New Patent Legislation: Innovation Act of 2013

By Dennis Crouch

Representative Bob Goodlatte (R-VA) with the bipartisan support of ten other members of the House has introduced a new set of proposed patent reforms currently tiled the “Innovation Act.” (H.R. 3309) The proposed bill includes a number of provisions disparate provisions that would have a substantial impact on patent enforcement, procurement, and ownership. Some of the changes include severe increases in the requirements associated with filing a patent infringement complaint; Major statutory limitations on discovery; Elimination of the patent applicant option of filing a civil action to obtain a patent under Section 145; Forcing the USPTO to use standard claim construction (rather than BRI) in post-grant proceedings; Introduction of a new Double-Patenting rule; etc. the 50+ page bill is somewhat complex and, as Hal Wegner wrote, “[e]very organization impacted by patents must carefully study the Goodlatte bill for hidden features or suffer the consequences.” [Text][Sectional-Analysis]

Major Proposed Changes include the Following:

  1. A heightened pleading requirement for filing patent infringement claims, including a particularized statement “with detailed specificity” as to “how the terms in each [asserted] claim … correspond to the functionality of [each] accused instrumentality.” A brand-generic infringement action under § 271(e)(2) need not comply with the heightened pleading requirements. In addition, the Judicial Conference would be ordered to modify the form complaint for patent infringement to reflect the heightened pleading.
  2. An assumption that attorney-fees will be awarded to a prevailing party. The new provision would require an award of fees “unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust.” On its face the provision is largely party-neutral with two caveats. First, the provision allows prevailing-accused-infringers to collect fees from non-plaintiffs who have a substantial interest in the patent-at-issue in the case. Second, the provision indicates that a patentee who extends a covenant-not-to-sue to the other party will be deemed a non-prevailing party and thus subject to attorney fees.
  3. Discovery will be limited until after a ruling on claim construction. In addition, the US Judicial Conference would be ordered to develop rules “to address the asymmetries in discovery burdens and costs in any civil action [relating to patents].”
  4. Transparency of Ownership. As a new required disclosure, the patentee in an infringement litigation must disclose anyone with a financial interest in either the patents at issue or the patentee and must additionally disclose the “ultimate parent entity” of the patentee. In the appropriate Federal Regulations, an ultimate parent entity is ethereally defined as “entity which is not controlled by any other entity.”
  5. Stay for Customer Suits. When both a manufacturer and its customer are sued for infringing the same patent, customer suit would be stayed so long as the customer agrees to be bound by the results of that case.
  6. IP in Bankruptcy. Under the new law, when a foreign company goes bankrupt, its trustee would no longer have the power to cancel licenses associated with US patent rights.
  7. No Civil Action to Challenge PTO. The new law would eliminated the civil action option found in 35 U.S.C. § 145. Patent applicants refused by the patentee would rather only have the option of appealing directly to the Federal Circuit.
  8. Shrinking Post-Grant-Review Estoppel. Under the current law, a post-grant review proceeding creates an estoppel against the petitioner later arguing in other forums “any ground that the petitioner raised or reasonably could have raised during that post-grant review.” 35 U.S.C. § 325(e). The new law would narrow that estoppel only to grounds actually raised.
  9. Patent Office Claim Construction. During Post-Grant Reviews and Inter Partes Reviews, the new law would require the patent office to use the ordinary “district court claim construction” law, that is, “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 and the prosecution history pertaining to the patent.”
  10. Double Patenting. There is some potential that the judicially created obviousness-type double patenting doctrine was eliminated by the recently implemented first-to-file regime. The new law would codify that doctrine.
  11. Covered Business Method Patent Review. The AIA creates an option for third parties to attack patents covering non-technological “covered business method” innovations through the use of a new post-grant review proceeding. The new law would somewhat restrict the scope of CBM review to only cover first-to-invent patents (rather than pre-AIA patents) as defined in Section 3(n)(1) of the AIA. The new law would also, inter alia, codify the USPTO’s somewhat broad definition of “financial product or service” described in the Versata case.
  12. Patent Term Adjustment. The new law would eliminate any patent term adjustment for “B delay” occurring after an applicant files a request for continued examination. This change would have a significant impact on the patent term of a large number of issued patents. The amendment proposes to be effective with regards to any “patent application or patent” pending on the Act’s date of enactment. (Note – it is unclear what it means for a “patent” to be “pending” in this context.)
  13. Federal Jurisdiction over Patent Cases. Although not a statutory change, the new law would make the “clarifying” statement that: “The Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.”

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

96 thoughts on “New Patent Legislation: Innovation Act of 2013

  1. The “sectional analysis” from the Judiciary Committee is not neutral, and represents the position of the bill’s proponents. The “analysis” claims that fee-shifting follows “the standard that is used for awarding fees against the U.S. under the Equal Access to Justice Act”. It doesn’t. The EAJA has more restrictions, including a rule that fees cannot be awarded to an entity with more than $7M in net worth or an individual with more than $2M. There are also statutory caps on billing rates in the EAJA. None of that is in HR 3309.As for who’s behind this bill, the original proponents were the American Association of Advertising Agencies and the Direct Marketing Association. See the ad industry position at “http://patents.aaaa.org/”. It seems they’re most concerned about a few specific patents: 6,628,314 and 6,771,290 (relates to targeted advertising), 5,251,294 (“Accessing, assembling, and using bodies of information” – rather vague), and 5,930,474 (store locators).HR 3309 is overkill for dealing with such a narrow problem.John Nagle / Animats

  2. I don’t understand what you mean in the parenthetical when you say “restrict the scope of CBM review to only cover first-to-invent patents (rather than pre-AIA patents) as defined in Section 3(n)(1) of the AIA”First-to-invent patents are pre-AIA patents. Don’t you mean “rather than POST-AIA patents”?

  3. pre-partnership wisdom:We are employing the PRE-PATENT method, while there is no registry (I do have 1st to file, because I did in 1991 but DID NOT PUBLISH after last argument with patent office wrongly siting “new issues” which were not presented nor present in application, I can renew as well as come with New Application describing advanced invention we own in Maritime Industry) such as prepatent-prepartnering registry = where you and I have same powers Big Business has at the USA PTO.So, use the USPTO wisely, as it has never been the inventors’ servant but to serve the best interests of the Department of Commerce and any Ministry of Finance, International Trade, Industry and alike, worldwide. The key to patent protection and insurance is, successful commercialization.So to protect yourself today, file but do not publish, so to use it as original to the patent you will apply for, when your partners and you are ready for commercialization.We are sponsoring an old website which was drafted for the Government of CANADA to capture the needs of Industry Canada to cultivate economic growth related to innovations, and the better use we see for the Canadian Corporate Capabilities registry/goldmind — and the WISDOM is not simple to capture @ http://prepatent.org but we do respond to direct emails send us.The prepartnership, is an automated process the HUB will offer, for all Global Traders.

      1. Enlighten me. Right now recordation is voluntary. Recordation is a benefit to the patent owner such that notice is given to a third party of the transfer. If patentee twice assigns the invention, recordation of the transfer by the first assignee provides a rebuttal presumption against the second assignee (if owner assigned it twice) that the second assignee is not a bonfire purchaser for value. Do you believe that the purpose of the new proposed law is consistent with this? If not, what is the purpose?

        1. Benefit to the patent owner.Not to a nanny state.Not to Big Corp, so that they can see whether or not ‘effective breach’ is a viable option (‘effective breach’ being the state of knowing who owns the patent and determining that the risk of suit is less than the benefit of breach).The only reason why knowing who owns the patent is worthwhile is to know “who you are up against.” Let’s dive a little bit deeper into why that is so important.And by the way, let’s also remember who coined the pejorative “Troll” in the first place – and why (hint: it was not for the benefit of the public).

          1. I think you mean “efficient” breach, anon. I’ve not heard that term applied to infringement before, but you make an interesting point. It’s certainly fair to say that the identity of the patentee is one factor for a big company to consider when it’s targeted by a suit or threat of suit. Not all of the reasons for that are nefarious, though.

              1. Calculating the odds of getting away with breach is nefarious. There are no two ways about it.Is it “nefarious” to challenge a law that you believe should never have been passed?

                1. Are you referring to your odd way of saying that a patent is a personal law?Are you also moving the goalpost (the answer here is yes, as the discussion has nothing to do with challenging the validity of a patent – you do not need to know the WHO of who owns a patent to challenge the WHAT of validity)?Try to remember that our founding fathers wanted patents to be freely alienable. Try to figure out why that is important here.But keep on trying to kick up the dust clouds Malcolm.

          2. The only reason why knowing who owns the patent is worthwhile is to know “who you are up against.”That’s not the only reason. I’m not “up against” anybody but, like everybody “in society” that I know (except for some crazy people and patent trolls), I’d like to be able to easily find out who has an ownership interest in any patent that may potentially be asserting against anyone. Patent claims restrict the right of everyone to make, sell or use things. These rights are granted to applicants by the government, i.e., by we the people, in a manner that we control at our whim. Why would we not want to know who owns these rights?

      2. It does seem that the traditional rationale for assignment recordation is the same as for real estate deeds (typically a purchaser protecting against later-asserted interests). Still, given the potential for a patent owner to accuse anyone of infringement, I think there is a compelling public interest in knowing who really owns this right. Maybe we don’t need to know the precise ownership of that house down the street, held in a trust. But that house isn’t about to come crashing down on you in federal court if you make a product or provide a service having certain features.

        1. Andrew – to take the house analogy one step further. If the house is owned by an out of state trust are you more likely to use the property without the permission of the owner, and say, allow the neighborhood kids to play a pick up game of soccer on the front lawn? Contrast that with whether you personally know the owner of the house – would you still allow the neighborhood kids to play?My point is – does knowing the ownership interest in the patent influence whether you are going to respect the government granted monopoly on the subject matter that it claims?

          1. The key difference is with regard to the notion of using the property without permission. With the soccer game, there will seldom be any uncertainty about whether that is trespass. You know quite clearly whether you’re on the lawn or not. That is not usually the case with patents given the room for debate about validity, enforceability and infringement.

    1. What societal benefit is there to requiring those who own the patent to register their interest?It’s the same “societal benefit” that requires that we (i.e., “society”) knows who is responsible for enacting and enforcing any other law that we may be hauled into court for allegedly breaking. It’s called “accountability”. It allows “society” to keep informed about the people and institutions who are acquiring/asserting the right (or rights) to tell other people what they can and can not do.The people who have trouble understanding this are invariably the same people (1) who support patent trolling and believe that “more patents, all the time” is the best thing for “society” and (2) who enjoy pretending that there is no distinction to be drawn between a patent right and, e.g., the right to “anonymously” own a pencil.

      1. Patents are not “law” per your odd little way of looking at things.The actual law tells you what they are: personal property.Try to be intellectually honest about this, please.

    1. You’re right aren’t you. That would mean to appeal rather than file an RCE. That would crush the board and the points the examiners need. Eh, 6?

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  5. Lest we forget one of the major drivers of this legislation:link to arstechnica.com…When a patent-holding company called Lumen View Technology sued FindTheBest, a consumer research website, the reaction it was looking for was a quick $50,000 payout for its patent on “multilateral decision making.” Instead, it ran into an entrepreneur willing to spend $1 million to stop it through a RICO lawsuit, and it found itself on the receiving end of a batch of tough publicity when FindTheBest’s CEO, Kevin O’Connor, started talking to the press about his fight.Lumen View’s lawyer, Damian Wasserbauer, really wants those bad headlines to disappear. He returned to court this week seeking a judicial order to silence O’Connor and his colleagues. He wants the judge to issue an order stopping FindTheBest or its lawyer from talking to the media or taking to social media to discuss “confidential settlement information.” And Wasserbauer wants more: he thinks FindTheBest should be forced to ask for corrections, and it should “remove from the Internet its prior media disclosures, blog posts, or press releases that disseminate this protectedinformation.” ….The rule that Wasserbauer cites, Rule 408 of the Federal Rules of Evidence, is not actually the legal gag order he apparently imagines it to be. The rule doesn’t say anything about talking to the media. It simply states that offers of compromise or settlement are often not admissible as evidence in court.”I’m an attorney, so I don’t comment on ongoing litigation,” was Wasserbauer’s only statement when contacted today by ArsLOL! Some “attorney”.We live in a wonderful age, folks, where information is easy to share. Don’t hesitate to share your experiences with patent trolls.

    1. From FindTheBest’s blog about this lawsuit:link to pandodaily.com…I reached out to Shapiro directly to ask her a few questions about her interest in the patent and let’s just say she was not thrilled. I asked Ms. Shapiro if she held any economic interest in the patent and she repeatedly recited the same thing, “I was a co-inventor of the patent but no longer own the patent.” In other words, she refused to answer thequestion and claimed not to know the lawyer I was referring to. Later that day, we received another phone call from Wasserbauer. Wasserbauer claimed that we had committed a “hate crime” against Shapiro and were in violation of the discovery process, which was false. He then told us we had until the end of the day to settle the case or face criminal charges for harassment. We immediately notified the FBI of his extortion attempt. …If I had signed an NDA, I wouldn’t have been able to use Shapiro’s name, talk about Lumen View Technology, the shell company that served us with the lawsuit, or the Hillcrest Group, where Shapiro is a venture consultant. I probably wouldn’t have even been able to write this article. I’m certain they will threaten us with more lawsuits after going public… Lots more good reading at the link. These NPE are ethics-deprived money-grubbing bottom-feeders, by any definition (being generous here), and the self-identified “patent apologists” out there have already spent way too much time over the past several years attacking the wrong people for the wrong reasons. They dug a nice hole for themselves and now I suppose they’ll just pretend it’s really warm and comfortable there.

  6. During the Opening Session of the AIPLA 2013 Annual Meeting today in Washington, DC, Dana Collaruli, USPTO Director, Office of Governmental Affairs, told attendees he thinks the patent reform legislation introduced this week by Rep. Bob Goodlatte, Chairman of the House Judiciary Committee, has a good chance of passing.

    1. Yeah, the word on the street that I’ve heard is that it has a 50 percent or better chance of passing, which is incredible really given that these things usually take years.

    2. I agree — this is coming out of the legislative gate with a full head of steam. There will probably be some amendments, but I think this will pass.

      1. More than just ‘seems.’The self-congratulatory Goodlatte prologue was directly challenged by Watt’s statements.Even with the decidedly biased data that went into the GAO report, the end result of that report is nowhere to be found in the Goodlatte witchhunt.And people laugh at the Salem witch trials and think that such could not possibly happen in today’s ‘modern’ world…Once again – exactly who coined the “Troll” term and exactly why was that term coined?

  7. “Second, the provision indicates that a patentee who extends a covenant-not-to-sue to the other party will be deemed a non-prevailing party and thus subject to attorney fees. “Not sure why this is a problem. It doesn’t apply in all instances, only when the CNS is “unilaterally” offered. Doesn’t apply to a CNS that is a result of the parties mutually agreeing to a CNS as a settlement.It’s to address the problem where the patent troll takes a meritless case all the way to the eve of trial, then unilaterally presents the defendant with a CNS thereby robbing the court of the ability to deal with a bad patent. This currently happens in cases in which the troll wants to avoid having their patents invalidated at trial. Then the troll starts over by suing another defendant in a different court. The CNS provision is an attempt to stop this kind of abusive behavior.

  8. Man, there is so much going on in this bill. I’ll bet that right now the BigLaw defense bar is privately cringing over the discovery hold. If that becomes law, there will be a precipitous decline in billable hours in patent cases. I doubt many judges would exercise their discretion to allow significant discovery on matters unrelated to claim construction.

    1. I’ll bet that right now the BigLaw defense bar is privately cringing over the discovery hold. If that becomes law, there will be a precipitous decline in billable hours in patent cases.I agree that billable hours spent on discovery in individual cases may decline for the “BigLaw defense bar” but I don’t think it’s a cringe-worthy event for them. Maybe someone from the BLDB will chime in to correct me …

      1. I was once a minion in that BLDB. I spent a large part of my time doing discovery work in patent cases. A big part of that never would have happened had this discovery hold been in place then.

  9. Re: Claim construction. The new law is way too narrow. It should apply not only to IPRs and PGR, but at least to petitions for ex parte. What happens and can happen is that party-infringer can anonymously submit a petition with the claim construction he prefers even after he have lost that battle in court. In order to avoid this game playing and avoidance of principles of estoppel, every petition should use court constructions before the PTO orders a reexam.

  10. Re: elimination of 145. They say a continuation is the way to get new evidence in. But, is this entirely true? A district court allows full discovery, even of third parties if necessary. Discovery is not available to the patent applicant in ex parte proceedings.

      1. LB, my reply to Owen, but lets assume that you believe that a reference actually was one’s own work. Now, just how does one prove that without discovery?

        1. ets assume that you believe that a reference actually was one’s own work. Now, just how does one prove that without discovery?You could file a declaration stating that the reference was actually one’s own work. Maybe with some corroborating evidence, too. Inventors should be aware of the need to keep records of such things.

          1. Malcolm, now that would be a twist, wouldn’t it? One would still need to keep records of conception and reduction to practice to show that what appears to be prior art is really one’s own work.

            1. One would still need to keep records of conception and reduction to practice to show that what appears to be prior art is really one’s own work.And, correct me if I’m wrong, but you are also going to need to prove that your idea was stolen from you by someone who then published it before you filed your application. Here’s a better course of action: if you want a patent, file the application before someone publishes your idea or you’re going to be hosed.

  11. Transparency of Ownership. As a new required disclosure, the patentee in an infringement litigation must disclose anyone with a financial interest in either the patents at issue or the patentee and must additionally disclose the “ultimate parent entity” of the patentee. In the appropriate Federal Regulations, an ultimate parent entity is ethereally defined as “entity which is not controlled by any other entity.”Most excellent.

  12. Question: in bullet point 11, should it read “The new law would somewhat restrict the scope of CBM review to only cover first-to-invent patents (rather than POST-AIA patents) as defined…” Thanks, I’m a bit confused.

  13. Covered Business Method Patent Review….The new law would somewhat restrict the scope of CBM review to only cover first to-invent patents (rather than pre-AIA patents) as defined in Section 3(n)(1) of the AIA.What is the reasoning behind that? Boo.

    1. It is odd. This was one change from the proposed bill that had substantially expanded CBM coverage both in scope and duration.

    2. Maybe fairness. As in passing a bill retroactively may not be fair when the bill makes it so that if you assert your validly obtained patent the defendant may trigger an automatic stay and return you to the PTO. Maybe retroactively doing that is not fair.

      1. I agree that the rights of existing stakeholders should be considered when fashioning laws that apply retroactively. But it’s not the only consideration. I’m curious as to whether this modification was made to appease certain parties who, in exchange, agreed not to challenge some of the other provisions.

  14. Still, I’ll bet this doesn’t change much. You know the more complicated you make this, the more the attorneys charge.

  15. No Civil Action to Challenge PTO. The new law would eliminated the civil action option found in 35 U.S.C. § 145. Patent applicants refused by the patentee would rather only have the option of appealing directly to the Federal Circuit.I don’t like this one. This one kept the PTO in line.

    1. And also introduced the absurdity of allowing evidence into the proceeding after the proceeding was concluded. Who knows what other little wrinkles are hiding?

    2. To be sure, this proposed elimination of civil action is not happening in a vacuum. The congress sees the games the courts are playing.

        1. What is the benefit of discovery against the PTO? Is there PTO work product being hidden from the public record somehow in these appeals or is there some other situation that just isn’t obvious to me?

          1. Perhaps a reference device does not work. Now how does one prove that without getting one and all the data on its construction and operations, and seeing if it does work, or has the alleged inherent feature.Perhaps the alleged reference was the patentee’s own work. Now how does one prove that without discovery?Perhaps the alleged publication was not published. Discovery could prove that one way or the other.Perhaps the rejection is for lack of enablement. Discovery could prove that the disclosure was enabling.I could go on, but you get the point.

            1. Perhaps a reference device does not work. Now how does one prove that without getting one and all the data on its construction and operations, and seeing if it does work, or has the alleged inherent feature.This is just run of the mill prosecution. You either argue your point or (if worse comes to worse) submit an expert declaration, making only the incontrovertible statements necesary to rebut the Examiner’s arguments. Third party discovery is a rather extreme recourse, no? Something I wrote five years ago that is cited by an Examiner is challenged by some alleged “inventor” who really really really wants a patent so now I need to cough up some ancient documents or hire a lawyer? What? C’mon.

                1. When you say “do not have access to”, do you mean “do not have access to” or do you mean “third party discovery would make it easier”?

                2. Third party discoverer would make it easier…Sort of like third party discoverers making it easier to know who owns personal property?Or sort of like third party discoverers making it easier to know personal conversations (which aren’t even ‘property’) – ala NSA?Slippery slopes…

          2. While the rules for the processing of the patent right state that all transactions are to be in writing, that is simply not the case. Yes, Owen, PTO work product is routinely hidden from the public record. Second set of eyes deliberations and pre appeal conferences are (largely) off-record. SPE-examiner deliberations are off-record. If the Office were to follow the rule of law, ANY action affecting an application would be reduced to writing and put in the record.

    1. 6, if you are a real fan of rigging the system and denying due process, I will agree the good congressman is non the right track.

  16. There is something I do not get about the proposed “obviousness-type” double patenting statute. Why limit the statute’s effect to 103? Does this limitation to 103 implicitly authorize two patents on the same exact invention?

      1. IANAE, perhaps, and perhaps not. But why limit the scope at all if that is in fact the case. This doesn’t make sense.

      2. But they say are codifying the double patenting doctrine. The new statute will be construed that way. There is a risk that if a patent does not fall literally within the scope of the new 106, it may not be unpatentable/invalid under the double-patenting doctrine. I think everyone behind needs to this to think this through.

    1. I must point out that the good congressmen think they are in fact codifying double patent doctrine when they are not. From the notes:”4) Prior art in cases of double patenting – codifies the double-patenting doctrine….”

  17. Regarding the customer suit stay, I don’t understand why it Is needed. Since Codex v. Milgo, and the cases that follow it, courts enjoin (stay) “mere” customer suits. Further, under principles of privity with notice (see the recent Aevoe Federal Circuit case) “mere” customers seem already to be bound by orders against their suppliers.

    1. I think it’s aimed at publicity from the scan-to-email troll shakedown that was circulating last year. Of course, the provision wouldn’t help in that case since* The troll didn’t seem to be litigating, just threatening* The troll didn’t sue the manufacturer at all* The scanners had other non-infringing uses and it’s not clear the patent would even apply against the manufacturerSo the provision might be simultaneously overdrafted and inadequate.

  18. I don’t imagine Goodlatte cares about the patent system so strongly as to have invested lots of time studying the issues and forming independent opinions that are reflected in this legislation; more likely one or more industries lobbied the hell out of him, and his bipartisan cohorts, and handed them “suggestions.” Any time something gets bipartisan support in Congress these days you know it must be (a) something incapable of producing a pitchforks and torches response from either the left or the right and (b) deep pockets are heavily funding both sides of the isle. Anyone know who’s trying to change the laws to suit themselves better?

  19. At first blush, this bill looks like it would have vastly more impact on patent litigation than did the AIA. Loser-probably-pays is huge.

    1. I see this as a huge improvement over the status quo. The heightened pleading standards, disclosure of interested parties (and corporate structure), and loser pays make this something I can get behind.Also, I like the limitation of discovery where there’s a claim construction issue.I see almost no downside to many of these provisions and will at least work to bring some amount of sanity back to process.

      1. I like the discovery hold and disclosure requirements, but I worry that the loser-probably-pays provision might make litigation a practical impossibility for small businesses and individuals. The potential liability for fees would be frightening.

        1. Here’s why I don’t think that that’s such a big deal: patents are strict liability and the fee shifting is limited by a substantially justified. If you’re going to assert infringement and bring the full weight of the civil litigation system against someone, you’d better be darn sure you’re patent is valid and they infringe.If you don’t have a substantially justified reason to believe your patent was valid: shame on you. You never have had a good right to begin with and you just caused another party to spend lots of money unnecessarily. If you weren’t substantially justified in your infringement argument, doubly shame on you.

            1. I’d be really curious how many “infringers” file suit before being threatened with infringement. That wouldn’t seem to stand up to the standing requirement for a DJ action.

              1. Badger, there are multiple problems here. If a patent owner has information that leads him to believe that X infringes, if he opens his mouth, he could be DJed. If it later turns out that the party who DJed him does not infringe, or he cannot afford the litigation, then he might end up paying the costs of the infringer.Now, from any point of view, one can see there is something fundamentally wrong with this from a due process point of view.

                1. If you have standing to file a DJ, then you have standing to file a DJ, i.e., you have been led to believe that a patent lawsuit is going to be filed against you. Why is there something “fundamentally wrong” about having the patentee pay for your costs under this situation when the patent is shown to be garbage?You also wrote: If it later turns out that the party who DJed him does not infringe … then he might end up paying the costs of the non-infringer who was deemed to have been sufficiently threatened to have DJ standingMy corrections in bold. I don’t see where there is a “due process” problem here. The “due process” problem with patents will always be the fact that every patent claim is a law written by a non-elected citizen with the help of a non-elected government employee which limits my ability (and everyone else’s ability) to practice the claim for roughly two decades. If a patent owner can’t learn to keep his/her mouth shut about exactly who needs to take a license to their “valid patent”, then they deserve to be taken to the cleaners by anyone willing to take them on.

                2. You mean practice the claim that has been duly recognized (and presumed valid – by law) as being the right of another?This appears to be straight out of the Infringer’s Rights Handbook.

            2. If this goes forward, then DJ defendants that aren’t ready to stand behind their patent and earlier infringement assertions might want to consider a quick covenant-not-to-sue, Ned. That will keep the costs down.

                1. Ned, are you saying that it’s fundamentally unfair to incentivize a patentee to walk away from a DJ action (on a patent he has threatened someone with, lest we forget) if he has no substantial basis for believing he can win?

                2. IANAE, the courts have ruled that an NPE can be hauled into court by breathing near a big boy. This means an NPE cannot even offer a license to a big boy without being hauled into court. What is this going to do? It is going to prevent negotiations. NPEs rather will get their proofs in order and simply file suit without prior notice. This might prevent shakedowns, but it will result in very weird behavior by both patentees and by the big boys, the latter will have to be a lot more diligent about not being blindsided. Otherwise a substantial investment in a new product might result in substantial damages and the payment of a patentee’s attorney fees.As the big boys figure this out, they just may have a change of heart.

                3. Ned, I think any loser-pays rule must include sufficient safeguards to protect a patentee acting in good faith, so I haven’t made up my mind on the proposal. However, I don’t think the proposal is any more unfair to DJ defendants than to patentee plaintiffs. There should be real consequences to threatening somebody’s business when you haven’t done your homework.

                4. LB, there are real consequences now — the DJ itself. But, if the patent owner has to pay the costs of the plaintiff, and if he has to get out quick or else, then he will get out quick. What’s going to happen as a consequence? PO’s are going to keep quite until they have their ducks all in order, then they will file suit without prior notice as they have no choice to even think about any other approach. But this really hurts patent owners who have a reasonable belief in infringement and need some discovery to prove it. This will particularly be true in the case of process patents.

                5. this really hurts patent owners who have a reasonable belief in infringement and need some discovery to prove it. This will particularly be true in the case of process patents.If you have a reasonable belief in infringement, then you must already have some good evidence that all the limitations in your claim are met. I don’t see where the patent owner is “hurt” in any unreasonable way.As for process patents, such patents have always been considered less valuable because it’s harder to meet the good faith requirements when you can’t “buy the process” and take it apart. I don’t see where there is any unreasonable “hurt” is being handed to patentees here. PO’s are going to keep quite until they have their ducks all in order, then they will file suit without prior notice as they have no choice to even think about any other approach.I don’t follow you, Ned. If the PO has “all its ducks in order”, then won’t the DJ action typically result in a loss for the plaintiff (i.e., the bringer of the DJ action) with the fees being paid by that plaintiff?

                6. Malcom, If a patent owner has his proofs in order, he has gone to a lot of expense already. He has reverse engineering done. He has expert opinions. That costs a lot of money. I say, he files suit rather than send a notice of infringement. If the infringer caves, the PO not only wins a judgment, he gets his investments in the litigation back.If the PO does not get fully prepared, he may find himself with a losing hand halfway through because he cannot prove infringement. If he then pulls out, he loses big time, having to pay the other guy’s attorney fees.No, the new law is going to change things a lot. The first time an big boy infringer learns of a patent is with the summons, and then he knows ship is sunk because the PO would not have sued unless he knew he could win.

        2. Well call goodlatte and make sure that he understands small entities need an exception maybe, or a limit on their total costs that would have to pay out in a loser pays situation.

          1. 6, you need to understand that the whole point here is to eliminate startup from entering or remaining in the field of competition of the big boys. The big boys see your product and copy it. If you open your mouth, they DJ you and you have to settle because you cannot afford to lose even if you think you are right.Where does that leave invention in America?

            1. Ridiculous, just how many of “the big boys” do you think reside in Goodlatte’s area?”If you open your mouth, they DJ you and you have to settle because you cannot afford to lose even if you think you are right.”Then don’t open your mouth until you’re ready to back it up? Is it that hard to simply get your house in order prior to opening your mouth? Responsibility, apparently the worst thing ever in the entitlement program that is patent system.

              1. Sure, 6, sure. Next time your client is sued for infringement without prior notice you might ask why the patent owner did not even try to negotiate first.

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