Key Players Update AIPLA on Growing Momentum for Patent Small Claims Court

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By Paul Shukovsky  


SEATTLE--There was a sense of inevitability about the possible inception of a patent small claims court with the focus being more on how to craft the new court rather than whether or not the proposal will see the light of day, when the issue was discussed May 1 at the spring meeting of the American Intellectual Property Law Association.

Bernard J. Knight Jr., the Patent and Trademark Office's general counsel said that he could not see any good reason to oppose the initiative.

“If the small inventor cannot enforce their patent rights because it's too expensive to go into district court and there are no alternative means to enforce their patents, a couple of things happen: No. 1, they are not going to invest in the patent system, and No. 2 … it's going to affect the U.S. economy,” he said.

Noting that the initiative has the support of the PTO's leadership, Knight said that small entities--the job creators in the United States--rely on their patents as collateral to get loans. “And banks are not going to be giving small businesses loans if these small businesses cannot enforce their rights.”

When the comment period on the proposal closed April, the PTO had received about 40 comments.

“I am happy to say that AIPLA is in favor of the proposal. So is the ABA. And IPO is against the proposal,” Knight said.

'A Lot of Issues … to Work Out.’

The PTO will organize the comments and put them on the web, Knight said. And the PTO will likely hold another round table to discuss the comments. He said that a legislative proposal would be published in a forthcoming issued of the Federal Register.

“The procedure is very, very attractive on a theoretical basis,” Knight said. “But there are a lot of issues from a practical perspective that we're going to have to work out.”

Among the issues is that the parties would have to waive their right to a jury trial. “Our legal position is that it is constitutional,” Knight said. “However, once we institute these proceedings, I can guarantee you that we are going to get a lawsuit saying that it's unconstitutional.” The argument, said Knight, will be that it is “basically coercive because people could not take advantage of this proceeding if they didn't agree to waive their right to a jury trial.”

Another pivotal concern is whether parties should be able to obtain injunctions. “Our position at the PTO, and now [that of] the ABA [as well], is that injunctions should not be available because these proceedings would then not be attractive to many defendants.”

'Voluntary on Both Sides.’

Judge Susan G. Braden of the U.S. Court of Federal Claims and chairwoman of the American Bar Association task force on creation of a patent small claims court clarified potential solutions to these issues.

Braden said that the ABA task force panel had concluded that the proceedings should start as a model small claims court program housed in conjunction with the already existing patent pilot program.

If venue before a patent pilot judge is not available, “you would come to my court as a default,” she said. Noting that the Court of Federal Claims has national jurisdiction, she said that many people “don't realize we have a large number of patent cases that arise in the context of military contracts.”

“It would be voluntary on both sides,” Braden said. “After the complaint is filed, both sides could opt out.”

With maximum damages capped at $3 million, “there would be no injunctions,” she said. “There would be no appellate review. The claim construction would be done in approximately 120 days. Very limited discovery. One-day hearing. Probably a limit on the number of witnesses. Maybe three.”

'Fast, Cheap and Rough Justice.’

Drawing on her positive experience working with George Washington University interns, Braden said that the program would employ student interns working for credit as specialized clerks working on patent cases alone.”

“So basically: fast, cheap and rough justice,” she said.

If infringement continues after receiving a judgment in small claims court, “you can come back” to enforce it, Braden said. “But you cannot take the judgment there and go to district court and try to bootstrap it into getting an injunction … because that judgment is not going to be with the benefit of full discovery.”

“My own view is that if the program is done successfully, you will not see a lot of damage awards,” she said. Inventors want “a license for somebody to utilize their technology and help them make a market for it.” She said her court would be well suited to house the small claims proceedings because “we already are set up to do this type of work. We have a very robust alternative dispute resolution program. We would build into this system a mandatory ADR kumbaya day or two after the complaint construction is done.”

Braden said that she hoped “to work with people from IPO and some of the other large corporations who have expressed some skepticism to see whether we can address or work with some of their concerns that they have to try and see if we can begin this as a model program.”

“No one is going to drag them into it,” she said. “The point is that if it is there, it'll work better if they want to be participants. And we are not looking, by the way, to be an attractive nuisance opportunity basically for what--and I don't want to use the word non-practicing entity--I'm just saying for opportunistic litigation. Those people do not care about $3 million. They are looking for something very different.”

'Cost Issue Cuts Both Ways.’

Patent attorney Robert Greenspoon of Flachsbart & Greenspoon, Chicago, asked the question in “Is the United States Finally Ready for a Patent Small Claims Court?” in the Winter 2009 volume of the Minnesota Journal of Law, Science and Technology.

He answered the question at the AIPLA panel in part by saying that “access to justice in the patent system is not just about personal rights. It's also about economic development. Ultimately it's about full employment in this country, and it's about national competitiveness. So there's a need for a small-claims proceeding.”

Chairman-elect of the ABA's Intellectual Property Law section Robert O. Lindefjeld turned around the argument that small claims proceedings will encourage “opportunistic” litigation.

“I think the cost issue cuts both ways,” he said. “There are a number of defendants in a patent infringement case who have settled their cases notwithstanding their meritorious defenses, just because the cost exceeded the potential benefit of removing a patent from the patent system. So just as well as you could say that this is going to result in more lawsuits, you could say it is going to result in parties making the decision to take a stand and defend themselves.”