Patent Reform: Innovation Act of 2015

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.

134 thoughts on “Patent Reform: Innovation Act of 2015

  1. Abraham Lincoln was the only U. S. President to hold a patent. On February 22, 1860, during a lecture on Discoveries, Inventions and Improvements, President Lincoln spoke eloquently about patent laws and their importance. These [patent laws] began in England in 1624, and in this country with the adoption of our Constitution. Before then any man [might] instantly use what another man had invented, so that the inventor had no special advantage from his own invention. The patent system changed this, secured to the inventor for a limited time exclusive use of his inventions, and thereby added the fuel of interest to the fire of genius in the discovery and production of new and useful things.

    I strongly believe that the so called “Innovation Act” (H.R. 9) currently being considered by the legislature will weaken our patent system, extinguishing the fuel of interest to the fire of genius in the discovery and production of new and useful things.

    Please allow me to explain by sharing my own personal story.

    One hundred thirty seven years after Lincoln’s lecture, during the early days of the Internet, five entrepreneurs who believed in our patent system, sitting in a conference room in Sandy Springs, Georgia, made a discovery that would forever change commerce on the Internet: Commerce Syndication. A provisional patent was filed on September 17, 1997. I was one of those inventors.

    My name is Danny Ross and my son, Del and I founded Nexchange Corporation, to practice this invention. Nexchange achieved significant success, having a presence on over 54% of the websites (Nielson) at that time, representing over 40 name brand retailers and employing a staff of over 100. Unfortunately, despite this measureable success but unable to raise the needed capital to fuel the continued growth, the company failed during the “dot com bust” of 2000.

    Del and I believed in the technology and purchased the patent application from two other secured creditors. In 2003 the patent was finally issued and the patent was placed in DDR Holdings, LLC (DDR), where I serve as Managing Director. By this time we had identified numerous large companies, capable of raising the necessary capital, that had implemented the DDR technology. Included among these companies were Expedia, Hotel.com, Travelocity, Orbitz and Digital River.

    We started DDR as a licensing effort, but were forced to litigate against these large New York Stock Exchange firms. At the same time we pursued continuation application to protect the inventions better, and we obtained three new patents and received a notice of allowance from the USPTO for a fourth patent last month.

    DDR’s story shows how difficult it can be for companies (especially small entities) to obtain recoveries. Although DDR settled with five of the six defendants after putting in significant work on this case, over more than a decade, the last defendant pursued its defenses through trial and federal appeal. The cost to that defendant undoubtedly well exceeded its initial exposure.

    Over the decade of litigation, DDR won the following significant victories:

    1. Success in Patent Office reexamination of two of the patents, while the lawsuit was stayed.
    2. Obtaining new patents despite citation of all prior art cited in the litigation.
    3. Staving off defense attempts to defeat the patent claims through summary judgment motions.
    4. Winning all contested claim-construction issues.
    5. Preventing defense efforts to significantly cramp expert testimony needed to prove DDR’s case.
    6. Victory at trial.
    7. Defeat of all post-trial motions to reverse the jury’s verdict.
    8. Defeat of all defenses proffered on appeal by the non-settling defendant.

    After reading DDR’s brief and hearing the oral argument, the Court of Appeals issued a precedential decision that favors inventors in four main respects:

    1. In a widely hailed ruling, the Court upheld one of DDR’s continuation patents despite a challenge to its patentability on Section 101 grounds. Since the Supreme Court’s latest ruling on this legal point in June 2014, the Court of Appeals has issued seven decisions on 101 issues, and DDR’s patent is the only one that the Court upheld.
    2. The Court further rejected a challenge to the claims as being excessively vague, which caused relief from those worried about potentially over-reaching application of the vagueness defense.
    3. The Court further rejected a challenge to a damages claim seeking to impose a duty on expert witnesses to develop evidence of infringement on repeated dates, rather than using reasonable inferences in lieu of constant monitoring.
    4. The Court refused to limit recoveries by patent owners who no longer practice their inventions.

    The DDR case disproves the oft-repeated politically motivated myth that it is too easy for a plaintiff to bring non-meritorious patent cases. DDR had to defeat more than sixty defenses raised in the course of a decade of litigation. Not every patent holder who reasonably believes he has a meritorious case can bear the substantial risk of financing reverse engineering work, technical and damage experts, deposition cost, and trial expenses. Although the DDR case has been profitable, it hardly shows any kind of unfairness in compensation or ease of suing. Indeed, after the unbroken string of successes described above, the jury’s damage award was far less tan DDR had hoped, and the Court of Appeals second-guessed the jury on another of DDR’s patents (although of course a patent holder need only win on one patent, not two, to obtain recovery).

    Although the odyssey was long and the path at times difficult, if DDR can prevail in obtaining compensation for use of its inventions, other start-ups who face similar obstacles can also hope that their R&D investments cannot just be appropriated by companies with greater marketing power or resources and higher arrogance quotients.

    The purpose of the patent system is to encourage and provide incentive for investment in innovation, as the Constitution says. As a venture capitalist, I can speak from experience. In addition to the strength of the management team, a venture capitalist will only make an investment if barriers to entry (use) can be shown. The patent system provides that barrier. In the absence, investment capital will be extinguished or greatly reduced and our country will lose one of its greatest assets: intellectual property.

    In closing, please allow me to further introduce myself. As I mentioned above, I spent my career in venture capital, instrumental in starting over 30 companies. I am a community leader, serving on numerous non-profit boards.

  2. Another great reason for increased transparency in patent ownership is so we can get a better idea of how many foreign criminals are playing the patent game.

    link to nytimes.com

    The Times also found a growing proportion of wealthy foreigners, at least 16 of whom have been the subject of government inquiries around the world, either personally or as heads of companies. The cases range from housing and environmental violations to financial fraud. Four owners have been arrested, and another four have been the subject of fines or penalties for illegal activities.

    The foreign owners have included government officials and close associates of officials from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico.

    They have been able to make these multimillion-dollar purchases with few questions asked because of United States laws that foster the movement of largely untraceable money through shell companies.

    Vast sums are flowing unchecked around the world as never before — whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets.

    Heck, it’s hard to avoid running into convicted US criminals once you’ve been prosecuting for a while. These sorts of characters are surely pulling some patent strings. How many, I wonder?

    But it would be sooooo upsetting to look more closely.

      1. Attacking patents

        Nobody’s “attacking patents”.

        The patent system is being fixed in an effort to keep the bottom feeders, grifters and abusers out of the system.

        If the present efforts fail, there will be additional efforts.

        You can count on that.

        And just in case you’ve forgotten: all this reform was very predictable and it was, in fact, predicted. It’s a direct result of the gates being opened to the lowest form of innovation.

        More to come!

        1. >The patent system is being fixed in an effort to keep the bottom feeders, grifters and abusers out of the system.

          The patent system is being destroyed by the moneyed big corporations who are buying Congress and the President.

    1. In addition to Malcolm’s misguided “they are bad + they have money = “WE” need to know everything” big-brotherism, now more of that “but it’s only data” anti-Snowden stuff:

      Your devices [old box…?] are listening…

      link to cnet.com

      Interestingly, Malcolm never has explained why he went maximum privacy in the DISQUS days…

  3. At 1.2.1 Dennis asks:

    “What’s wrong then with a fixed tarrif? Limits on the attorney fees, otherwise there is a real incentive to drive-up the fees b/c of of the % chance that you won’t have to pay those costs.”

    to which I would ask:

    What’s wrong with the Fixed Fee Tariff system in Germany, in which at the outset the court sets a “Value of the Action” (something between 500k and a multiple of 2000 of that). A Table of Fixed Fees, published by Justice, sets the quantum of fees you will pay to the winner if you lose. As you might guess, the amount is in proportion to the “value” of the case.

    I’ll go first. What if you win on some issues but lose on others? The German Tables are not sophisticated enough to handle that half way house.

    Anything else?

    1. There was a case that I am familiar with where the demand was for $8000. Outside counsel said the cause of action was unjustified and recommended litigation. At the end of the day there was a settlement where the plaintiff was paid their demanded $8000. Then the outside counsel said his bill, for $300,000.

      If you are management at this company, who would you fire? The inside manager or the outside counsel?

      1. It is cases like these they give me pause about fee shifting. If the winner will have his fees paid, then the amount in controversy is entirely irrelevant to the amount of fees that will be expended in order to win.

        Max points to Germany that has a limit on the amount of fees that can be collected from the other side upon a victory. I think we need that In United States if we are going to seriously consider adopting a system where the winner’s fees are paid by the other side.

      2. You fire probably both of them, though perhaps the outside counsel (OC) was at the most fault. Someone should’ve said, “OC’s billable rate is X/hour; 8,000/X = Y; OC, can you litigate this for Y?”. (And the answer to that should be obviously “No”.)

        However, sometimes clients aren’t logical. A defendant might not want to settle and instead could fight at all costs. Perhaps $300,000 was worth it to that defendant. Perhaps the settlement was more to the defendant’s liking.

        1. Reminds me of a certain giganto-mega corp going after an independent 80 plus year old farmer all the way up to the Supreme Court.

          How much do you think they are going to collect? (directly, that is)

          1. EXCELLENT POINT!!!!!!

            In the Bowman case, Bowman just wanted to plant his retained seed and not buy new commodity seed every year. The amount in controversy to Bowman was peanuts, say, under $10k per annum.

            But to Monsanto, the case was far more important as their entire business depended on the outcome. Billions were at stake — from their point of view.

            If they could spend a billion to collect $10k, it was probably worth it to them to do so, given the stakes.

            But the saddling Bowman with $1 billion when the amount in controversy was so small would simply be unjust. But what if it was ordered by statute?

            One can see here that one size does not fit all. Without caps and limits related to the amount controversy, injustices will happen day in and day out.

            I think it better that we simply scrap the whole idea.

            Max, thanks for bringing the German system to our attention.

            Anon, thanks for reminding us of the Bowman case.

            1. Now I see the post is gone, let me try again.

              In the Bowman case, Bowman just wanted to plant his retained seed and not buy new commodity seed every year. The amount in controversy to Bowman was peanuts, say, under $10k per annum.

              But to Monsanto, the case was far more important as their entire business depended on the outcome. Billions were at stake — from their point of view.

              If they could spend a billion to collect $10k, it was probably worth it to them to do so, given the stakes.

              But the saddling Bowman with $1 billion when the amount in controversy was so small would simply be unjust. But what if it was ordered by statute?

              One can see here that one size does not fit all. Without caps and limits related to the amount controversy, injustices will happen day in and day out.

              I think it better that we simply scrap the whole idea.

              Max, thanks for bringing the German system to our attention.

              Anon, thanks for reminding us of the Bowman case.

            2. Ned,

              ANY sense of “fixed limits” has the possibility of irreconcilable differences as to value as you rightly point out between a single “infringer” and a patent “going down” and becoming worthless against the entire market.

              Is it fair to the patentee for a meager limit that does not reflect their value?

              Is it fair for the single “infringer” for a monster limit that does not reflect his value (even though the object in dispute carries beyond just his single pittance)?

              There are other aspects as well to be unfolded from such a seemingly simple concept – see my post below at 1.1.4 asking Prof. Crouch to unpack his question.

              1. In the German system, the court sets the Value of the Action after hearing the parties on the point. Just because both sides have deep pockets (pharma vs generic) does not mean the Value will inevitably be set high. Not if it suits both sides to ask the judge to set a low value. The judge decides.

                1. MaxDrei,

                  Since I do not have my German system glasses on, and in respect of German sovereignty, (and explicitly noting that my precise example here is NOT one of battling deep pockets contrasted with a perhaps low value of the case), would you be so kind as to render your esteemed opinion on the example I did provide?

                  My example presents a very disparate binary choice: either very high value (for the patentee) or a mere pittance (for the accused infringer).

                  There is to be NO Solomon like splitting the baby in half here, as such an answer is clearly fair to neither party.

                  How then, would your proposed system proceed?

                2. This specially for anon, in answer to his question.

                  The doctrine of “proportionality” runs.

                  Suppose the asserted patent is a blockbuster but the damages caused by the infringer are small. The District Court in Germany, handling infringement, would be inclined to set a low value on the infringement suit.

                  Suppose that the response of the little infringer includes daring to put validity of the blockbuster patent in issue at the Federal Patents Court in Munich (and by the way, given the presumption of validity, that often does not happen) in a so-called “nullity suit”. Having heard the parties, the panel of judges there would likely be inclined to put a substantially higher price tag on that particular suit. That would certainly be a deterrent for a party that attacks validity more in hope than with any concrete expectation of success.

                  Remember, in Germany, no equity, no discovery, no cross-examination, no “preponderance” (just a “more likely than not” standard to reach), and in the end a market of only 80 million citizens to make profits out of. Everything is so different from the USA. What works so well in Germany might not be any help at all in the USA.

                3. Thank you MaxDrei – sincerely.

                  Would it be fair to say that one unforeseen side affect to the situation you describe is that ONLY deep pockets will take the chance and challenge validity?

                  That’s not all that different from the pre-“Tr011” patent armegeddon scenario that Big Corp enjoyed (and why they coined the pejorative term in the first place).

                  I am not so sure that “public policy” motives here in the States would idly sit by and let the impetus to challenge validity be eroded like that, so I am uncertain that the German eyeglasses of “proportionality” will help the US vision. Which, of course, still leaves us with the basic incompatibility of the irreconcilable differences in value.

                  I think it plain to see that the anti-patent forces (Left and Right) see no problem with being unfair to the patentee. I just don’t see how that position is compatible with the foundations of having a patent system in the first place. The thrust from the Infringer’s Rights groups just do not leave a healthy middle ground (there is no way to be Solomon like and split the baby in half). If, as it appears that you recognize, we are unwilling to bifurcate infringement and validity, then forcing a “loser-pay” system comes down to a devil-in-the-details as to end effect of whether patents become essentially useless or whether they become an even bigger patent nuclear strike by the parties who can afford to throw the most money at their lawyers. How the cap is set, sans bifurcation, if a cap is set, will be telling. If no cap is set, then it is clearly the established entities that are most favored in that new game.

                4. Again, in response to anon’s most recent question about deep pockets. I answer because I suppose my answer below might be of interest to other readers as well:

                  The German Justice Table of Costs (to be paid by the loser to the winner) is not such a high number that only a deep pocketed litigant can countenance it. Unless they are at the high end of the scale, the numbers would strike a party with experience of litigation in the USA as small change (or peanuts). Even at the high end of the scale they are (I imagine) less than one month’s budget for litigation in the USA.

                  To repeat: the court sets the Value of the Action (how much is at stake), which in turn sets how much in legal costs the loser must pay the winner. So what if Goliath (intent on intimidating David) wants costs set at the top end of the scale but David (who just wants justice) wants costs set at the bottom end? The judge will decide, perhaps somewhere between David’s figure and Goliath’s, taking all pleaded factors into account.

                  So, anon, you might now be able to work out the answer to your question.

                  All: I remember attending, about 20 years ago, a lecture about patent litigation in the USA. One early ppt frame was a flow chart with about 50 boxes on it. One of them was the “Infringement Y/N” box. Another was the “Valid Y/N” box. The other 48 boxes addressed stuff which plays no part in patent litigation in Europe. This one frame, I thought, should be seen by all European patent attorneys, for it goes a long way to revealing why patent litigation inherently costs multiples more in the USA than it does in Europe.

                5. MaxDrei,

                  You allude to the possibility of “somewhere in between” but as I pointed out, such would be unfair to both parties.

                  Further, the example I gave (one in which Big Corp was NOT “intent on intimidating David” but was actually looking at Justice too; albeit Justice of a much different “magnitude” than David — whole market versus pittance), the Value of the Action for each are vastly and irreconciably different on such orders of magnitude that one wonders if a tabled value would suffice (and if indeed a high enough value for the entire market is listed, that no David would ever come close to being able to shoulder that load).

                  What I am able to work out is that my dilemma is not so easily dismissed.

                6. As far as I can tell, anon at 6:58 pm yesterday misunderstands how a court in Germany sets the “Value of the Case”.

                  Suppose that the alleged infringer is selling one allegedly infringing machine a month and the profit per machine is very modest. Well then the Value of the infringement suit is also modest, regardless how valuable the patent is to its owner.

                  But suppose that the patented technology is by now ubiquitous, in some ubiquitous consumer product for which the market is , by now, huge. There are many licensees, each paying whacking royalties. So the Value of any German Federal Court action to revoke the patent is liable to be assessed as huge, regardless how big or small is the value of the ongoing infringement suit in the District Court.

                7. I far as I can tell

                  You don’t tell very well.

                  Clearly.

                  Take your last paragraph… That’s the scenario I have consistently painted. Clearly.

                  So with that in mind, do you as David approach the court – ever – to challenge validity and expose yourself to the other side’s massive fees?

                  Do you then retreat from your implied “well the court might take a middle view” Solomon like split the baby approach (which remains unfair to both parties)?

                  Not sure why you struggle seeing that I am not misunderstanding what you are saying about the German court setting the “Value of the Case.”

                8. To repeat what I wrote above:

                  “The German Justice Table of Costs (to be paid by the loser to the winner) is not such a high number that only a deep pocketed litigant can countenance it. Unless they are at the high end of the scale, the numbers would strike a party with experience of litigation in the USA as small change (or peanuts). Even at the high end of the scale they are (I imagine) less than one month’s budget for litigation in the USA.”

                  For the litigant, as for anybody else, Life’s Not Fair. But in setting the value of the case the German court will make it as proportionate and “fair” as is humanly possible

                9. You are also NOT repeating other things that you said…

                  In any event, as near as I can tell the Annex 2 in the RVG (table of costs) maxes out at a value of the case of 500,000 Euros – not even close to a million dollars US and nowhere near the Billion dollar actual value in the example being discussed here.

                  Those German glasses just won’t make anyway happy here in the States. That’s just not even close to being as fair as humanly possible.

                10. Once you get to a “No Stone Unturned” level of commitment to winning a case, what’s left after that, to increase your reasonable legal costs higher than that? Turning over stones more than once?

                  In real cases, do CEO’s ever decree “Leave No Stone Unturned”. If the real case is important enough, I imagine they do. If so, why should the German Table of Reasonable Legal Costs go on rising, once the “No Stone Unturned” level of case value has been reached?

                11. You are confusing toe very separate things.

                  Yes, there is the mentality of a “No Stone Unturned” commitment that can and will unleash a spend whatever it takes to win mentality.

                  That’s not what is under discussion here.

                  What is under discussion is the very real notion that a Billion dollar value can be a real value.

                  If your answer to my pointing out that the German court has a max value cap that is but a shadow of a possible real value, that such cannot be fair and is most definitely not “what is humanly possible” is to offer goalpost moving, dust kicking, well then, I think you stopped trying to be helpful and that you just don’t want to see the dilemma of an artificial cap.

                12. I do not understand your problem anon. I assume it is as follows.

                  We are discussing here compensation for legal spend, in ordinary run of the mill cases (rather than cases where there is abuse), paid by the Loser, to the Winner, at the end of the litigation.

                  In the USA there is zero compensation. In Germany there is the figure in the Table. I see the Table system as approximating to fairness but you criticize it as not perfect.

                  But you yourself cannot suggest a system that delivers more fairness than the German Table system.

                  Some might propose the system in England, where legal costs are decided by a Taxing Master of the court. That system has its unfairnesses too, as the current debate in Europe reveals.

                  The emerging pan-European Patents Court will likely settle upon a costs regime that combines the best of current German and English practice.

                13. More dust kicking from MaxDrei…

                  You are switching to “approximating to fairness” from the humanly possible that you previously claimed…?

                  But you yourself cannot suggest

                  Maybe because I see the inherent no compatible irreconcilable difference in actual value that you continue to ignore…

                  And like I said from the start, a Solomon “split the baby” is unfair to BOTH parties.

                  As I also said, the dilemma is not so easily dismissed.

                  It still isn’t. Tell me, what is the percent of a billion that the max table value provides…?

  4. According to the WSJ, the deal bio cut for the AIA for 12 years of exclusive orange book registration for an approved bioactive is proposed to be cut to 7 years by the Administration. So there ya go. Bio cut the deal to stop opposing the AIA, and now the Admin is proposing to cut the deal from 12 years back to 7.

    link to wsj.com

  5. BigCorp to Independent Inventors: “All your patented innovations are belong to us.”

    Sad indeed to watch as Congress and the President work so hard to protect the intellectual property rights of American innovators in countries around the world … at the same time they scheme to take away those very same rights from those very same innovators here in America …

    Why is protection in China more important than protection in America?

  6. I encourage everyone to spend some time listening to the Feb 2 CAFC oral arguments in Eon Corp IP Holdings versus Companies Who Actually Do Stuff.

    While the plaintiff in that case has little chance of winning its appeal (the district court chucked the case on SJ because there was no disclosure of any algorithm to support its menu-providing “means”), the oral arguments were interesting just so you can hear some highly intelligent and articulate people try to answer the question: how many angels can dance on the head of a pin when the pin is made of smoke? That wasn’t the actual question being addressed, of course. The actual question is: when does a completely fake non-existent “structure” become sufficiently “solid” that it deserves patent protection, even as it remains completely fake and non-existent?

    The best part might be where Judge Newman worries about “thousand page patent specifications”, as if that presents some sort of new problem for patent applicants (it doesn’t — applicants in the grown up arts have been filing massive amounts of specially formatted data at the PTO for many years; it certainly can be difficult and stressful but grown-ups are expected to be able to deal with that).

    The worst part is that neither of the parties involved, nor any of the judges, has the guts to simply observe what a spectactular and outrageously costly and expensive c k the CAFC created when it thoughtlessly turned the patent system on its head and declared that information processing (and therefore information itself) had a fake physical existence that could be accomodated by the existing patent system.

    All this reform is the direct result of the CAFC-fueled (and PTO propelled) promotion of the mythology that information-processing methods, logic and information itself have patent-relevant “structures”. Why is that? It’s because the creation of that myth resulted in a patentable “technology” that was completely divorced from the underlying technical skill, knowldge and effort necessary to implement that “technology” in a meaningful way. The system predictably and quickly devolved into a wild west where nobody knew what was going on, least of all the judges responsible for creating the mess (that would require admitting that they created a mess). To accelerate matters, it was a wild west where the weapons (in this case, functionally claimed information processing patents) were handed out for the asking.

    And that’s what’s being cleaned up now. But it’s happening far too slowly and with not nearly enough resolve. In large part, that’s because the courts and lawmarkers are primarily exposed to interests who are typically invested in mainting the nonsensical proposition directly responsible for the mess. That allows the courts to continue to pretend that the elephant isn’t even the room, even when they can plainly smell the peanuts (as was the case in the Eon oral arguments).

    1. And yet again the same self-serving rant as we’ve seen millions of times before from the guy who simply cannot and will not put his money where his mouth is and stop using those innovations that he would deny protection to.

      1. Yes why should we worry about 1,000 page disclosures that teach what a PHOSITA know

        Did you listen to the oral arguments?

        I didn’t get the sense that any of the judges was inclined to rewrite the already broken law regarding functional claiming of computer-implemented information processing so that a “new function” covered “every fake non-existent ‘structure’ that a PHOSITA at the time could have come up with to perform some aspect of the function.” No doubt you’d love that result — any patentee would!

        If that were the case, every claim construction dealing with a functional claim would then turn into a pure battle of the experts over what the “ordinary person” could program given the recitation of the “new function”, with the patentee continually trying to thread the needle, over and over again, to exclude the “ignorant” ordinary people in the prior art but somehow always include the defendant who independently wrote and marketed software that actually works, regardless of how much time it took the defendant to do that and regardless of the complete failure to disclosure a single working embodiment by the patentee.

        Yes, everybody is very familiar with that game. Even the judges are familiar with it. Listen to them banter about whether some amount of human perspiration precludes a finding of sufficient fake non-existent “structure” to satisfy 112P6. Listen to Newman beg one of the attorneys to describe what would be sufficient fake non-existent “structure” to qualify as structure under 112P6. Listen to the attorney melt down and avoid the question. It’s surreal.

          1. To clarify: I’m not opposed to some sort of protection for software and computer implemented inventions per se.

            But listening to the oral arguments between two very smart defense counsel, and before the Fed Cir…

            It is difficult to escape the conclusion that our current vocabulary and set of laws just can’t deal with the issues that software patents raise.

            1. …some sort…?

              Still waiting for a cogent argument from you as to why patent law should not cover the utility aspect of manufactures (machine components) and machines.

              Clear away the dust-kicking that you cling to.

              1. In this particular instance, I’d cite the oral arguments.

                The way the law must twist and contort to deal with the unique issues presented by the “machine components” at issue is beyond absurd.

                It is like listening to people argue about “how many angels can dance on the head of a pin when the pin is made of smoke.”

        1. It’s really not that surreal (I’ve not listened to the arguments). 112P6 in regards to computer-implemented MPF claims came out of nowhere. The main case, Aristocrat Technologies Australia Pty Ltd. v. International Game Technology, 86 USPQ2d 1235 (Fed. Cir. 2008), really makes little sense. The CAFC complains that there’s no algorithm for the “means”, but the algorithm was quite easy for me to see, and I’m nowhere near one skilled in the art.

          Plus, I find it odd that what one skilled in the art knows or does not know completely is jettisoned once 112P6 is held to govern the claims. Why?

          112P6 (or f in this case) says the following:

          (f) Element in Claim for a Combination.— An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

          Why does “described in the specification” suddenly become “without the knowledge of one skilled in the art”? I haven’t found the reasoning for this, and in many ways it makes no sense.

          Thus, we arrive at the point where if you say “means for X”, where the structure is a general purpose processor, the structure is an algorithm. That was something the CAFC “invented” from thin air and took quite a few people by surprise. Had they known (in this case) when they wrote the application, they could’ve included the algorithm and saved the patent.

            1. Algorithms aren’t structures, PB.

              Thanks for trying, though.

              Eventually you’ll “get it.” Everybody will.

              Just like the Mayo issue, people will do everything to pretend that they don’t understand the issue or they “can’t see it” for some reason. And then they’ll go quiet.

    2. MM, the fiasco of patenting information is but one example of a larger problem presented by existence of the Federal Circuit, a special-interest court located in DC, surrounded on all side by the lobby organizations of that special-interest, where the lawyers who practice before it are composed of almost entirely of members of that special-interest’s bar.

      If there is a reason the Federal Circuit has grown a reputation of ignoring Supreme Court authority, it has to do with this special interest bar. The Federal Circuit at times seems not to be an independent federal court, but an agent of the patent bar, reflecting in its opinions, not the law and policy handed down by the Supreme Court, but the views of its “constituency.”

      This is not to say that the members of the court are even aware of the problem of being a court held almost captive by a special-interest, but it is quite apparent to other courts and even to the Supreme Court.

          1. Is this the same Ned that on the recent copyright thread was all about how software just had to be all about function (as opposed to information)…?

            Which side of the mouth today, mr heller?

      1. “fiasco of patenting information is but one example of a larger problem presented by existence of the Federal Circuit”

        Indeed, all the recent changes would be unnecessary if the CAFC and PTO had kept their unwanted noses completely out of computer software.

        As it is, this Innovation Act and Alice and even more changes in coming years will continue to be necessary and the next set will be even more effective.

        A simple clarification in §101 and §282 stating that computer software cannot ever be patentable or infringing subject matter would do more than all the adjustments Congress is considering and put an end to the ongoing erosion necessary to compensate for a metastasizing system.

      2. Ned, no question that “the Federal Circuit has grown a reputation of ignoring Supreme Court authority.” But is not this court you are publicly slamming here (for far more than that) the same court you are going to be appearing before soon to try to argue them into holding unconstitutional all IPRs, CBMs and current reexaminations?

        1. Paul, I think the Fed. Cir. judges try to be fair. It is just they exist in an environment of group think, where most of those that practice before the court share that same group think.

          We have had hundreds if not thousands of IPRs. How many have raised constitutional challenges despite the obvious conflict Patlex has with the Supreme Court cases? Very few. Now, why is that do you think?

          You yourself have expressed the attitude here multiple times that the Federal Circuit has decided the issue. There is nothing to see here. Let’s move on. All as if the Federal Circuit could in fact overrule the Supreme Court and get away with it.

          I was aghast when State Street Bank came down. For awhile there, the bar thought they had it won — the Federal Circuit had decided to overrule the well-established doctrine that business methods were not patentable subject matter. Well, how did that work out in the end?

          In the recent thread discussing the issue, not a singe post that I can recall defended Patlex. Not one. That decision is simple indefensible. And yet, it is the shaking foundation that supports the entire edifice of post grant proceedings.

          The Bar has been attempting for decades now to get courts out of deciding patent validity for one reason or another, and you know it. Until I had direct experience with BRI, serial reexaminations, and the like, I generally supported the concept. I no longer do.

          A federal judge may not be an expert in science or engineering, but he or she is independent and fair. Only with an independent judiciary deciding validity can one truly get justice on a reliable basis.

          1. Congress – not the Court – has put forth the notion that business methods (as a category) are patent eligible subject matter.

            Your spin to the contrary fails.

  7. Hi Dennis,

    You missed a very important point in the new legislation


    SEC. 9. IMPROVEMENTS AND TECHNICAL CORRECTIONS TO
    THE LEAHY-SMITH AMERICA INVENTS ACT.

    (a) POST-GRANT REVIEW AMENDMENT.—Section
    10325(e)(2) of title 35, United States Code is amended by 11
    striking ‘‘or reasonably could have raised’’.

    By striking “or reasonably could have raised” this will give big tech companies like Google to harass the patentee with IPR with slightly modified or new prior art over and over again at USPTO and District Court.

    The Invalidity theories of the defendant will NEVER be exhausted by striking “or reasonably could have raised”

    This seemingly minor change will doom the patentee !

    I have yet to see anyone highlight this part of the new act in any of the blogs.

    regards,
    -Brian

      1. Dennis,

        Can you please add that point in your original writeup so other folks who dont read the comments can be made aware of it too.

        Thank you,
        -Brian

    1. Brian, when by the PTAB’s own data shows that only 10% of patent claims subject to IPR trials are confirmed as it is, the negative effect on the patent system that the various flavors of post grant reviews currently have can only be multiplied by this so-called reform.

      In aspect after aspect, they system is being biased against patent owners, in favor of the accused infringer, who normally has big pockets.

      It seems the big infringer bar is going to keep pressing for reforms that taken together will effectively insulate them from the patent system. They can ignore the patents of independent inventors because if challenged, they can crush them with IPRs and the like. With competitors of equal size, there remains the cross license.

      This is brave new world that we are entering. It is a world where patents will become unimportant/non existent except in a few limited cases such as chemicals and the like. In particular, startups will not be financed because their patents, if they choose to get them, will be all but valueless.

      Without the startup, America will soon fall behind in true innovation. We have already lost manufacturing. What will happen when we lose innovation as well?

      What is going on here has to be stopped.

      1. You can see the serial abuse of PTAB by Google.

        I was just following the Simple Air case and in that they have tried to invalidate the same patent with CBM twice.

        CBM2014-00054 in 12/23/2013
        CBM2014-00170 8/6/2014

        Even though both times it was rejected. If you read those two CBMs Google keeps on refining them with every iteration.

        If new reform on the way that strikes ‘‘or reasonably could have raised’’.

        Then it will be open season to use the IPR/CBM to harass the patentee till he gives up.

        Can some one write a new blog just explaining the repercussion of striking ‘‘or reasonably could have raised’’ from the AIA ? This is a humble request to Dennis and Ned , to highlight this with concrete examples / scenarios

        regards,
        -Brian

        1. Brian, Since I have personally seen so much abuse in straight reexaminations, I know that what can be abused will be abused. Abuse is not a defect of the system; it is a feature. The folks behind these reforms erect smokescreens of good intentions to mask what they really want.

          I have been there when the big boys have cajoled the small-fry into supporting first-to-file by inveiglements large and small when first-to-file was not in their best interests, but in the interests only of the big international firm.

          Today we hear of the troll, which has no definition but is generally attributed to a company that licenses patents as a business model as opposed to using patents to protect a product or a service. But the big boys have long done exactly this. Think of AT&T and IBM.

          It is high time we as a nation tell these folks to stop, and for the rest of us to try to figure out how to repeal or undo some of the worst aspects of the reforms already passed into law.

          But we here on Patently-O can do our bit. We can point out the problems of currently proposed legislation and how it can be abused, etc. In many cases, the cure for a perceived problem can be much worse than the disease.

          1. A troll is a litigation abuser – and we should all work to define it as such. NPE’s have as much right to the value of their patents as anyone.

            And yes, please somebody do tell IBM to stop trolling tiny companies for crazy dollars. Soonest !

            1. In broad strokes, I agree with you here Mr. Snyder.

              The trick of course is defining what “litigation abuse” is.

              That term tends to be quickly warped if only looked at from one side of the contested issue or the other.

              There needs to be an affirmative step taken to stop demonizing those who wish to enforce their granted property rights. All too often it is the mere act of filing suit that is so demonized. Thus, it should be clear that it is an improper metric to merely count the number of lawsuits and say “there is a problem” (or conversely, there is no problem).

              A finer view is needed. But that finer view does NOT support the witch hunt, the “Tr011” boogeyman horror stories that resonate with the attempted legal changes.

              Yes – I applaud your call for better definitions and a sharper focus on the issues. Alas, such clarity will paint a different picture than the one wanted by those seeking to weaken the patent system (even as they perversely call their weakened system “stronger”).

        2. As it stands, “or reasonably could have raised” is only being struck from PGR, a proceeding unavailable after 9 months from issuance. It will remain for IPRs and CBMRs which become available after that first 9 months.

            1. There is nothing on point from Goodlatte or the other Reps in the Bill’s committee hearing its first time around. But see below testimony in that hearing (page 47) from Robert A. Armitage, Former General Counsel, Eli Lilly & Co. His thinking is that estopping this broadly will disincentive parties from utilizing PGR.

              … Fixing this claim construction disparity, opens the door to securing broader support for another provision in Section 9, a provision that would correct the AIA’s broad estopple against later challenges to the same patent in a post grant review procedure. The Section 9 estopple fix corrects an inadvertent legislative drafting error in the AIA. Indeed, without this correction the AIA’s new post grant review procedure is almost certain to be underutilized and the important benefits that this procedure can bring to the patent system, by removing questionable patents, would be lost or at least significantly impaired.

              He has it somewhat backwards there. The amendment here is only to Section 325(e)(2) which relates to estoppel in district courts and the ITC — not in subsequent PTAB proceedings for which the “or reasonable could have raised” language would remain.

              1. Armitage “testimony” is meaningless (with all due respect) as he is not an elected representative.

                He advocates a viewpoint that benefits Lilly – a large multinational corporation. You will have to excuse me as I do not accept his conclusory statements.

                1. One more thing. IPR only estops a petitioner from later asserting invalidity based on printed publications. The available grounds for invalidity in a PGR, on the other hand, are all grounds of invalidity. In PGRs, this has the potential of precluding any invalidity defense if petitioner later finds himself a defendant. I think this “chips-all-in” risk coupled with PGR’s short 9 month window makes narrower estoppel a reasonable proposition.

  8. This is so clearly written for the benefit of Big High Tech (BHT) it is absurd. BHT steals your technology and runs you to the brink of being out of business; wish you could sue them but you can’t. Why because you’d have to post a bond that you can’t afford because BHT has been running you out of business. This is a disaster for small business. Unfortunately, they won’t know it for several years because they have been bamboozled into believing they are going to get sued everyday be some “troll,” without this legislation — despite the fact that small businesses are very rarely sued by such entities.

    1. BHT steals your technology

      I innovate all the time in my business and of course my business uses computers. Big High Tech hasn’t stolen any of my innovations. I don’t even worry about that happening.

      What “technology” of yours has “Big High Tech” “stolen” from you? Share your story with everyone, providing all the relevant details. You must have hundreds, if not thousands, of great examples of these oh-so-painful stories to share about “Big High Tech” stealing stuff from “little guys” who are struggling so hard to make ends meet.

      I am happy to share all kinds of stories with you about big and small businesses harassed by patent trolls who contribute less than zero to technological progress but expect thousands, if not millions, of dollars in return for their clever manipulation of our broken patent system.

      small businesses are very rarely sued by such entities.

      That’s only because small businesses are harder to shake down for the big payoffs that drive all these “innovators” to shove claims that protect “new” applications of basic logic (carried out by a POWERFUL COMPUTER BRAIN, of course) at our patent system.

      This is a disaster for small business.

      Maybe it’s a disaster for your “small business”, but it’s not a disaster for mine. Not at all. Nobody except for a tiny, tiny, tiny fraction of people wants to live in a world where we need to be worried about being sued because of information we provide “automatically” to our customers.

      That tiny, tiny, tiny fraction of people marginalized themselves with relentless bad behavior and, let’s face it, a sense of entitlement that was about ten thousand times larger than reality permitted. Enjoy. There’s more to come.

      1. Dear MM,

        If the Business model is to provide “every service on the internet for free and do targeted advertizing by monetizing the user by leveraging his online behavior.

        If any of those services were “previously” built on the assumption that user will pay for it. And now if Big company like Google comes and provide any of those “service/OS/software/mobileApp” for free. Your small software business , mobile App business will be in trouble.

        Because you cannot compete with free and you don’t have the network effect ad business model.

        Now if you were a startup and had any defend-able IP and you now assert that IP against the “free” provider.

        This innovation Act (mostly lobbied by big corporations like Google) will make sure you will never be successful in asserting your defend-able IP rights.

        No one will come forward with concrete examples you are looking for, because that would not be prudent. For those examples you can check for IPR database who big companies are trying to invalidate or the District court docket for the list of LLC suing big companies. And then check how many of those patents first originated from small startups who are now bankrupt.

        regards,
        -Brian

      2. An independent government body (even is of the Lemly-related data) has already told that tale.

        Guess what?

        It does not align with your script.

        But why let facts get in the way now?

  9. I like the proposals myself, saving perhaps the BRI standards one. But, if that be the will of the congress then it is fine as well.

  10. It is crazy to be amending the patent statute again so soon. Congress needs to give the AIA time to work itself out before monkeying around with the statute again. They are trying to micromanage the courts and the PTO, and under separation of powers, they are not allowed to micromanage the courts.

    WRT construction standards, can some one please articulate what the real difference is between the two? Seems that BRI interprets the claims in light of the specification, supposedly giving the terms a broader interpretation than district courts under the “ordinary meaning” standard. I just don’t see the difference. Judge Plager recently commented in his Additional Views opinion in Flo Healthcare that “ordinary meaning” construction resulted in the “single correct interpretation”. How is this different that what the PTO or PTAB does under BRI? It seems to me that people with a claim construction that they liked in the district court are complaining that the district court should trump, but this has nothing to do with which standard is used, just the person applying the standard. In the PTO/PTAB a scientifically trained person is doing it and at the district court a lay person is doing it. I trust the scientifically trained person more to come up with the better interpretation.

    1. Brian,

      To really understand what our scientifically trained USPTO person is doing by applying BRI ! these days ..

      Please read the Post

      Even under BRI, A Wired-Connection is not “Wireless”

      link to patentlyo.com

      If you still think scientifically trained USPTO person knows more about wireless , you should think again.

      -regards,
      Brian Smith

    2. Brian, but congress can micro-manage the courts.

      According to the Federal Circuit in Cuozzo, congress can foreclose court review of assertions of statutory jurisdiction by an agency even if by doing this congress has effectively foreclosed review of the statute itself by the courts.

      Now, if I am not mistaken, congress has that exact power — to authorize the executive to determine what a law means without court review. Marbury v. Madison.

      Hmm…

      On further thinking about it, perhaps I got the holding of Marbury backwards.

      1. I am really looking forward to your case about Article 1 tribunal vs Article 3 courts constitutional issues.

        I am assuming you read the dissenting Circuit Judge NEWMAN opinion
        and you will use a lot of what he said in presenting your case.

        link to cafc.uscourts.gov

        Also how different would the yesterday’s cafc decision would have been, if this new legislation draft had come before Cuozz had a chance to argue , because the draft take the position of Judge Newman.

        regards,
        -Brian

  11. Anyone know why there is a need for “transparency of ownership” and a 90-day limit to tell the PTO of any change in ownership?

      1. I guess my question should be, why do they think there’s a need?

        If you have a “large” client that gets bought or even simply changes its name, or anything else that triggers an assignment, 90 days isn’t a lot of time. And it’s almost impossible to not make a mistake in cases where a lot of patents are being assigned. Do you lose rights because of that mistake?

      2. Certainly records are not being kept up

        I think you are (again) mixing up “nice-to-haves” with “need-to-haves.”

        All of the need for the Quid Pro Quo is already satisfied with the “what” contained in the actual patent.

    1. Anyone know why there is a need for “transparency of ownership”

      The US patent system exists to serve the public. For obvious reasons, the public has an interest in knowing not only in who is being harmed by the system, but also who is profiting from the system and how the system is being used and/or abused by these entities.

      For example, the public is surely entitled to know whether, say, 50% of all US patent applications or 50% of all US pending patents were owned or controlled by a single foreign entity.

      It’s always fascinating to see people obsess over some minor instance of “government secrecy” but then leap to defend the government dealings (and surely the obtaining of patent rights is such a dealing) of incredibly wealthy individuals.

      Only in America.

      1. That serving the public is called the Quid Pro Quo.

        You want more – and you dissemble as to the fact that you are wanting more.

        Stop kicking up dust with your purposeful conflations.

    2. Let’s say you find a patent that reads on your device, and you want to license it. Without up-to-date records, it could be very difficult to figure out how to do that.

      Patents serve a public notice function, part of that is knowing who is claiming to own certain things.

      From a more practical standpoint: transparency helps people make good business decisions. E.g., maybe you’ll think twice about selling your patent to an assertion entity to sue your customer if your customer can easily figure that out. Instead, you may just go and license your customer (which, presumably you want to keep). Your customer, should you decide to sue them, can also rationally decide whether they want to keep dealing with you.

      1. Knowing “who” is not part of – and has zero to do with – the Quid Pro Quo, Jane.

        Quite in fact, your comment of “rationally decide” is an indicator of the Efficient Breach theory promulgated by the Imfringer’s Rights groups.

        This is just more anti-patent, make-patents-so-weak-as-to-be-useless C R P.

        The only transperancy required in the Quid Pro Quo is the “what” of the patent. The desired nature of patents having the attributes of personal property and of being fully alienable as such should not so readily be sacrificed at the alter of convenience of Efficient Breach. Those types of business decisions should NOT take the upper hand as to why we have a patent system – and one our F0umding F@thers crafted as they did.

        The notice is of the patent itself. All else is beyond the Quid Pro Quo.

    3. Intellectual Ventures. IV holds many patents – but in a wise decision – records the ownership at PTO as an LLC (many) with a name unrelated to IV. This frustrates the serial infringers (like google), because google wants to use its political connections and influence over PTO (say it ain’t so Joe!) to have these patents designated for SAWs or IPR decisions. In other words, if PTO does not know who ownes the patents, they don’t know who to punish as a politically disfavored entity. That is the most obvious explanation.

      1. IV holds many patents – but in a wise decision – records the ownership at PTO as an LLC (many) with a name unrelated to IV. This frustrates the serial infringers (like google), because google

        The troll-luvver’s obsession with google is way beyond weird.

        I have zero affiliation with google. Don’t really like the company. Their patent portfolio is filled with some of the worst junk every filed.

        But I fully support transparency of patent ownership regardless.

        google wants to use its political connections and influence over PTO

        And Intellectroll Ventures doesn’t? Give us a break already.

  12. 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.

    That would require patentees to have some modest understanding of the scope of their own patent claims, and what the words in those claims actually mean. And then they’d have to reveal their own understanding right off the bat instead of just making a bunch of conclusory statements about the defendant.

    Quite a development. And a long time coming.

    1. Initial infringement contentions are usually, due in many jurisdictions, very soon after filing of a complaint. I can’t imagine how this is going to have any measurable effect on current litigation practices.

      1. I can’t imagine how this is going to have any measurable effect on current litigation practices.

        As you indicated, it depends on the jurisdiction. Certain jurisdictions are going to be brought up to speed.

        Initial infringement contentions are usually, due in many jurisdictions, very soon after filing of a complaint.

        Now they’ll be due a tad sooner and defendants won’t have to waste time guessing about what the plaintiff is thinking. That’s fair and reasonable.

  13. Hoo boy. Among the pleading requirements is:

    For each patent identified under paragraph (1), whether a standard-setting body has specifically declared such patent to be essential, potentially essential, or having potential to become essential to that standard-setting body.”

    Who drafted this language? Surely not someone with half a clue of what goes on in standard-setting. The vast majority (if not all) SSOs don’t declare patents to be essential/potentially essential — companies self-declare (or just offer a blanket FRAND commitment). And the patents are not essential to the “standard-setting body,” they are essential to specific standards set by that SSO.

    1. “they are essential to specific standards set by that SSO.”

      That is what they mean. But I’m sure they’ll appreciate any further pedantism.

    2. Motion to strike the pleadings your Honor. J: One what grounds?

      Because I represent Large Co. are we dominate the standards-setting body and our sales of this infringing product is taking off like a rocket we therefore stipulate this should be a ‘standard essential’ and this patent has : ” having potential to become essential to that standard-setting body.” We call it project ‘infringement gold’ in the committee back room.

  14. Re attorney fee shifting, Dennis says: In my view, an improvement upon this would be to set reasonableness early-on based upon an estimation of the case value.

    This is a very interesting idea, and I want to think about this some more. In particular, I would want to think about how it ties in to expected discovery/litigation costs as well. As many people acknowledge, discovery costs are often primarily on the defense side. A limit in fees would maybe need to consider those unequal burdens and how to incentivize both plaintiffs and defendants to limit the amount of discovery taken. Obviously other portions of the bill address issues with discovery, but it is interesting to think about how these sections interact and how we can make litigation more efficient and fair for all parties involved.

      1. Bingo. High costs of patent litigation are almost completely driven by defense firms who are paid handsomely to engage in unnecessary motion practice.

        1. Although there may be some firms who do this, I doubt it is common practice. Firms who would do that would not have clients for very long…..

          1. Your intuition is incorrect.

            This type of behavior by defense counsel is as common as the “settle for less than the cost of defense” play by an NPE. The defense will use motion practice to soften a settlement position. Who do you think pays for this motion practice? Defense is not working on contingency.

            If the reduction in settlement is less than the money spent to “negotiate”, the client wins. How often do you think that happens?

            The institution of a patent small claims court or defense fee limits on cases where a plaintiff will stipulate to the fact that they are asking for a settlement that falls under certain thresholds would be welcome.

            1. Bluto,

              Unfortunately what you propose would be labeled as a guaranteed win for the “Tr011s,” since the courts would clearly move for the plaintiff-asked for settlements than the full bore price of lawsuit and negotiations (that is in fact the corpus of the ‘they are a tr011’ cry now).

              Keep in mind as well, that any lowering of costs of litigation may (yes even though the costs may not be equally divided) just may I tell you, instigate MORE lawsuits (not less).

              This too, is often sought to be minimized in the discussions leading up to any legislation (and will be one of those “unforeseen” – but easily foreseeable – consequences after legislation.

        2. BB: High costs of patent litigation are almost completely driven by defense firms who are paid handsomely to engage in unnecessary motion practice.

          The world’s most ridiculous argument refuses to die.

          “The people I sued made me spend a lot of money! If only they’d have just given up right away it would have been so much cheaper for them!”

          The vast majority of sane people don’t go around looking to be sued. There are no “professional defendants” in the patent sphere who create entities solely for the purpose of infringing some patent and funneling the money to defense attorneys.

          But there certainly are highly specialized professional patent plaintiffs whose sole purpose for existing is to “monetize” patents. Perhaps you’ve heard of these people? More likely you are one of those people because your statement is exactly the kind of weird upside-down nonsense that permeates the thinking of those who are eyebrow deep in that “business model”.

          Not everybody throws their conscience to the wind every time someone puts money in front of them. On the contrary, a lot of people who have the kind of money that a typical lawyer has decide to spend their time “giving back” to those who have less, with little or no expectation of an substantial financial reward.

          Perhaps next you’ll tell me that I’m just “jealous” of Intellectroll Ventures. It’s been a while since I’ve heard that line but it’s not unprecedented.

          1. Next time read someone’s comments before you respond.

            Your entire argument conflates the behavior or defendants with their counsel. Defendants don’t want to spend money playing games. Unfortunately, defendants depend entirely on their counsel who do like to play games. Next time, respond to the arguments presented instead of erecting your straw man to burn.

      2. Good point. I think the courts can play a better role here in getting the parties to talk about what is reasonable given the stakes at issue. Discovery is open to abuse from both sides, and it would be good for courts to try to be more active in making sure the costs of discovery don’t outweigh the benefits of what that discovery is to the case.

        1. Jane, there is already attorney fee shifting on the books. See the rules concerning a proffer. There are some very good law review/ economics papers on this subject. Maybe you should try to find a legislative tweak to encourage more use of what many believe is a fair balance between infringers and enforcers concerning loser pay.

          1. If you’re referring to FRCP 68, my understanding is that only refers to costs, and there is law regarding what is meant by “costs” and for patent claims, that does not include legal fees.

            Were you referring to something else? Obviously there is also the exceptional case statute, but I don’t think that’s what you were referring to?

            1. Last time I looked – and it was a while ago – I thought attorney fees could be included as costs under FRCP 68 – if you were specific in the proffer. I could be wrong. At any rate, I would suggest tweaking FRCP68, instead of the brightline test. As you know, cases can terminate rather quickly – when a judge decides to punch it off his docket. Interesting discussion of an earlier Goodlatte proposal at link to m.foley.com

      3. Dennis if there is no amount stated in the compliant like “$1000”, what then? If the pursuant demand is impossible to meet (e.g. like more money than you have made in the period), you have no choice but to defend, whatever the cost.

        1. Make a proffer – of what you believe is the fair value of settlement. If the proffer is rejected – then mandatory fee shifting takes place. If I recall correctly that is the way the statute works.

                1. I very much did read – did you?

                  Did you notice the portion of your statement to which my comment goes to? Or did you not realize that which you yourself typed?

                  Why then do you think it is a reality (no matter how sad) that we so need to import?

                  Or were you just being careless again in expressing yourself?

      4. I’m not sure that I understand the thrust of the Professor’s question:

        If someone sues you for $1,000 and you know they have no claim, is it ever reasonable to spend $100,000 to successfully defend the claim?

        First, the notion of “knowing that they have no claim” appears presumptuous at best, as every defendant always appears to know that their case ‘cannot be wrong’ and is the driver for the two sides to be proceeding to court in the first place.

        Is there a suggestion here that a minimum level of wrong be alleged before the complaint will earn the right to be heard? Is there some de facto level below which that the defendants “knowledge” will be taken as a given and plaintiff won’t be heard? Exclusive takes on the meaning of exclusive except some deminimus?

        This isn’t the first time that some aspect of “fair use” has been implicitly pushed into the patent realm by Prof. Crouch. Is that a part of the question here?

        On the other hand, is the question related to limiting defense efforts tied to what the plaintiff is asking for? Oddly, this appears to strengthen the accused ‘Tr011’ tactic of asking for a nuisance settlement amount. The blueprint of gauging the level asked to be just below the level of what may be an otherwise objectively (and quite separate from any amount which may be asked for) be determined, or estimated.

        Or is this a roundabout way of telling plaintiffs that they are no longer free to set the monetary level that they are currently free to set? That plaintiffs MUST set the level at some best guess “actual” and cannot negotiate?

        There’s a lot packed into that question. Please elucidate (you may choose any sentence structure that works for you).

        1. The Act would allow for recovery of “reasonable” litigation fees. Dennis is obviously asking to what extent a fee’s reasonableness depends on the amount at stake in the litigation.

          Check you reading comprehension skills.

    1. Unless you are willing to put a fixed tariff in place (ex. 100k up to claim construction, 500k up to discovery, 1million if it gets to trial), trying to fix reasonable costs ahead of time is unlikely to be productive.

      What’s reasonable will depend on the complexity of the patent, number of claims asserted, how many products they are asserted against, the value of those products, how much that value represents to the defendant, whether an injunction is sought, likely, and the potential impact on the defendant. Almost all of those factors are subject to change during the course of the proceeding, so any early estimate of reasonable costs could be wildly off what was reasonable at the end of the day.

      One approach that can work is to provide a tariff/scale that provides guidelines based on the steps taken (between a-b hours for a preparing a motion plus the number of hours spent hearing the motion if oral arguments, c-d hours for document discovery, etc.) so that each party can do a rough running tab of their potential liability based on the steps taken to date. One aspect of such an approach though is it tends to underestimate the actual costs, as the allowable hours for each step will tend to be calculated based on a simple situation, while many cases will have at least one complicated step or stage.

      1. What’s wrong then with a fixed tarrif? Limits on the attorney fees, otherwise there is a real incentive to drive-up the fees b/c of of the % chance that you won’t have to pay those costs.

        1. Exactly. There has to be some way to push these small potatoes cases into a small claims type situation or immediate mediation from the outset.

        2. A fixed tariff can work; but unless it is set low there is a potential windfall for the successful party, or if compensation is only the greater of the amount actually spent or the tariff, an incentive to spend more than you might otherwise do so.

          If the tariff is set too low then the anticipated benefits of having a loser pays system are partly defeated, as your recovery becomes a small percentage of your actual costs, and your risks of payment become small compared to the potential rewards.

        1. In the minds of others, this is an attack on patents when it appears to be other systemic issues at play.

          Weakening patents to treat other issues is a notoriously poor choice.

          If the problem is the cost of litigation – treat the right cause with court reform.

          If the problem is business identity and asset hiding – treat the right cause with business formation reform (it is most definitely NOT only patents that are manipulated with the various shell corporations that are allowed to exist under law.

          The koolaid needs to be out down.

      1. Most federal civil cases are big businesses or governments going against each other or small entities or individuals suing big businesses.

        But patent cases are usually big businesses, litigation shops, and wealthy patent aggregators suing small innocent businesses hoping to bilk them out of cash by running up their attorney fees. That makes patent litigation the ideal place to have loser pays rules and other federal civil suits a very bad place for them.

        1. Owen,

          Which one of these small business has the lobbying power to get both side of the isle to agree on something .. when we all know they dont agree on anything …. one word answer is biggest donor to both side of the isle Google ! (the ultimate small business)

          Anytime you see both sides agreeing 100 % on something, you should be assured they americans are going to get ***ked from both sides.

          -Brian

    2. Ugh, reasonableness based on cost analysis of the patent.

      Are we trying to simplify the patent system? Or make it worse. The court should not worry about the pseudo-economic science of valuation of patents.

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