Patent Reform 2015: Republican Agenda

by Dennis Crouch

Although the Washington DC politics of patent law is somewhat confusing, the divide on tort reform is much more clear and the pending patent reform legislation in Congress is largely tort reform (but with a focus on patents).  The Republican led House of Representatives passed the Goodlatte Innovation Act in 2013 (H.R.3309), but Democrats in the Senate have stymied the Bill’s progress despite support from the White House.  With Senate control now in Republican hands, I expect that a revised version of the Innovation Act will be able to pass through both houses of congress in 2015 and be signed by President Obama.

Meanwhile, changes in the patent system since 2013 have somewhat tempered demands for reform. Particularly the Supreme Court took strong pro-defendant positions in Alice Corp (patent eligibility), Nautilus (indefiniteness), and Octane Fitness (attorney fees) and, at the same time, the new post-issuance review proceedings have proven to be effective mechanisms for challenging patents in parallel to court actions. Further, it is likely that Supreme Court will raise pleading standards for patent cases (by eliminating Form 18) this calendar year as part of a larger reform of the rules of civil procedure. Likely as a result of  all of these factors, new infringement lawsuits are down as is the market-value of patents.  To be clear though, pro-reformers are still calling for reforms and this may be low-hanging fruit for Republican lawmakers.

H.R. 3309 as passed includes:

  • Substantially raising the pleading standards in patent cases – well above Iqbal and Twombly;
  • Creating presumption of fee shifting and ability to join ‘interested’ parties to pay fees when a losing-patentee is under-capitalized;
  • Severely limit pre-claim-construction discovery;
  • Partially limiting the availability of pre-suit demand letters for proving willfulness when seeking punitive (willfulness) damages;
  • Requiring transparancy of ownership;
  • Allowing for stays of customer-lawsuits in certain situations;
  • Narrowing the estoppel provision for Post-Grant Review filings; and
  • Codifying double patenting.

Indications are that President Obama’s administration and USPTO Director Nominee Michelle Lee support these changes (with some modification) — making this an area of early bipartisan cooperation in the new Congressional term.

Dennis Crouch

About Dennis Crouch

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

67 thoughts on “Patent Reform 2015: Republican Agenda

    1. Yeah I agree. With a Google Congress gridlock is better. O’Bummer has lost his way. He has become just like George (“the baboon”) Bush.

  1. “With Senate control now in Republican hands, I expect that a revised version of the Innovation Act will be able to pass through both houses of congress in 2015 and be signed by President Obama.”

    Huzzah! Democracy triumphs even through the republicans lol!

  2. While the Republicans have a majority in the Senate, they don’t have 60 votes. Absent that, I believe it only takes one Democratic Senator (ahem – Leahy) to fillibuster a Republican-supported bill such that it never gets voted on by the full Senate. Let the lobbying begin!

      1. I just never agree with Democrats on anything, but how can they be so right here and the Republicans be so wrong? Both favor big business, but in this instance, Obama is cozying up (e.g., google) while the rest of his party is pushing away. It’s just so schizophrenic.

    1. Why would Leahy filibuster the bill? He was supportive of some parts of the Goodlatte bill, and he was upset when Harry Reid held up Leahy’s version of the bill in the Senate.

    1. 1) remove the appeal of patent cases from the review power of the Supreme Court (as noted in the comments at link to patentdocs.org )

      2) clarify and remove the mess surrounding patent eligibility, restoring the sense of a wide open front gate.

      3) go on the offensive and remove the speculative “such may happen” reasoning of the Court, and remind the Court that an actual case or controversy is required for the Court to invoke any “constitutional issue,” if the Court attempts to override the limitation of subject matter imposed on the Court.

    2. 1. English Rule default loser pays

      2. Automatic joining of real parties and plaintiff law firms to recover fee awards

      3. Challenge before PTAB for any reason at any time by any party over any issued patent with fees set no higher than first examination fee

      4. Remove presumption of validity, since the PTO is not examining carefully enough to justify it

      5. Higher pleading standards

      6. Discovery reform

      7. Dispositive affirmative defense against infringement by proving that the accused product used, sold, made, or offered was computer software intended for general purpose computers.

      8. Multiply maintenance fees by 10x for 3.5 years, 25x thereafter

      9. Double examination fees, at least double time allocated to examiners per patent; quadruple would be better

      1. Oh, and reform venue shopping. Defendants should get their home office or headquarters DC as the default venue. Appeals should be to regional courts of appeal, not CAFC.

          1. Lots of business have a legitimate use for patenting new technology. None of the reforms I propose would cause them trouble. I want to neuter only the cheats, abusers, and trolls.

            1. Owen,

              You need to realize that your view of “legitimate” falls short of what patents are.

              negative rights, fully alienable as personal property.

              Please come up to speed on the basics before inserting your emotional baggage.

            2. “None of the reforms I propose would cause them trouble. ”

              8. Multiply maintenance fees by 10x for 3.5 years, 25x thereafter

              9. Double examination fees, at least double time allocated to examiners per patent; quadruple would be better.

              For starters, these would cause everyone a lot of trouble.

              1. If one remembers that Owen tends to operate in a vacuum, then the recommendation to improve examination by increasing examination time is not bad.

                Increasing costs of course is bad and only serves to make patents a sport of kings (a typical Big Corp answer).

                What the time answer comes down to of course is the necessary trade-off between the unachievable “perfect examination for every application” and some undefined lesser standard in order to process the bulk of applications.

                Prof. Lemley has written of this situation.

                The answer of course cannot be perfect examination, as that is simply not a realistic, achievable goal.

                It is also the reason why we will always have some type of post-grant review.

                I would posit however that one does not improve the quality of the throughput by focusing on post-grant review processes.

                Anyone who has been involved in any Quality Management training will confirm that.

                It all comes back to what I have advocated forever and a day here: we need to re-engineer the business method of how examination is done and how examiners are rewarded.

                Perhaps my pal Hal Wegner is correct in his observation that the recent Republican wins will finally break the logjam created by the Democrat-Patent Union alliance that stymied examination count reform.

    3. 1. Restore the authority of the regional circuits to hear patent appeals. To eliminate forum shopping, provide that the patent owner’s choice of forum shall always prevail if venue is otherwise proper. Restore patent venue to the infringer’s place of incorporation, business or infringement.

      2. End post grant reviews and non voluntary reexaminations as a violation of Art. III. Treat patent owner reexaminations as reissues.

      3. Provide for pre-grant oppositions (esp. for reissues) with a right of appeal to patent owners or to losing opponents who have Art. III standing.

      4. Provide that only the record owner may sue, that non joining joint owners may be joined involuntarily, and that all joint owners must sign to convey a license.

      5. Provide that customer suits must be enjoined in favor of a manufacturer/seller suit if both are directly liable and in privity such that a ruling on infringement against the manufacturer would otherwise be binding on the customer under the principles of res judicata and privity, and with the further understanding that a final judgment in favor of the patentee will be binding on any customer if suit is enjoined. Of course, also provide that a customer may opt out and actively litigate. (Actually, this would only codify the law IMHO.)

      6. Provide mandatory fee shifting if the patent owner ultimately prevails or if the accused infringer prevails on a motion to dismiss, on summary judgment, or any stipulated judgment based on lack of infringement after claim construction.

      7. Provide that a final injunction is mandatory unless outweighed by the public interest.

      8. Repeal 112(f).

      9. Clarify that knowledge of a patent is not required to be liable under 271(b) or (c).

      10. Clarify that patentable processes are limited to methods of making or using one of the other categories, and in the case of uses, that the use provide a physical effect.

      11. Eliminate marking as a prerequisite for damages. Instead, provide for increased damages for proper marking and/or actual notice of infringement.

      12. Clarify that when a patent covers something alive, that only artificially induced reproduction is an infringement by making, and that an infringing use or sale is an infringement only if the thing used or sold was artificially made. Think Pierson v. Post. Clarify that this is not intended to overrule Monsanto where the intentional retention of patented seed in high purity for replanting and reselling in volumes greater than the commodity seed originally purchased was deemed to be an infringement.

        1. Night, just consider 1 for a moment. That solution would have been a lot better for patent law back when — when forum shopping was a problem. Always preferring the patent owner’s choice of forum would simply have restored the status quo ante where prior to the creation of the DJ action and the forum non conveniens statute, the patent owner’s choice prevailed. The patent venue statute limited the patent’s owner’s first choice to a “convenient” forum.

      1. Or put a requirement that judges have a science background and have shown some interest in science and patents.

        (Move the current Google judges to another circuit. )

  3. Can someone please explain the motivation behind the desire for “Requiring transparancy of ownership;”?

    If you are trespassing, all that matters is that YOU do not own the land. And you would know that well enough. Why is the identity of the owner relevant or material?

    1. I’d disagree Les. Whether you have an easement, rights of way permissions, etc. all matter in trespass cases.

      In patent cases, there’s a few reasons it’s relevant:
      1. On more than one ocassion, subsequent discovery revealed that agreements were already in place that would preclude new enforcement by the plaintiff.
      2. Important for well-tuned discovery: licenses, damages, proper assignments of interest, etc.
      3. Determination of pockets for which to pursue sanctions, attorney’s fees, counter-claims of infringement, etc.

      1. 1) I’m intrigued. How can an accused infringer have an agreement with a patent owner covering a patent that the accused infringer doesn’t know is covered by the agreement and how can the accused infringer not know that the patent is owned by someone with whom the accused infringer has a covering agreement?

        2) What does an infringer need to discover, that is not sealed and that is not of public record with regard to the patent that is made discoverable by knowing the identity of the owner?

        3) Ah ha! Knowing the owners identity lets you retaliate in ways unrelated to the patent itself. Exactly why you should not be granted that information.

        1. 1) I’m intrigued. How can an accused infringer have an agreement with a patent owner covering a patent that the accused infringer doesn’t know is covered by the agreement and how can the accused infringer not know that the patent is owned by someone with whom the accused infringer has a covering agreement?

          Non-exclusive patent right obtained from an owner? Promise not to sue from an owner? Participation in a standards making body by an owner?

          Agreements need not be written or expressly identify a patent. There’s lots of ways.

          2) What does an infringer need to discover, that is not sealed and that is not of public record with regard to the patent that is made discoverable by knowing the identity of the owner?

          See above.

          3) Ah ha! Knowing the owners identity lets you retaliate in ways unrelated to the patent itself. Exactly why you should not be granted that information.

          Uh, yes?

          You have a right to sue, that doesn’t mean you’re free from retaliation. Ownership is certainly relevant (see above). It’s also entirely relevant from a settlement/negotiation posture (can you actually collect on an attorney’s fee award).

          Also, I don’t see how litigation from, for example, a business partner isn’t relevant? Or why we’d want to encourage proxy litigation.

      2. Also, identifying the “real party in interest” is madatory in various proceedings, including IPRs, for good reasons including estoppels and relevant related cases.

      3. mmm, all that I think should be required by statute is that only the record owner of 100% of the legal title may bring suit, that a non joining joint owner may be joined involuntarily, and that all joint owners must sign in writing in order to convey a license.

        Thus, the inventors are deemed to be the original joint owners. To file suit, the PTO record must be updated to show a chain of title to the current owner/plaintiff.

        People who have silent interests in income? I can see that knowing such could be useful for retaliatory suits, but I don’t think failing to identify silent partners should have any effect on the ability to sue.

    2. Land ownership seems like a horrible analogy to bolster your position, considering that land ownership has been tracked by the government far more closely than patent ownership for centuries. Even car ownership requires notifying the government of transfer of title, and a valuable patent is worth a lot more than a valuable car.

  4. I’m hoping it’s at least something closer to the Leahy bill, which softened some of the harsh overreaches.

  5. If the Republicans are the party of business, why heck would they support further gutting the patent statute? For non-high tech start-ups (I’m thinking biotech, medical devices and pharma), patents are critical. Maybe these GOP guys really are as dumb as their opponents say they are.

    1. IDGI,

      The “party of business” is a misnomer.

      Remember that first, these are politicians (both sides of the aisle).

      1. They have become the party of BIG business (much like the democrats). And that’s a distinction with a huge difference in this context.

    2. I Don’t Get It, from my observation, Democrats today are willing to curry the favor of big business on IP. I saw this first hand — and when I saw it,
      I was just a bit shocked. I too had thought Dems to be anti-business as a part of their ideology going back to FDR. But that is not the case today.

      Thus, both parties, it seems, listen to and seek donations from, big business on IP issues. Patents, and IP in general, seems be non partisan.

      Tort reform, however, has always been something that Republicans have favored and Democrats have opposed. Thus it shocked me to see Obama was in favor of the Goodlatte bill, which is a form of tort reform. I guess the TLA gave this form of tort reform a green light. They might want to reconsider.

  6. The Republicans will be more enthusiastic about this and will try to produce a bill Obama will support. It would be useful to have some Democrats on board, too, but last night was a disaster for pro-tech and pro-software Democrats.

    Udall, Hagan, and Begich were the core of software supporters in the Dem caucus. They’re all gone now. You would think California would support tech, but Boxer and Feinstein are committed to exsanguinating Silicon Valley for the benefit of Hollywood and the national security state.

    So — aside from Schumer — it may be an all Republican effort this time. I hope they put heavy user pays presumptions in the bill; that’s the best partisan idea the Republicans have.

    1. Part of this may be paying up for what Google paid to get them in there.

      Let’s not forget that Google is number and Goldman Sachs is number in giving.

    2. Heavy “loser pays” is not the panacea that you think it is.

      That will merely drive an even greater “lawyering up” and “win at all costs” ‘win‘ for the litigation lawyers involved (and further favors Big Corp, who can better handle the risk involved in high stakes litigations).

      Instead of reflexively pouring out the mantra you have been fed, some critical thinking would help you realize why pro-tech and pro-software aligns with being pro-patent.

      1. Instead of reflexively pouring out the mantra you have been fed, some critical thinking would help you realize why pro-tech and pro-software aligns with being pro-patent.

        Why can’t you simply state your disagreement, without layering on the insults?

      2. I’m a partisan D, so saying it’s the best partisan R idea is faint praise.

        The English Rule version of loser pays can result in much cheaper litigation as it rewards offers to settle cheap early in litigation and makes legal fee extortion harder. That isn’t the rule written in the last Innovation Act, though; it had a rule that was both weaker and more expensive. Still, it’s better than the presumption against fee shifting we have now.

        “pro-tech and pro-software aligns with being pro-patent.”

        Sure, it aligns with being pro-patent on hardware. And it aligns with being absolutely against patents on anything that can be done in software.

        1. Owen,

          First and foremost, you continue to ignore the fact that software is equivalent to hardware and is equivalent to firmware. Thus, your last comment trying to create a distinction between alignment of hardware and software is pure nonsense.

          Second, as I have remarked previously, the (not-so) “un”-intended consequence of much cheaper litigation is much more litigation.

          Currently (as shown in several recent threads) the rate of litigation per possible litigated patent is well under 1%. Be careful of what you wish for, as if you make actually enforcing patents (through litigation, as designed by Congress) much easier, you invite more – not less – such actions.

          1. Anon,

            Would you consider a voice-over-internet-protocol (VOIP) telephone to be patentable over a plain-old-telephone-system (POTS) telephone?

            Or would you deem the two devices to be “equivalents”?

              1. Perfectly reasonable answer, Anon.

                So, even though the devices have the same function (full-duplex voice and signaling over a communications network), you would still need to see the claims, because they can’t be considered equivalent if they are performing their functions in substantially different ways . . . right?

        2. Owen, you’re not dealing in reality here. The big corps will continue to rip off the little guys, and a loser pays system just ENSURES that they ultimately win. Especially when there’s no threat of injunction anymore.

          1. BJA, there are two views on loser pays, but certainly, one would not file anything approaching a frivolous suit.

            But of a non frivolous suit is filed, the infringer may not want to litigate full court because they know they will eventually lose and only have to pay the patent owner his attorney fees.

            Of course, getting an unbiased view of a case from one’s defense counsel is all but impossible because the only way they money is to litigate.

              1. I would say in general who owns a patent has no bearing on whether or not you are infringing that patent, so there is no need for general disclosure of ownership.

                If you have an agreements that you think grant you license to make or use the invention, then make your case to the judge for discovery.

                But I see no reason for making that information generally available so that you or others can harass and retaliate via other means.

      3. I agree with anon. Raising the stakes with “loser pays” just raises the stakes. If I base a substantial part of my business on a patent and you are infringing, I am going to throw money to win no matter what. Each party is confident that they are right, so they will just run up the attorney fees.

        Also, the heightened pleading standard will not work. Look at the 19th century before law and equity were merged. Big business were able to navigate the procedural problems with no issues. So they will be able to sue and/or infringe at will.

        Also, without the threat of litigation, there is no incentive to license. Patents will be practically useless because they are unenforceable.

        1. They’ll be useless for small businesses, but the big businesses will be able to get them issued cheaper and more easily enforce them against any upstarts. Win/win for the entrenched players.

    3. Owen, I am trying to understand your point here: “You would think California would support tech, but Boxer and Feinstein are committed to exsanguinating Silicon Valley for the benefit of Hollywood and the national security state.”

      Both Boxer and Feinstein stood with the startup aspects of SV in voting to excise first-to-file from the 2011 bill. I will assume that most of the big SV companies were in favor of first-to-file because they also file foreign. So I do not perceive the two senators as being completely at the beck and call of big SV firms.

      Supporting tech and supporting big SV firms are not the same thing.

      Take Apple. I assume they have seen their share of bogus software patents, so I would not be surprised to find them a supporter of the Goodlatte anti-patent bill. Does that mean they should give to Democrats at this juncture to see the Republican anti-patent bill passed? Boxer and Feinstein seem pro-patent.

      1. I don’t know the 2011 legislative history, but Feinstein and Boxer have repeatedly hurt Silicon Valley companies, large and small, in favor of pretty much anyone else. NSA types, Hollywood, defense contractors, trial lawyers, and the like are far ahead of the tech industry in CA senators’ preferences.

        The Goodlatte bill is pro-patent, it’s just a slight limit on the worst abuses. I expect Feinstein and Boxer to favor the interests of even openly abusive trial lawyers over SV.

        The Democrats that SV should have supported were the lamented Udall, Hagan, and Begich and their allies in the Senate. They were all pro-patent and anti-abuse. Senator elect Peters (D-MI) seems like another very good one. (And Begich’s votes won’t all be counted until next week, but he’s in trouble.)

        1. Owen, abuse is no good, but the some of the legislation goes way too far so as to be aimed directly at the small guy, rather than an abuser. Small guys are the real source of new ideas, and big guys abuse too. See, e.g., any company with a mountain of patents that demands protection money from the weak.

  7. While I was clerking at the court, I was allowed to assist the House with some of this. I was told, because I was sort of floored that anything was moving, was that the troll problem coupled with the historic bi-partisan nature of IP made IP an area, one of very few, where stuff could happen.

    1. Yes, and the absence of any required Government expenditure or tax increase is naturally an important reason why patent law changes are especially attractive to a Republican Congress.
      It is indeed ironic that so many of the patent attorneys who have been so upset with all the recent patent law legislative and Sup Ct. judicial changes are regular supporters of the party that bit them, and well may do so again, as well as appointing the present Sup. Ct. majority. Whereas the party that had been controlling the Senate until this morning’s voting reports contained many of the opposers of draconian “troll control” and other tort reform legislation that could adversely impact far more than just the few egregious patent trolls that have been mass targeting small businesses.

      1. Paul, I don’t think that you can fairly attribute the recent SCOTUS decisions to the conservative majority appointed by Republican Presidents. For starters, all of the relevant decisions have been unanimous ones. Also, I view the legislative changes–passed and proposed–as being much more of a response to effective lobbying rather than anything reflective of political party or leanings.

Comments are closed.