2). Specifically, under the AIA provision as currently written, a PGR
challenger is estopped from asserting in a subsequent court case “that the
[patent] claim is invalid on any ground that the petitioner raised or
reasonably could have raised during that post-grant review.” The bills--it is
Section 9(b) of H.R. 3309--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.
Some of the stakeholders involved in the AIA
negotiations disagree that this was a scrivener's error.
• PTAB claim
construction. S. 1720's Section 7(b) emulates H.R. 3309's Section 9(c) in
changing the Patent Trial and Appeal Board's standards and procedures as to
claim construction to match those of district courts. Ex-PTO executives have
generally criticized this provision, because the PTAB gives patent owners the
option to amend claims, which cannot happen in court.
The result of the
change would be no inconsistency between the PTAB and a district court for
unchanged claims, as the provision's supporters want, but an inconsistency at
the PTO between how claims are construed in an application or reexamination and
how amended claims are construed in PTAB challenges.
The two bills also
include a number of additional modifications to AIA provisions--such as the
inventor's oath or declaration, assignment and joint inventorship--that have
H.R. 3309 equivalents and have not been contested in hearings to date.
Sens. Amy J. Klobuchar (D-Minn.), Michael S. Lee (R-Utah) and Sheldon
Whitehouse (D-R.I.) are co-sponsors of S. 1720. Lee coauthored with Goodlatte a
National Review Online article on Dec. 4 that
supported the legislation generally and mentioned each bill specifically,
without citing any preference for one or the other.
H.R. 3309 as reported to the floor is available at http://pub.bna.com/ptcj/HR3309Reported13Nov20.pdf.
Judiciary Committee report is available at http://pub.bna.com/ptcj/HR3309JCreport.pdf.
Goodlatte's manager's amendment is available at http://pub.bna.com/ptcj/HR3309Amend26.pdf.
Polis's accepted amendment is available at http://pub.bna.com/ptcj/HR3309Amend04.pdf.
Jackson Lee's accepted amendment is available at http://pub.bna.com/ptcj/HR3309Amend08.pdf.
Differences in Conyers/Watt defeated substitute are available at http://pub.bna.com/ptcj/HR3309Substitute.pdf.
S. 1720 is available at http://pub.bna.com/ptcj/S172013Nov18.pdf.
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
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