I received some questions regarding my statement that the provisions of the Inventor Rights Act of 2019 “have historic roots.” This post addresses those in more detail.
Profit Disgorgement – Reset to 1946: I will start with the profit disgorgement provision – which is a major change away from the current compensatory scheme in U.S. Utility Patent Law. That said, disgorgement remains available for design patent infringement as well as other IP regimes such as copyright, trademark, and trade secret misappropriation. The basic approach to disgorgement is to calculate the infringer’s profits associated with the infringement and then hand those profits over to the rights holder. As Supreme Court explained in Tilghman v. Proctor, 125 U.S. 136 (1888), this approach is designed to avoid unjust enrichment by the infringer — what patent owners term “efficient infringement.”
The reasons that have led to the adoption of this [profit disgorgement] rule are that it comes nearer than any other to doing complete justice between the parties, that in equity the profits made by the infringer of a patent belong to the patentee and not to the infringer, and that it is inconsistent with the ordinary principles and practice of courts of chancery either on the one hand to permit the wrongdoer to profit by his own wrong
Tilghman v. Proctor, 125 U.S. 136 (1888). Profit disgorgement was eliminated from the text of the Patent Act in 1946 and Courts have held that it is no longer an available remedy. See Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961) (“The purpose of the change was precisely to eliminate the recovery of profits as such, and allow recovery of damages only.”); Caprice L. Roberts, The Case for Restitution and Unjust Enrichment Remedies in Patent Law, 14 Lewis & Clark L. Rev. 653 (2010).
The provision found in the Inventor Rights Act of 2019 would effectively reinstate the disgorgement option close to what it was back in the 1870s when disgorgement became available for cases at law in addition to those in equity where it was already available.
Venue – Reset to 2017: Under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), federal patent infringement lawsuits can only be filed in states where the defendant either (1) is incorporated or (2) “committed acts of infringement and has a regular and established place of business.” Quoting 28 U.S.C. § 1400(b). Prior to TC Heartland, venue was much broader and was proper so long as the court had personal jurisdiction over the defendant (i.e., minimum contacts). The proposal in the Inventor Rights Act of 2019 would not fully restore the broad venue, but would allow an inventor to sue in states where the inventor conducted research or has a regular and established physical facility.
Injunctions – Reset to 2006: For many years courts issued injunctions as a matter of course against adjudged infringers. That changed following eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In eBay, the Supreme Court ruled, inter alia, that no injunction should issue absent proof of irreparable harm caused by the infringement as well as inadequate remedy at law.
The proposal in the Inventor Rights Act of 2019 would would restore the pre-eBay law and thus allow for injunctive relief.
Post-Issuance Review – Reset to 1980: The Bayh-Dole Act (1980) authorized involuntary ex parte reexaminations. Since then, the scope of involuntary post issuance challenges have grown — most significantly with Trials under the 2011 America Invents Act (AIA).
The proposal in the Inventor Rights Act of 2019 would would restore the pre-1980 setup – barring any involuntary post-issuance review by the USPTO:
The United States Patent and Trademark Office shall not undertake a proceeding to reexamine, review, or otherwise make a determination about the validity of an inventor-owned patent without the consent of the patentee
Of course, a key principle of the proposal here is that it applies only to a subset of patents — those owned by their inventors.
(k) The term ‘inventor-owned patent’ means a patent with respect to which the inventor of the invention claimed by the patent or an entity controlled by that inventor—(1) is the patentee; and (2) holds all substantial rights.’