Patent Reform 2013: Measured Reform Proposals from the Senate

Senators Leahy (D-VT), Lee (R-UT), and Whitehouse (D-RI) have proposed their own patent reform bill titled the Patent Transparency and Improvements Act (PTIA) of 2013 –this one much more narrowly focused on egregious patent enforcement abuses. As compared with the Goodlatte proposal, the Leahy-Lee proposal is much more measured and limited in its action. Democratic leaders on the House Judiciary Committee (Representatives Conyers and Watt) have announced their support of the Leahy-Lee approach over Goodlatte's that would include "far ranging changes to the litigation system, such as limits on pleadings and discovery, and intrusive mandates on the court system." 

The Leahy-Lee PTIA includes a number of interesting provisions. Most of the provisions are replicas of those already proposed in other bills. One new provision here is a statement authorizing the FTC to act against unfair and deceptive practices associated with the sending of fraudulent or materially misleading demand letters in connection with the assertion of a patent. Although not stated, the new law would also be tangentially useful for both state attorneys general and for private class-action plaintiffs to seek compensation against egregious actions.

A key element of the proposal would be to require that any demand letters include a statement of (A) patent asserter's identity; (B) the patent being asserted; and (C) the reasons for the assertion.

Under the proposal, the new statute would state that:

It shall be an unfair or deceptive act … for a person, in connection with the assertion of a US patent, 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 if –

(1) the communications falsely threaten that administrative or judicial relief will be sought if compensation is not paid or the infringement issue is not otherwise resolved;

(2) the assertions contained in the communications lack a reasonable basis in fact or law, including, for example, because—

(A) the person asserting the patent is not a person, or does not represent a person, with the current right to license the patent to, or to enforce the patent against, the intended recipients or any affiliated persons; or

(B) the communications seek compensation on account of activities undertaken after the patent has expired; or

(3) the content of the written communications is likely to materially mislead a reasonable recipient, including, for example, because the content fails to include such facts reasonably necessary to inform the recipient of—

(A) the identity of the person asserting a right to license the patent to, or enforce the patent against, the intended recipient or any affiliated person;

(B) the patent issued by the USPTO alleged to have been infringed; and

(C) the reasons for the assertion that the patent may be or may have been infringed.

The Senators will readily admit that this statute is only directed toward the worst offenders and would not serve the goal of generally weakening the ability of a patent holder to assert its rights.

In addition to the bad faith demand letter rules, the proposal would also improving post-issuance review procedures to require that the PTO apply the same claim construction as used in court rather than the “broadest reasonable interpretation.”  In my view, this change should be implemented across the board so that all interpretations made on the record at the PTO will have a direct and foreseeable impact on the scope actually given to claims during litigation. At the same time, the PTO should be able to maintain wide authority to object to claim terms that are indefinite or poorly defined. 

A full outline of the bill is here and the text is here.  Up next – the Demand Letter Transparancy Act of 2013.

28 thoughts on “Patent Reform 2013: Measured Reform Proposals from the Senate

  1. That’s mild compared to the fee-shifting provision in HR 3309, which is out of of markup and on its way to the House floor for a vote. Opposition is building but there’s a frantic effort to push this through before the opposition becomes too strong. The fee-shifting language was changed slightly during markup. One Congressman commented that the amendment made it “slightly less awful”. Here’s the new language: “Page 5, strike lines 18 through 25 and replace it with the following:(a) Award. The court shall award to a prevailing party reasonable fees and other expenses incurred by that party in connection with a civil action in which any party asserts a claim for relief arising any act of Congress relating to patents, unless the court finds that the position and the conduct of the non-prevailing party or parties were reasonably justified in law and in fact or that special circumstances, such as severe economic hardship to a named inventor, make an award unjust.”Questions for the attorneys here:1. Is there a safe harbor in there? Is there some set of conditions a plaintiff could meet which would protect them from paying the other parties’ expenses if they lose?2. Does this apply to infringement claims against the Government? Can the plaintiff be required to pay the Government’s fees? Is there any other part of US law where that is required?John Nagle / Animats

  2. I’m glad to see Congress work on this. Let’s craft a solution at the federal level, where it belongs, and preempt the patchwork of state regulations now being woven.

  3. If this is meant to address the flood of stupid patent demand letters (as compared to curb litigation abuses), then I’d prefer that Congress just leverage unfair debt collection laws or allow state law claims to govern demand letters. This seems to be the fairest way to level the playing field without going all the way to “patent litigation.” Alternatively, you could even imagine a non-litigation procedure that would allow a letter recipient to require of a sender:1. Evidence of infringement2. Evidence of ownership of the patent3. The amount believed owed attributable to that infringement.If the letter writer fails to provide that information upon demand, then they’re estopped from suing or further seeking collection.This wouldn’t prevent litigation immediately, but it certainly would work to mitigate the expense associated with frivilous fishing expeditions.

    1. Evidence of infringement might require discovery. I think fairness dictates that no more than an explanation of the reason for suspicion of infringement be required.

      1. I could go for an articulation of the reasonable basis for infringement contention. (And if you have a reasonable non-infringement position on that then you have a reasonable defense to willfulness).

  4. I think it would be pretty difficult to prove a false threat under (1). People change their mind about litigation all the time. If even one party that ignores a demand letter gets sued, can it be said that the threat was false?And how far does the suit have to go? Note that it only requires that relief be “sought.” Is filing a complaint enough? Reaching some kind of decision on the merits? Final judgment? What about filing a complaint, engaging in pro forma settlement talks that recapitulate the demand letter, and then voluntarily dismissing the case?

    1. “People change their mind about litigation all the time.”Perhaps they should be required to be ready to follow through before wasting other people’s time?

  5. “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”Note the “and.” This suggests to me that one could avoid the requirements of the law by stating either that the recipient infringes or that they bear liability, just not both. Something like “Are you aware of the ’123 patent? Your company’s activities may be infringing it. You can avoid an expensive lawsuit to determine whether or not you are infringing by paying a licensing fee of $X.” No statement of infringement there!It’s really just a variation on the declaratory judgment jurisdiction-avoidance dance.Also interesting that it’s limited to written communications. I haven’t heard of anyone using demand robo-calls or a call center to issue licensing demands, but it seems like a way around the law.

      1. Quite possibly not. My comparison to DJ jurisdiction was to say that patentees will continue to engage in the same behavior, just with some tweaks to avoid the consequences of the change in the law. I think that’s what happened with MedImmune. Demand letters are still sent, they’re just a lot more vague.I would say that by the time a letter can avoid DJ jurisdiction it would probably also avoid this law. The point of the hypothetical I gave was to suggest that it would be possible to write something that looks an awful lot like a demand letter, with very clear expectations, that nonetheless wouldn’t trigger the additional requirements of the law. Letters that avoid DJ jurisdiction these days are so vague that it’s hard to really call them demand letters.

        1. …so because of MedImmune, the ‘demand’ letters have become MORE fuzzy and unclear…?Something about the law of unintended consequences comes to mind…

            1. Leopold, I do not think you understand the gist of what is going on – or, you are not on the same page as your ‘brethren’ when it comes to these letters – many feel that they cannot be safely ignored, nor are they OK with the consequences of doing such.

            2. anon, I tell my clients to run their businesses based on what they know, not based on fear. Show me the case where someone was found to be willfully infringing because they received a letter that said “we’re not saying you’re infringing – we’re just sending you this list of patents because we’re really nice guys,” and then I’ll change my advice.

            3. Oh don’t get me wrong, Leopold.I agree with you that receiving a business communication (any business communication) that is unintelligible – and lacks so much specificity as some of the worst examples of “Troll” letters – and can be lacking in any real ‘bite,’ may not amount to much of anything, but that is not the gist of the conversation here.I would advise any client receiving such a letter to simply respond with a request for particularity in order to properly assess any contemplated action. A letter that is deemed to be a threat of a lawsuit (whether or not such threat rises to a DJ action) should be treated with a nominal amount of seriousness. That nominal amount can easily be “please provide adequate information.” A rule of reason should prevail and the ‘need’ for legislation is quite the over-reaction here. But that is what happens when the patent system is under attack.

            4. when it comes to these letters – many feel that they cannot be safely ignored,I thought such annoyances were screened out by your mailroom staff.

  6. I see no reason why this needs to be an either/or situation, why can’t we have both the senate’s suggestions and the house’s suggestions?

      1. A problem to be considered Leopold, even for commercial speech is any overreach that chills perfectly legal speech.Here, informing someone that they may be infringing and that they should consider taking a license of contemplate the costs of a legal battle is being overhyped as ‘the worst thing ever.’ Much of the proposed legislation simply goes too far.It’s not like it is the first time that the legislature has attempted to (or even passed) law that has been deemed to violate the constitution.Here, the evidence of dust-kicking is plainly visible before any legislation is passed. Blind eyes are running amuck.Sound familiar?

  7. I have no problem with B or C. But once again, I don’t understand the need for A. The only reason for A that I can see is so that rich infringers can determine that the patent owner is too weak to worry about.

    1. Identifying the actual patent owner allows the alleged infringer to check whether the owner is violating any contracts or injunctions.Suppose, for instance, that company A sells the right to make some product to company B, then has subsidiary C, owned by an off-shore trust of which A is the ultimate beneficial owner, sue B for patent infringement. Company A is clearly not acting in good faith, but it would currently be difficult for B to establish that C was actually an arm of A.You may argue that this never happens, that no business owner would ever be so unethical, but how would we know?

  8. I think broadest reasonable interpretation in initial examination (not on appeal) is relevant given the presumption of validity. All post allowance practice or post initial examination (appeal) should be conducted on the basis of actual meaning though.

    1. I might be inclined to go the other way, PA.Use broadest reasonable interpretation throughout – after all, if the interpretation is in fact reasonable, then the interpretation really should not be that different from the Doctrine of Equivalents, and the granted patent would still match the examined application. As it is currently (at least theoretically), BRI creates a no-coverage zone that may actually belong to the applicant.

      1. I agree, and that’s why I said actual construction on appeal. Either you get what you ask for, or, if you think you deserve and need that empty space, appeal. That makes it quicker and cheaper to issue VALID patents.

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