by Dennis Crouch
On February 5, 2015, Rep. Goodlatte reintroduced his patent reform bill: the Innovation Act. Co-sponsors already include the bipartisan group of Reps. Defazio, Issa, Nadler, Smith, Lofgren, Chabot, Eschoo, Forbees, Pierlusi, Chaffetz, Jeffries, Marino, Farenthold, Holding, Johnson, Huffman, Honda, and Larsen.
Read the Bill: Innovation Act 2015
The bill as introduced includes the following provisions:
- Heightened Pleading Requirements: Significant raising of the pleading requirement for patent cases. A patent holder filing an infringement lawsuit – at the time of filing – would need to include a set of infringement charts showing how each limitation of each asserted claim in each asserted patent is found within each accused product or instrumentality. However, the plaintiff would not be required to complete the entire chart if the infringement is not readily available after a reasonable amount of pre-filing due diligence. Form 18 would also be eliminated. Pharmaceutical companies filing infringement actions under 271(e)(2) wouldn’t need to comply. The approach here raises some separation of powers concerns (ordering the Judicial Conference to act). The Judicial Conference has also already moved to eliminate Form 18 in a way that would implicitly increase pleading requirements. Those changes are expected to take-effect December 2015. However, the Judicial Conference changes do not go nearly as far as the legislative proposal here.
- Presumption of Attorney Fees: Under the new law, a court would be required to award attorney fees and “other expenses” to the prevailing party unless a judge “finds that the position and conduct of the nonprevailing [was] reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust. This flips the current rule where attorney fees are only available in “exceptional cases” and instead replaces it with a roughshod version of the “English Rule.” In cases where the patentee is undercapitalized, the law would allow the court to pierce the corporate veil and make investors and other ‘interested parties’ pay the attorney fee award. Unlike the English system, the proposal here does not place any limits on the potential fee award other than it be “reasonable.” In my view, an improvement upon this would be to set reasonableness early-on based upon an estimation of the case value.
- IPR Claim Construction: Rejecting the Federal Circuit’s recent Cuozzo decision, the Bill would require the USPTO to construe claims in post-issuance reviews (IPR/PGR/CBM) in the same manner as would be done by a district court and “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.” And, if a court has already construed the claim then the PTO must “consider such claim construction.” This particular change is one that favors patentees.
- Discovery Limits: The bill would limit discovery in litigation until after a claim construction ruling (if one is necessary for the case). For cases where claim construction is dispositive, this ruling has the potential of reducing costs. It also will create further pressure on courts to conduct early claim construction decisions. At the same time, the approach seems to increase the likelihood that a court will separate the claim construction decision from its summary judgment decision (which would likely require further discovery) except, perhaps in cases involving definiteness under Section 112(b). Additionally, discovery of non “core” documents would also be severely limited, and anyone asking for discovery would need to first either (a) post a bond sufficient to cover the expected costs of additional discovery or (b) be a large enough company.
- Willful Infringement: Willful infringement can lead to treble damages, but the Bill would limit the applicability of pre-suit demand letters for proving willfulness unless the demand letter identifies: (1) the patent in question; (2) the ultimate parent entity that owns the patent; (3) the accused products; and (4) how the product infringes at least one claim of the patent.
- Transparency of Ownership: In any lawsuit, the patent owner must disclose “the ultimate parent entity” of any assignee of the patent. Further, the patentee will be under an ongoing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. Failure to keep-up the information results in no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.
- Stay of Customer Suits: In limited cases, the courts will stay customer lawsuits when the manufacturer of the accused product steps up to challenge the patent.
- Foreign Bankruptcy: The bill would stop the practice of a bankruptcy executor canceling US IP licenses in foreign bankruptcies. This is already barred for U.S. bankruptcies under 365(n) of the Bankruptcy code.
- Codifying Double Patenting: The bill would codify a double patenting regime that would seemingly replace the obvousness-type double patenting system developed by the courts. The proposal would particularly allow prior filings by overlapping inventors to count as prior art unless a terminal disclaimer is filed.