This post provides some initial notes from my first read-through of the proposed legislation. More information regarding the proposal is available at an earlier post here.
- Top Secret Development: The proposed legislation was developed in-secret by a closed-group representing industry organizations. As it turns out, however, the major big-industry players are not all on-board and neither are groups of would-be patent plaintiffs. The end-result is a bill that is heavily tilted toward providing additional avenues for challenging patent validity and for reducing the power of all patents. In that sense, the Bill is a gift to potential defendants. In the end, the legislation is so one-sided that it is quite unlikely to move forward without a complete overhaul.
- No Grace Period?: The proposed first-to-file has been contentious for many years. Proponents of the change talk about how Interference proceedings are an awful process and first-to-file avoids that problem. A first-to-file system automatically awards the patent to the first applicant who submits the patent application. The proposed legislation, of course, does far more than ease resolution of interference disputes. The proposal shifts all focus from an invention date to the “effective filing date” and in-the-process eliminates the US one-year grace period. Notably, the grace period would still be intact for the inventor’s own disclosure.
- Joint Research avoids Anticipation: The grace period is also still intact for disclosures made by the patent assignee — a provision clearly favoring companies with larger research-arms. In addition, there is still a one-year filing grace-period for disclosures made by parties to a properly-written joint research agreement.
- Public Use and On Sale Activity outside of the US would now be considered prior art. This is probably justified by recently expanded extraterritorial effect of patent enforcement.
- Damages a new floor: The new damages proposal is very specific and sets a new (lower) floor for damages. Under the proposal, courts must conduct a reasonable royalty analysis focused at the “patent’s specific contribution over the prior art.” The statutory language surrounding this analysis appears to be complex enough to occupy dozens of CAFC opinions explaining the proper methods of determining the economic value of the difference between the invention and the prior art. Reasonable royalty does, however, remain only a floor — although according to the statute, it must now be calculated (even if going after lost-profits). (Jury Trial Issues?)
- Clear Path to Avoid Willfulness: Adios Treble Damages. The patent community spends a considerable amount of time discussing willful infringement and the associated enhanced damages. The current patent statute, however, does not mention willful infringement allowing for additional theories for enhancing damages. The amendment would limit treble damages only to cases where willfulness is found based on clear and convincing evidence of either (1) notice of how particular acts infringed particular claims or (2) intentional copying with knowledge of the patent or (3) continuing to sell the infringing product after being adjudge an infringer. “Good faith” by the infringer avoids willfulness. Although the ‘rules’ regarding increased damages have been becoming ever more stratified, this statute removes the vast majority of the current leeway given to courts and juries.
- Bifurcation of Trials: Many defendants believe that juries are biased simply by hearing that they are accused of willful infringement. The reforms would bar a patentee from even alleging willfulness until after the patent has been found valid and infringed.
- Inter Partes Reexamination: Many patent litigators have warned clients against filing inter partes reexamination requests because of the litigation estoppel created by by 35 USC 315(c). That provision estopps later validity challenges on grounds that a third party “raised or could have raised” during the reexamination. The Patent Reform Act would limit the estoppel to only issues actually raised — striking the “could have raised” language.