[House Report 113-279]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 113-279
======================================================================
INNOVATION ACT
_______
December 2, 2013.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Goodlatte, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS AND ADDITIONAL VIEWS
[To accompany H.R. 3309]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 3309) to amend title 35, United States Code, and the
Leahy-Smith America Invents Act to make improvements and
technical corrections, and for other purposes, having
considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 16
Background and Need for the Legislation.......................... 18
Hearings......................................................... 44
Committee Consideration.......................................... 44
Committee Votes.................................................. 44
Committee Oversight Findings..................................... 55
New Budget Authority and Tax Expenditures........................ 56
Congressional Budget Office Cost Estimate........................ 56
Duplication of Federal Programs.................................. 57
Disclosure of Directed Rule Makings.............................. 58
Performance Goals and Objectives................................. 58
Advisory on Earmarks............................................. 58
Section-by-Section Analysis...................................... 58
Changes in Existing Law Made by the Bill, as Reported............ 72
Dissenting Views................................................. 93
Additional Views................................................. 115
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Innovation Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Patent infringement actions.
Sec. 4. Transparency of patent ownership.
Sec. 5. Customer-suit exception.
Sec. 6. Procedures and practices to implement and recommendations to
the Judicial Conference.
Sec. 7. Small business education, outreach, and information access.
Sec. 8. Studies on patent transactions, quality, and examination.
Sec. 9. Improvements and technical corrections to the Leahy-Smith
America Invents Act.
Sec. 10. Effective date.
SEC. 2. DEFINITIONS.
In this Act:
(1) Director.--The term ``Director'' means the Under
Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office.
(2) Office.--The term ``Office'' means the United States
Patent and Trademark Office.
SEC. 3. PATENT INFRINGEMENT ACTIONS.
(a) Pleading Requirements.--
(1) Amendment.--Chapter 29 of title 35, United States Code,
is amended by inserting after section 281 the following:
``Sec. 281A. Pleading requirements for patent infringement actions
``(a) Pleading Requirements.--Except as provided in subsection (b),
in a civil action in which a party asserts a claim for relief arising
under any Act of Congress relating to patents, a party alleging
infringement shall include in the initial complaint, counterclaim, or
cross-claim for patent infringement, unless the information is not
reasonably accessible to such party, the following:
``(1) An identification of each patent allegedly infringed.
``(2) An identification of each claim of each patent
identified under paragraph (1) that is allegedly infringed.
``(3) For each claim identified under paragraph (2), an
identification of each accused process, machine, manufacture,
or composition of matter (referred to in this section as an
`accused instrumentality') alleged to infringe the claim.
``(4) For each accused instrumentality identified under
paragraph (3), an identification with particularity, if known,
of--
``(A) the name or model number of each accused
instrumentality; or
``(B) if there is no name or model number, a
description of each accused instrumentality.
``(5) For each accused instrumentality identified under
paragraph (3), a clear and concise statement of--
``(A) where each element of each claim identified
under paragraph (2) is found within the accused
instrumentality; and
``(B) with detailed specificity, how each limitation
of each claim identified under paragraph (2) is met by
the accused instrumentality.
``(6) For each claim of indirect infringement, a description
of the acts of the alleged indirect infringer that contribute
to or are inducing the direct infringement.
``(7) A description of the authority of the party alleging
infringement to assert each patent identified under paragraph
(1) and of the grounds for the court's jurisdiction.
``(8) A clear and concise description of the principal
business, if any, of the party alleging infringement.
``(9) A list of each complaint filed, of which the party
alleging infringement has knowledge, that asserts or asserted
any of the patents identified under paragraph (1).
``(10) 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,
and whether the United States Government or a foreign
government has imposed specific licensing requirements with
respect to such patent.
``(b) Information Not Readily Accessible.--If information required to
be disclosed under subsection (a) is not readily accessible to a party,
that information may instead be generally described, along with an
explanation of why such undisclosed information was not readily
accessible, and of any efforts made by such party to access such
information.
``(c) Confidential Information.--A party required to disclose
information described under subsection (a) may file, under seal,
information believed to be confidential, with a motion setting forth
good cause for such sealing. If such motion is denied by the court, the
party may seek to file an amended complaint.
``(d) Exemption.--A civil action that includes a claim for relief
arising under section 271(e)(2) shall not be subject to the
requirements of subsection (a).''.
(2) Conforming amendment.--The table of sections for chapter
29 of title 35, United States Code, is amended by inserting
after the item relating to section 281 the following new item:
``281A. Pleading requirements for patent infringement
actions.''.
(b) Fees and Other Expenses.--
(1) Amendment.--Section 285 of title 35, United States Code,
is amended to read as follows:
``Sec. 285. Fees and other expenses
``(a) Award.--The court shall award, to a prevailing party,
reasonable fees and other expenses incurred by that party in connection
with a civil action in which any party asserts a claim for relief
arising under any Act of Congress relating to patents, unless the court
finds that the position and conduct of the nonprevailing party or
parties were reasonably justified in law and fact or that special
circumstances (such as severe economic hardship to a named inventor)
make an award unjust.
``(b) Certification and Recovery.--Upon motion of any party to the
action, the court shall require another party to the action to certify
whether or not the other party will be able to pay an award of fees and
other expenses if such an award is made under subsection (a). If a
nonprevailing party is unable to pay an award that is made against it
under subsection (a), the court may make a party that has been joined
under section 299(d) with respect to such party liable for the
unsatisfied portion of the award.
``(c) Covenant Not to Sue.--A party to a civil action that asserts a
claim for relief arising under any Act of Congress relating to patents
against another party, and that subsequently unilaterally extends to
such other party a covenant not to sue for infringement with respect to
the patent or patents at issue, shall be deemed to be a nonprevailing
party (and the other party the prevailing party) for purposes of this
section, unless the party asserting such claim would have been
entitled, at the time that such covenant was extended, to voluntarily
dismiss the action or claim without a court order under Rule 41 of the
Federal Rules of Civil Procedure.''.
(2) Conforming amendment and amendment.--
(A) Conforming amendment.--The item relating to
section 285 of the table of sections for chapter 29 of
title 35, United States Code, is amended to read as
follows:
``285. Fees and other expenses.''.
(B) Amendment.--Section 273 of title 35, United
States Code, is amended by striking subsections (f) and
(g).
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act and
shall apply to any action for which a complaint is filed on or
after the first day of the 6-month period ending on that
effective date.
(c) Joinder of Interested Parties.--Section 299 of title 35, United
States Code, is amended by adding at the end the following new
subsection:
``(d) Joinder of Interested Parties.--
``(1) Joinder.--In a civil action arising under any Act of
Congress relating to patents in which fees and other expenses
have been awarded under section 285 to a prevailing party
defending against an allegation of infringement of a patent
claim, and in which the nonprevailing party alleging
infringement is unable to pay the award of fees and other
expenses, the court shall grant a motion by the prevailing
party to join an interested party if such prevailing party
shows that the nonprevailing party has no substantial interest
in the subject matter at issue other than asserting such patent
claim in litigation.
``(2) Limitation on joinder.--
``(A) Discretionary denial of motion.--The court may
deny a motion to join an interested party under
paragraph (1) if--
``(i) the interested party is not subject to
service of process; or
``(ii) joinder under paragraph (1) would
deprive the court of subject matter
jurisdiction or make venue improper.
``(B) Required denial of motion.--The court shall
deny a motion to join an interested party under
paragraph (1) if--
``(i) the interested party did not timely
receive the notice required by paragraph (3);
or
``(ii) within 30 days after receiving the
notice required by paragraph (3), the
interested party renounces, in writing and with
notice to the court and the parties to the
action, any ownership, right, or direct
financial interest (as described in paragraph
(4)) that the interested party has in the
patent or patents at issue.
``(3) Notice requirement.--An interested party may not be
joined under paragraph (1) unless it has been provided actual
notice, within 30 days after the date on which it has been
identified in the initial disclosure provided under section
290(b), that it has been so identified and that such party may
therefore be an interested party subject to joinder under this
subsection. Such notice shall be provided by the party who
subsequently moves to join the interested party under paragraph
(1), and shall include language that--
``(A) identifies the action, the parties thereto, the
patent or patents at issue, and the pleading or other
paper that identified the party under section 290(b);
and
``(B) informs the party that it may be joined in the
action and made subject to paying an award of fees and
other expenses under section 285(b) if--
``(i) fees and other expenses are awarded in
the action against the party alleging
infringement of the patent or patents at issue
under section 285(a);
``(ii) the party alleging infringement is
unable to pay the award of fees and other
expenses;
``(iii) the party receiving notice under this
paragraph is determined by the court to be an
interested party; and
``(iv) the party receiving notice under this
paragraph has not, within 30 days after
receiving such notice, renounced in writing,
and with notice to the court and the parties to
the action, any ownership, right, or direct
financial interest (as described in paragraph
(4)) that the interested party has in the
patent or patents at issue.
``(4) Interested party defined.--In this subsection, the term
`interested party' means a person, other than the party
alleging infringement, that--
``(A) is an assignee of the patent or patents at
issue;
``(B) has a right, including a contingent right, to
enforce or sublicense the patent or patents at issue;
or
``(C) has a direct financial interest in the patent
or patents at issue, including the right to any part of
an award of damages or any part of licensing revenue,
except that a person with a direct financial interest
does not include--
``(i) an attorney or law firm providing legal
representation in the civil action described in
paragraph (1) if the sole basis for the
financial interest of the attorney or law firm
in the patent or patents at issue arises from
the attorney or law firm's receipt of
compensation reasonably related to the
provision of the legal representation; or
``(ii) a person whose sole financial interest
in the patent or patents at issue is ownership
of an equity interest in the party alleging
infringement, unless such person also has the
right or ability to influence, direct, or
control the civil action.''.
(d) Discovery Limits.--
(1) Amendment.--Chapter 29 of title 35, United States Code,
is amended by adding at the end the following new section:
``Sec. 299A. Discovery in patent infringement action
``(a) Discovery in Patent Infringement Action.--Except as provided in
subsection (b), in a civil action arising under any Act of Congress
relating to patents, if the court determines that a ruling relating to
the construction of terms used in a patent claim asserted in the
complaint is required, discovery shall be limited, until such ruling is
issued, to information necessary for the court to determine the meaning
of the terms used in the patent claim, including any interpretation of
those terms used to support the claim of infringement.
``(b) Discretion To Expand Scope of Discovery.--
``(1) Timely resolution of actions.--If, under any provision
of Federal law (including the amendments made by the Drug Price
Competition and Patent Term Restoration Act of 1984 (Public Law
98-417)), resolution within a specified period of time of a
civil action arising under any Act of Congress relating to
patents will necessarily affect the rights of a party with
respect to the patent, the court shall permit discovery, in
addition to the discovery authorized under subsection (a),
before the ruling described in subsection (a) is issued as
necessary to ensure timely resolution of the action.
``(2) Resolution of motions.--When necessary to resolve a
motion properly raised by a party before a ruling relating to
the construction of terms described in subsection (a) is
issued, the court may allow limited discovery in addition to
the discovery authorized under subsection (a) as necessary to
resolve the motion.
``(3) Special circumstances.--In special circumstances that
would make denial of discovery a manifest injustice, the court
may permit discovery, in addition to the discovery authorized
under subsection (a), as necessary to prevent the manifest
injustice.''.
(2) Conforming amendment.--The table of sections for chapter
29 of title 35, United States Code, is amended by adding at the
end the following new item:
``299A. Discovery in patent infringement action.''.
(e) Sense of Congress.--It is the sense of Congress that it is an
abuse of the patent system and against public policy for a party to
send out purposely evasive demand letters to end users alleging patent
infringement. Demand letters sent should, at the least, include basic
information about the patent in question, what is being infringed, and
how it is being infringed. Any actions or litigation that stem from
these types of purposely evasive demand letters to end users should be
considered a fraudulent or deceptive practice and an exceptional
circumstance when considering whether the litigation is abusive.
(f) Demand Letters.--Section 284 of title 35, United States Code, is
amended--
(1) in the first undesignated paragraph, by striking ``Upon
finding'' and inserting ``(a) In General.--Upon finding'';
(2) in the second undesignated paragraph, by striking ``When
the damages'' and inserting ``(b) Assessment by Court; Treble
Damages.--When the damages'';
(3) by inserting after subsection (b), as designated by
paragraph (2) of this subsection, the following:
``(c) Willful Infringement.--A claimant seeking to establish willful
infringement may not rely on evidence of pre-suit notification of
infringement unless that notification identifies with particularity the
asserted patent, identifies the product or process accused, and
explains with particularity, to the extent possible following a
reasonable investigation or inquiry, how the product or process
infringes one or more claims of the patent.''; and
(4) in the last undesignated paragraph, by striking ``The
court'' and inserting ``(d) Expert Testimony.--The court''.
(g) Effective Date.--Except as otherwise provided in this section,
the amendments made by this section shall take effect on the date of
the enactment of this Act and shall apply to any action for which a
complaint is filed on or after that date.
SEC. 4. TRANSPARENCY OF PATENT OWNERSHIP.
(a) Amendments.--Section 290 of title 35, United States Code, is
amended--
(1) in the heading, by striking ``suits'' and inserting
``suits; disclosure of interests'';
(2) by striking ``The clerks'' and inserting ``(a) Notice of
Patent Suits.--The clerks''; and
(3) by adding at the end the following new subsections:
``(b) Initial Disclosure.--
``(1) In general.--Except as provided in paragraph (2), upon
the filing of an initial complaint for patent infringement, the
plaintiff shall disclose to the Patent and Trademark Office,
the court, and each adverse party the identity of each of the
following:
``(A) The assignee of the patent or patents at issue.
``(B) Any entity with a right to sublicense or
enforce the patent or patents at issue.
``(C) Any entity, other than the plaintiff, that the
plaintiff knows to have a financial interest in the
patent or patents at issue or the plaintiff.
``(D) The ultimate parent entity of any assignee
identified under subparagraph (A) and any entity
identified under subparagraph (B) or (C).
``(2) Exemption.--The requirements of paragraph (1) shall not
apply with respect to a civil action filed under subsection (a)
that includes a cause of action described under section
271(e)(2).
``(c) Disclosure Compliance.--
``(1) Publicly traded.--For purposes of subsection (b)(1)(C),
if the financial interest is held by a corporation traded on a
public stock exchange, an identification of the name of the
corporation and the public exchange listing shall satisfy the
disclosure requirement.
``(2) Not publicly traded.--For purposes of subsection
(b)(1)(C), if the financial interest is not held by a publicly
traded corporation, the disclosure shall satisfy the disclosure
requirement if the information identifies--
``(A) in the case of a partnership, the name of the
partnership and the name and correspondence address of
each partner or other entity that holds more than a 5-
percent share of that partnership;
``(B) in the case of a corporation, the name of the
corporation, the location of incorporation, the address
of the principal place of business, and the name of
each officer of the corporation; and
``(C) for each individual, the name and
correspondence address of that individual.
``(d) Ongoing Duty of Disclosure to the Patent and Trademark
Office.--
``(1) In general.--A plaintiff required to submit information
under subsection (b) or a subsequent owner of the patent or
patents at issue shall, not later than 90 days after any change
in the assignee of the patent or patents at issue or an entity
described under subparagraph (B) or (D) of subsection (b)(1),
submit to the Patent and Trademark Office the updated
identification of such assignee or entity.
``(2) Failure to comply.--With respect to a patent for which
the requirement of paragraph (1) has not been met--
``(A) the plaintiff or subsequent owner shall not be
entitled to recover reasonable fees and other expenses
under section 285 or increased damages under section
284 with respect to infringing activities taking place
during any period of noncompliance with paragraph (1),
unless the denial of such damages or fees would be
manifestly unjust; and
``(B) the court shall award to a prevailing party
accused of infringement reasonable fees and other
expenses under section 285 that are incurred to
discover the updated assignee or entity described under
paragraph (1), unless such sanctions would be unjust.
``(e) Definitions.--In this section:
``(1) Financial interest.--The term `financial interest'--
``(A) means--
``(i) with regard to a patent or patents, the
right of a person to receive proceeds related
to the assertion of the patent or patents,
including a fixed or variable portion of such
proceeds; and
``(ii) with regard to the plaintiff, direct
or indirect ownership or control by a person of
more than 5 percent of such plaintiff; and
``(B) does not mean--
``(i) ownership of shares or other interests
in a mutual or common investment fund, unless
the owner of such interest participates in the
management of such fund; or
``(ii) the proprietary interest of a
policyholder in a mutual insurance company or
of a depositor in a mutual savings association,
or a similar proprietary interest, unless the
outcome of the proceeding could substantially
affect the value of such interest.
``(2) Proceeding.--The term `proceeding' means all stages of
a civil action, including pretrial and trial proceedings and
appellate review.
``(3) Ultimate parent entity.--
``(A) In general.--Except as provided in subparagraph
(B), the term `ultimate parent entity' has the meaning
given such term in section 801.1(a)(3) of title 16,
Code of Federal Regulations, or any successor
regulation.
``(B) Modification of definition.--The Director may
modify the definition of `ultimate parent entity' by
regulation.''.
(b) Technical and Conforming Amendment.--The item relating to section
290 in the table of sections for chapter 29 of title 35, United States
Code, is amended to read as follows:
``290. Notice of patent suits; disclosure of interests.''.
(c) Regulations.--The Director may promulgate such regulations as are
necessary to establish a registration fee in an amount sufficient to
recover the estimated costs of administering subsections (b) through
(e) of section 290 of title 35, United States Code, as added by
subsection (a), to facilitate the collection and maintenance of the
information required by such subsections, and to ensure the timely
disclosure of such information to the public.
(d) Effective Date.--The amendments made by this section shall take
effect upon the expiration of the 6-month period beginning on the date
of the enactment of this Act and shall apply to any action for which a
complaint is filed on or after such effective date.
SEC. 5. CUSTOMER-SUIT EXCEPTION.
(a) Amendment.--Section 296 of title 35, United States Code, is
amended to read as follows:
``Sec. 296. Stay of action against customer
``(a) Stay of Action Against Customer.--Except as provided in
subsection (d), in any civil action arising under any Act of Congress
relating to patents, the court shall grant a motion to stay at least
the portion of the action against a covered customer related to
infringement of a patent involving a covered product or process if the
following requirements are met:
``(1) The covered manufacturer and the covered customer
consent in writing to the stay.
``(2) The covered manufacturer is a party to the action or to
a separate action involving the same patent or patents related
to the same covered product or process.
``(3) The covered customer agrees to be bound by any issues
that the covered customer has in common with the covered
manufacturer and are finally decided as to the covered
manufacturer in an action described in paragraph (2).
``(4) The motion is filed after the first pleading in the
action but not later than the later of--
``(A) the 120th day after the date on which the first
pleading in the action is served that specifically
identifies the covered product or process as a basis
for the covered customer's alleged infringement of the
patent and that specifically identifies how the covered
product or process is alleged to infringe the patent;
or
``(B) the date on which the first scheduling order in
the case is entered.
``(b) Applicability of Stay.--A stay issued under subsection (a)
shall apply only to the patents, products, systems, or components
accused of infringement in the action.
``(c) Lift of Stay.--
``(1) In general.--A stay entered under this section may be
lifted upon grant of a motion based on a showing that--
``(A) the action involving the covered manufacturer
will not resolve a major issue in suit against the
covered customer; or
``(B) the stay unreasonably prejudices and would be
manifestly unjust to the party seeking to lift the
stay.
``(2) Separate manufacturer action involved.--In the case of
a stay entered based on the participation of the covered
manufacturer in a separate action involving the same patent or
patents related to the same covered product or process, a
motion under this subsection may only be made if the court in
such separate action determines the showing required under
paragraph (1) has been met.
``(d) Exemption.--This section shall not apply to an action that
includes a cause of action described under section 271(e)(2).
``(e) Consent Judgment.--If, following the grant of a motion to stay
under this section, the covered manufacturer seeks or consents to entry
of a consent judgment relating to one or more of the common issues that
gave rise to the stay, or declines to prosecute through appeal a final
decision as to one or more of the common issues that gave rise to the
stay, the court may, upon grant of a motion, determine that such
consent judgment or unappealed final decision shall not be binding on
the covered customer with respect to one or more of such common issues
based on a showing that such an outcome would unreasonably prejudice
and be manifestly unjust to the covered customer in light of the
circumstances of the case.
``(f) Rule of Construction.--Nothing in this section shall be
construed to limit the ability of a court to grant any stay, expand any
stay granted under this section, or grant any motion to intervene, if
otherwise permitted by law.
``(g) Definitions.--In this section:
``(1) Covered customer.--The term `covered customer' means a
party accused of infringing a patent or patents in dispute
based on a covered product or process.
``(2) Covered manufacturer.--The term `covered manufacturer'
means a person that manufactures or supplies, or causes the
manufacture or supply of, a covered product or process or a
relevant part thereof.
``(3) Covered product or process.--The term `covered product
or process' means a product, process, system, service,
component, material, or apparatus, or relevant part thereof,
that--
``(A) is alleged to infringe the patent or patents in
dispute; or
``(B) implements a process alleged to infringe the
patent or patents in dispute.''.
(b) Conforming Amendment.--The table of sections for chapter 29 of
title 35, United States Code, is amended by striking the item relating
to section 296 and inserting the following:
``296. Stay of action against customer.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act and shall apply to any
action for which a complaint is filed on or after the first day of the
30-day period that ends on that date.
SEC. 6. PROCEDURES AND PRACTICES TO IMPLEMENT RECOMMENDATIONS OF THE
JUDICIAL CONFERENCE.
(a) Judicial Conference Rules and Procedures on Discovery Burdens and
Costs.--
(1) Rules and procedures.--The Judicial Conference of the
United States, using existing resources, shall develop rules
and procedures to implement the issues and proposals described
in paragraph (2) to address the asymmetries in discovery
burdens and costs in any civil action arising under any Act of
Congress relating to patents. Such rules and procedures shall
include how and when payment for document discovery in addition
to the discovery of core documentary evidence is to occur, and
what information must be presented to demonstrate financial
capacity before permitting document discovery in addition to
the discovery of core documentary evidence.
(2) Rules and procedures to be considered.--The rules and
procedures required under paragraph (1) should address each of
the following issues and proposals:
(A) Discovery of core documentary evidence.--Whether
and to what extent each party to the action is entitled
to receive core documentary evidence and shall be
responsible for the costs of producing core documentary
evidence within the possession or control of each such
party, and whether and to what extent each party to the
action may seek nondocumentary discovery as otherwise
provided in the Federal Rules of Civil Procedure.
(B) Electronic communication.--If the parties
determine that the discovery of electronic
communication is appropriate, whether such discovery
shall occur after the parties have exchanged initial
disclosures and core documentary evidence and whether
such discovery shall be in accordance with the
following:
(i) Any request for the production of
electronic communication shall be specific and
may not be a general request for the production
of information relating to a product or
business.
(ii) Each request shall identify the
custodian of the information requested, the
search terms, and a time frame. The parties
shall cooperate to identify the proper
custodians, the proper search terms, and the
proper time frame.
(iii) A party may not submit production
requests to more than 5 custodians, unless the
parties jointly agree to modify the number of
production requests without leave of the court.
(iv) The court may consider contested
requests for up to 5 additional custodians per
producing party, upon a showing of a distinct
need based on the size, complexity, and issues
of the case.
(v) If a party requests the discovery of
electronic communication for additional
custodians beyond the limits agreed to by the
parties or granted by the court, the requesting
party shall bear all reasonable costs caused by
such additional discovery.
(C) Additional document discovery.--Whether the
following should apply:
(i) In general.--Each party to the action may
seek any additional document discovery
otherwise permitted under the Federal Rules of
Civil Procedure, if such party bears the
reasonable costs, including reasonable
attorney's fees, of the additional document
discovery.
(ii) Requirements for additional document
discovery.--Unless the parties mutually agree
otherwise, no party may be permitted additional
document discovery unless such a party posts a
bond, or provides other security, in an amount
sufficient to cover the expected costs of such
additional document discovery, or makes a
showing to the court that such party has the
financial capacity to pay the costs of such
additional document discovery.
(iii) Limits on additional document
discovery.--A court, upon motion, may determine
that a request for additional document
discovery is excessive, irrelevant, or
otherwise abusive and may set limits on such
additional document discovery.
(iv) Good cause modification.--A court, upon
motion and for good cause shown, may modify the
requirements of subparagraphs (A) and (B) and
any definition under paragraph (3). Not later
than 30 days after the pretrial conference
under Rule 16 of the Federal Rules of Civil
Procedure, the parties shall jointly submit any
proposed modifications of the requirements of
subparagraphs (A) and (B) and any definition
under paragraph (3), unless the parties do not
agree, in which case each party shall submit
any proposed modification of such party and a
summary of the disagreement over the
modification.
(v) Computer code.--A court, upon motion and
for good cause shown, may determine that
computer code should be included in the
discovery of core documentary evidence. The
discovery of computer code shall occur after
the parties have exchanged initial disclosures
and other core documentary evidence.
(D) Discovery sequence and scope.--Whether the
parties shall discuss and address in the written report
filed pursuant to Rule 26(f) of the Federal Rules of
Civil Procedure the views and proposals of each party
on the following:
(i) When the discovery of core documentary
evidence should be completed.
(ii) Whether additional document discovery
will be sought under subparagraph (C).
(iii) Any issues about infringement,
invalidity, or damages that, if resolved before
the additional discovery described in
subparagraph (C) commences, might simplify or
streamline the case, including the
identification of any terms or phrases relating
to any patent claim at issue to be construed by
the court and whether the early construction of
any of those terms or phrases would be helpful.
(3) Definitions.--In this subsection:
(A) Core documentary evidence.--The term ``core
documentary evidence''--
(i) includes--
(I) documents relating to the
conception of, reduction to practice
of, and application for, the patent or
patents at issue;
(II) documents sufficient to show the
technical operation of the product or
process identified in the complaint as
infringing the patent or patents at
issue;
(III) documents relating to
potentially invalidating prior art;
(IV) documents relating to any
licensing of, or other transfer of
rights to, the patent or patents at
issue before the date on which the
complaint is filed;
(V) documents sufficient to show
profit attributable to the claimed
invention of the patent or patents at
issue;
(VI) documents relating to any
knowledge by the accused infringer of
the patent or patents at issue before
the date on which the complaint is
filed;
(VII) documents relating to any
knowledge by the patentee of
infringement of the patent or patents
at issue before the date on which the
complaint is filed;
(VIII) documents relating to any
licensing term or pricing commitment to
which the patent or patents may be
subject through any agency or standard-
setting body; and
(IX) documents sufficient to show any
marking or other notice provided of the
patent or patents at issue; and
(ii) does not include computer code, except
as specified in paragraph (2)(C)(v).
(B) Electronic communication.--The term ``electronic
communication'' means any form of electronic
communication, including email, text message, or
instant message.
(4) Implementation by the district courts.--Not later than 6
months after the date on which the Judicial Conference has
developed the rules and procedures required by this subsection,
each United States district court and the United States Court
of Federal Claims shall revise the applicable local rules for
such court to implement such rules and procedures.
(5) Authority for judicial conference to review and modify.--
(A) Study of efficacy of rules and procedures.--The
Judicial Conference shall study the efficacy of the
rules and procedures required by this subsection during
the 4-year period beginning on the date on which such
rules and procedures by the district courts and the
United States Court of Federal Claims are first
implemented. The Judicial Conference may modify such
rules and procedures following such 4-year period.
(B) Initial modifications.--Before the expiration of
the 4-year period described in subparagraph (A), the
Judicial Conference may modify the requirements under
this subsection--
(i) by designating categories of ``core
documentary evidence'', in addition to those
designated under paragraph (3)(A), as the
Judicial Conference determines to be
appropriate and necessary; and
(ii) as otherwise necessary to prevent a
manifest injustice, the imposition of a
requirement the costs of which clearly outweigh
its benefits, or a result that could not
reasonably have been intended by the Congress.
(b) Judicial Conference Patent Case Management.--The Judicial
Conference of the United States, using existing resources, shall
develop case management procedures to be implemented by the United
States district courts and the United States Court of Federal Claims
for any civil action arising under any Act of Congress relating to
patents, including initial disclosure and early case management
conference practices that--
(1) will identify any potential dispositive issues of the
case; and
(2) focus on early summary judgment motions when resolution
of issues may lead to expedited disposition of the case.
(c) Revision of Form for Patent Infringement.--
(1) Elimination of form.--The Supreme Court, using existing
resources, shall eliminate Form 18 in the Appendix to the
Federal Rules of Civil Procedure (relating to Complaint for
Patent Infringement), effective on the date of the enactment of
this Act.
(2) Revised form.--The Supreme Court may prescribe a new form
or forms setting out model allegations of patent infringement
that, at a minimum, notify accused infringers of the asserted
claim or claims, the products or services accused of
infringement, and the plaintiff's theory for how each accused
product or service meets each limitation of each asserted
claim. The Judicial Conference should exercise the authority
under section 2073 of title 28, United States Code, to make
recommendations with respect to such new form or forms.
(d) Protection of Intellectual-Property Licenses in Bankruptcy.--
(1) In general.--Section 1520(a) of title 11, United States
Code, is amended--
(A) in paragraph (3), by striking ``; and'' and
inserting a semicolon;
(B) in paragraph (4), by striking the period at the
end and inserting ``; and''; and
(C) by inserting at the end the following new
paragraph:
``(5) section 365(n) applies to intellectual property of
which the debtor is a licensor or which the debtor has
transferred.''.
(2) Trademarks.--
(A) In general.--Section 101(35A) of title 11, United
States Code, is amended--
(i) in subparagraph (E), by striking ``or'';
(ii) in subparagraph (F), by striking ``title
17;'' and inserting ``title 17; or''; and
(iii) by adding after subparagraph (F) the
following new subparagraph:
``(G) a trademark, service mark, or trade name, as
those terms are defined in section 45 of the Act of
July 5, 1946 (commonly referred to as the `Trademark
Act of 1946') (15 U.S.C. 1127);''.
(B) Conforming amendment.--Section 365(n)(2) of title
11, United States Code, is amended--
(i) in subparagraph (B)--
(I) by striking ``royalty payments''
and inserting ``royalty or other
payments''; and
(II) by striking ``and'' after the
semicolon;
(ii) in subparagraph (C), by striking the
period at the end of clause (ii) and inserting
``; and''; and
(iii) by adding at the end the following new
subparagraph:
``(D) in the case of a trademark, service mark, or trade
name, the trustee shall not be relieved of a contractual
obligation to monitor and control the quality of a licensed
product or service.''.
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act and
shall apply to any case that is pending on, or for which a
petition or complaint is filed on or after, such date of
enactment.
SEC. 7. SMALL BUSINESS EDUCATION, OUTREACH, AND INFORMATION ACCESS.
(a) Small Business Education and Outreach.--
(1) Resources for small business.--Using existing resources,
the Director shall develop educational resources for small
businesses to address concerns arising from patent
infringement.
(2) Small business patent ombudsman.--The Patent Ombudsman
Program established under section 28 of the Leahy-Smith America
Invents Act (Public Law 112-29; 125 Stat. 339; 35 U.S.C. 2
note) shall coordinate with the existing small business
outreach programs of the Office, and the relevant offices at
the Small Business Administration and the Minority Business
Development Agency, to provide education and awareness on
abusive patent litigation practices. The Director may give
special consideration to the unique needs of small firms owned
by disabled veterans, service-disabled veterans, women, and
minority entrepreneurs in planning and executing the outreach
efforts by the Office.
(b) Improving Information Transparency for Small Business and the
United States Patent and Trademark Office Users.--
(1) Web site.--Using existing resources, the Director shall
create a user-friendly section on the official Web site of the
Office to notify the public when a patent case is brought in
Federal court and, with respect to each patent at issue in such
case, the Director shall include--
(A) information disclosed under subsections (b) and
(d) of section 290 of title 35, United States Code, as
added by section 4(a) of this Act; and
(B) any other information the Director determines to
be relevant.
(2) Format.--In order to promote accessibility for the
public, the information described in paragraph (1) shall be
searchable by patent number, patent art area, and entity.
SEC. 8. STUDIES ON PATENT TRANSACTIONS, QUALITY, AND EXAMINATION.
(a) Study on Secondary Market Oversight for Patent Transactions To
Promote Transparency and Ethical Business Practices.--
(1) Study required.--The Director, in consultation with the
Secretary of Commerce, the Secretary of the Treasury, the
Chairman of the Securities and Exchange Commission, the heads
of other relevant agencies, and interested parties, shall,
using existing resources of the Office, conduct a study--
(A) to develop legislative recommendations to ensure
greater transparency and accountability in patent
transactions occurring on the secondary market;
(B) to examine the economic impact that the patent
secondary market has on the United States;
(C) to examine licensing and other oversight
requirements that may be placed on the patent secondary
market, including on the participants in such markets,
to ensure that the market is a level playing field and
that brokers in the market have the requisite expertise
and adhere to ethical business practices; and
(D) to examine the requirements placed on other
markets.
(2) Report on study.--Not later than 1 year after the date of
the enactment of this Act, the Director shall submit a report
to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate on the findings and recommendations of the Director from
the study required under paragraph (1).
(b) Study on Patents Owned by the United States Government.--
(1) Study required.--The Director, in consultation with the
heads of relevant agencies and interested parties, shall, using
existing resources of the Office, conduct a study on patents
owned by the United States Government that--
(A) examines how such patents are licensed and sold,
and any litigation relating to the licensing or sale of
such patents;
(B) provides legislative and administrative
recommendations on whether there should be restrictions
placed on patents acquired from the United States
Government;
(C) examines whether or not each relevant agency
maintains adequate records on the patents owned by such
agency, specifically whether such agency addresses
licensing, assignment, and Government grants for
technology related to such patents; and
(D) provides recommendations to ensure that each
relevant agency has an adequate point of contact that
is responsible for managing the patent portfolio of the
agency.
(2) Report on study.--Not later than 6 months after the date
of the enactment of this Act, the Director shall submit to the
Committee on the Judiciary of the House of Representatives and
the Committee on the Judiciary of the Senate a report on the
findings and recommendations of the Director from the study
required under paragraph (1).
(c) Study on Patent Quality and Access to the Best Information During
Examination.--
(1) GAO study.--The Comptroller General of the United States
shall conduct a study on patent examination at the Office and
the technologies available to improve examination and improve
patent quality.
(2) Contents of the study.--The study required under
paragraph (1) shall include the following:
(A) An examination of patent quality at the Office.
(B) An examination of ways to improve patent quality,
specifically through technology, that shall include
examining best practices at foreign patent offices and
the use of existing off-the-shelf technologies to
improve patent examination.
(C) A description of how patents are classified.
(D) An examination of procedures in place to prevent
double patenting through filing by applicants in
multiple art areas.
(E) An examination of the types of off-the-shelf
prior art databases and search software used by foreign
patent offices and governments, particularly in Europe
and Asia, and whether those databases and search tools
could be used by the Office to improve patent
examination.
(F) An examination of any other areas the Comptroller
General determines to be relevant.
(3) Report on study.--Not later than 6 months after the date
of the enactment of this Act, the Comptroller General shall
submit to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate a report on the findings and recommendations from the
study required by this subsection, including recommendations
for any changes to laws and regulations that will improve the
examination of patent applications and patent quality.
(d) Study on Patent Small Claims Court.--
(1) Study required.--
(A) In general.--The Director of the Administrative
Office of the United States Courts, in consultation
with the Director of the Federal Judicial Center and
the United States Patent and Trademark Office, shall,
using existing resources, conduct a study to examine
the idea of developing a pilot program for patent small
claims courts in certain judicial districts within the
existing patent pilot program mandated by Public Law
111-349.
(B) Contents of study.--The study under subparagraph
(A) shall examine--
(i) the number of and qualifications for
judges that could serve on such small claims
courts;
(ii) how such small claims courts would be
designated and the necessary criteria for such
designation;
(iii) the costs that would be incurred for
establishing, maintaining, and operating such a
pilot program; and
(iv) the steps that would be taken to ensure
that the courts in the pilot program are not
misused for abusive patent litigation.
(2) Report on study.--Not later than 1 year after the date of
the enactment of this Act, the Director of the Administrative
Office of the United States Courts shall submit a report to the
Committee on the Judiciary of the House of Representatives and
the Committee on the Judiciary of the Senate on the findings
and recommendations of the Director of the Administrative
Office from the study required under paragraph (1).
(e) Study on Demand Letters.--
(1) Study.--The Director, in consultation with the heads of
other appropriate agencies, shall conduct a study of the
prevalence of the practice of sending patent demand letters in
bad faith and the extent to which that practice may, through
fraudulent or deceptive practices, impose a negative impact on
the marketplace.
(2) Report to congress.--Not later than 1 year after the date
of the enactment of this Act, the Director shall submit a
report to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate on the findings and recommendations of the Director from
the study required under paragraph (1).
(3) Patent demand letter defined.--In this subsection, the
term ``patent demand letter'' means a written communication
relating to a patent that states or indicates, directly or
indirectly, that the recipient or anyone affiliated with the
recipient is or may be infringing the patent.
(f) Study on Business Method Patent Quality.--
(1) GAO study.--The Comptroller General of the United States
shall conduct a study on the volume and nature of litigation
involving business method patents.
(2) Contents of study.--The study required under paragraph
(1) shall focus on examining the quality of business method
patents asserted in suits alleging patent infringement, and may
include an examination of any other areas that the Comptroller
General determines to be relevant.
(3) Report to congress.--Not later than 6 months after the
date of the enactment of this Act, the Comptroller General
shall submit to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate a report on the findings and recommendations from the
study required by this subsection, including recommendations
for any changes to laws or regulations that the Comptroller
General considers appropriate on the basis of the study.
SEC. 9. IMPROVEMENTS AND TECHNICAL CORRECTIONS TO THE LEAHY-SMITH
AMERICA INVENTS ACT.
(a) Repeal of Civil Action To Obtain a Patent.--
(1) Repeal.--Section 145 of title 35, United States Code, is
repealed.
(2) Conforming amendments.--
(A) Federal circuit jurisdiction.--Section 1295(a)(4)
of title 28, United States Code, is amended--
(i) in subparagraph (A), by striking ``except
that an applicant or a party'' and all that
follows through the end of the subparagraph and
inserting the following: ``except that a party
to a derivation proceeding may also have remedy
by civil action under section 146 of title 35;
an appeal under this subparagraph of a decision
of the Board with respect to a derivation
proceeding shall waive the right of such party
to proceed under section 146 of title 35;'';
and
(ii) in subparagraph (C), by striking
``section 145, 146, or'' and inserting
``section 146 or''.
(B) Federal circuit appeal.--Section 141(a) of title
35, United States Code, is amended--
(i) by striking ``may appeal the Board's
decision to'' and inserting ``may appeal the
Board's decision only to''; and
(ii) by striking the second sentence.
(C) Adjustment of patent term.--Section
154(b)(1)(A)(iii) of title 35, United States Code, is
amended by striking ``section 141, 145, or 146'' and
inserting ``section 141 or 146''.
(D) Clerical amendment.--The table of sections for
chapter 13 of title 35, United States Code, is amended
by repealing the item relating to section 145.
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act and
apply to any proceeding in which a decision is made by the
Patent Trial and Appeal Board on or after such date of
enactment.
(b) Post-Grant Review Amendment.--Section 325(e)(2) of title 35,
United States Code is amended by striking ``or reasonably could have
raised''.
(c) Use of District-Court Claim Construction in Post-Grant and Inter
Partes Reviews.--
(1) Inter partes review.--Section 316(a) of title 35, United
States Code, is amended--
(A) in paragraph (12), by striking ``; and'' and
inserting a semicolon;
(B) in paragraph (13), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following new paragraph:
``(14) providing that for all purposes under this chapter--
``(A) each claim of a patent shall be construed as
such claim would be in a civil action to invalidate a
patent under section 282(b), including construing each
claim of the patent 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
``(B) if a court has previously construed the claim
or a claim term in a civil action in which the patent
owner was a party, the Office shall consider such claim
construction.''.
(2) Post-grant review.--Section 326(a) of title 35, United
States Code, is amended--
(A) in paragraph (11), by striking ``; and'' and
inserting a semicolon;
(B) in paragraph (12), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following new paragraph:
``(13) providing that for all purposes under this chapter--
``(A) each claim of a patent shall be construed as
such claim would be in a civil action to invalidate a
patent under section 282(b), including construing each
claim of the patent 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
``(B) if a court has previously construed the claim
or a claim term in a civil action in which the patent
owner was a party, the Office shall consider such claim
construction.''.
(3) Technical and conforming amendment.--Section 18(a)(1)(A)
of the Leahy-Smith America Invents Act (Public Law 112-29; 126
Stat. 329; 35 U.S.C. 321 note) is amended by striking ``Section
321(c)'' and inserting ``Sections 321(c) and 326(a)(13)''.
(4) Effective date.--The amendments made by this subsection
shall take effect upon the expiration of the 90-day period
beginning on the date of the enactment of this Act, and shall
apply to any proceeding under chapter 31 or 32 of title 35,
United States Code, as the case may be, for which the petition
for review is filed on or after such effective date.
(d) Codification of the Double-Patenting Doctrine for First-Inventor-
To-File Patents.--
(1) Amendment.--Chapter 10 of title 35, United States Code,
is amended by adding at the end the following new section:
``Sec. 106. Prior art in cases of double patenting
``A claimed invention of a patent issued under section 151 (referred
to as the `first patent') that is not prior art to a claimed invention
of another patent (referred to as the `second patent') shall be
considered prior art to the claimed invention of the second patent for
the purpose of determining the nonobviousness of the claimed invention
of the second patent under section 103 if--
``(1) the claimed invention of the first patent was
effectively filed under section 102(d) on or before the
effective filing date of the claimed invention of the second
patent;
``(2) either--
``(A) the first patent and second patent name the
same inventor; or
``(B) the claimed invention of the first patent would
constitute prior art to the claimed invention of the
second patent under section 102(a)(2) if an exception
under section 102(b)(2) were deemed to be inapplicable
and the claimed invention of the first patent was, or
were deemed to be, effectively filed under section
102(d) before the effective filing date of the claimed
invention of the second patent; and
``(3) the patentee of the second patent has not disclaimed
the rights to enforce the second patent independently from, and
beyond the statutory term of, the first patent.''.
(2) Regulations.--The Director shall promulgate regulations
setting forth the form and content of any disclaimer required
for a patent to be issued in compliance with section 106 of
title 35, United States Code, as added by paragraph (1). Such
regulations shall apply to any disclaimer filed after a patent
has issued. A disclaimer, when filed, shall be considered for
the purpose of determining the validity of the patent under
section 106 of title 35, United States Code.
(3) Conforming amendment.--The table of sections for chapter
10 of title 35, United States Code, is amended by adding at the
end the following new item:
``106. Prior art in cases of double patenting.''.
(4) Exclusive rule.--A patent subject to section 106 of title
35, United States Code, as added by paragraph (1), shall not be
held invalid on any nonstatutory, double-patenting ground.
(5) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act and
shall apply to a patent or patent application only if both the
first and second patents described in section 106 of title 35,
United States Code, as added by paragraph (1), are patents or
patent applications that are described in section 3(n)(1) of
the Leahy-Smith America Invents Act (35 U.S.C. 100 note).
(e) PTO Patent Reviews.--
(1) Clarification.--
(A) Scope of prior art.--Section 18(a)(1)(C)(i) of
the Leahy-Smith America Invents Act (35 U.S.C. 321
note) is amended by striking ``section 102(a)'' and
inserting ``subsection (a) or (e) of section 102''.
(B) Effective date.--The amendment made by
subparagraph (A) shall take effect on the date of the
enactment of this Act and shall apply to any proceeding
pending on, or filed on or after, such date of
enactment.
(2) Authority to waive fee.--Subject to available resources,
the Director may waive payment of a filing fee for a
transitional proceeding described under section 18(a) of the
Leahy-Smith America Invents Act (35 U.S.C. 321 note).
(f) Clarification of Limits on Patent Term Adjustment.--
(1) Amendments.--Section 154(b)(1)(B) of title 35, United
States Code, is amended--
(A) in the matter preceding clause (i), by striking
``not including--'' and inserting ``the term of the
patent shall be extended 1 day for each day after the
end of that 3-year period until the patent is issued,
not including--'';
(B) in clause (i), by striking ``consumed by
continued examination of the application requested by
the applicant'' and inserting ``consumed after
continued examination of the application is requested
by the applicant'';
(C) in clause (iii), by striking the comma at the end
and inserting a period; and
(D) by striking the matter following clause (iii).
(2) Effective date.--The amendments made by this subsection
shall take effect on the date of the enactment of this Act and
apply to any patent application or patent that is pending on,
or filed on or after, such date of enactment.
(g) Clarification of Jurisdiction.--
(1) In general.--The Federal interest in preventing
inconsistent final judicial determinations as to the legal
force or effect of the claims in a patent presents a
substantial Federal issue that is important to the Federal
system as a whole.
(2) Applicability.--Paragraph (1)--
(A) shall apply to all cases filed on or after, or
pending on, the date of the enactment of this Act; and
(B) shall not apply to a case in which a Federal
court has issued a ruling on whether the case or a
claim arises under any Act of Congress relating to
patents or plant variety protection before the date of
the enactment of this Act.
(h) Patent Pilot Program in Certain District Courts Duration.--
(1) Duration.--Section 1(c) of Public Law 111-349 (124 Stat.
3674; 28 U.S.C. 137 note) is amended to read as follows:
``(c) Duration.--The program established under subsection (a) shall
be maintained using existing resources, and shall terminate 20 years
after the end of the 6-month period described in subsection (b).''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
(i) Technical Corrections.--
(1) Novelty.--
(A) Amendment.--Section 102(b)(1)(A) of title 35,
United States Code, is amended by striking ``the
inventor or joint inventor or by another'' and
inserting ``the inventor or a joint inventor or
another''.
(B) Effective date.--The amendment made by
subparagraph (A) shall be effective as if included in
the amendment made by section 3(b)(1) of the Leahy-
Smith America Invents Act (Public Law 112-29).
(2) Inventor's oath or declaration.--
(A) Amendment.--The second sentence of section 115(a)
of title 35, United States Code, is amended--
(i) by striking ``Except as otherwise
provided'' and inserting ``Except for an
application filed under section 118 or as
otherwise provided''; and
(ii) by striking ``shall execute'' and
inserting ``may be required by the Director to
execute''.
(B) Effective date.--The amendments made by
subparagraph (A) shall be effective as if included in
the amendment made by section 4(a)(1) of the Leahy-
Smith America Invents Act (Public Law 112-29).
(3) Assignee filers.--
(A) Benefit of earlier filing date; right of
priority.--Section 119(e)(1) of title 35, United States
Code, is amended, in the first sentence, by striking
``by an inventor or inventors named'' and inserting
``that names the inventor or a joint inventor''.
(B) Benefit of earlier filing date in the united
states.--Section 120 of title 35, United States Code,
is amended, in the first sentence, by striking ``names
an inventor or joint inventor'' and inserting ``names
the inventor or a joint inventor''.
(C) Effective date.--The amendments made by this
paragraph shall take effect on the date of the
enactment of this Act and shall apply to any patent
application, and any patent issuing from such
application, that is filed on or after September 16,
2012.
(4) Derived patents.--
(A) Amendment.--Section 291(b) of title 35, United
States Code, is amended by striking ``or joint
inventor'' and inserting ``or a joint inventor''.
(B) Effective date.--The amendment made by
subparagraph (A) shall be effective as if included in
the amendment made by section 3(h)(1) of the Leahy-
Smith America Invents Act (Public Law No. 112-29).
(5) Specification.--Notwithstanding section 4(e) of the
Leahy-Smith America Invents Act (Public Law 112-29; 125 Stat.
297), the amendments made by subsections (c) and (d) of section
4 of such Act shall apply to any proceeding or matter that is
pending on, or filed on or after, the date of the enactment of
this Act.
(6) Time limit for commencing misconduct proceedings.--
(A) Amendment.--The fourth sentence of section 32 of
title 35, United States Code, is amended by striking
``1 year'' and inserting ``2 years''.
(B) Effective date.--The amendment made by this
paragraph shall take effect on the date of the
enactment of this Act and shall apply to any action in
which the Office files a complaint on or after such
date of enactment.
(7) Patent owner response.--
(A) Conduct of inter partes review.--Paragraph (8) of
section 316(a) of title 35, United States Code, is
amended by striking ``the petition under section 313''
and inserting ``the petition under section 311''.
(B) Conduct of post-grant review.--Paragraph (8) of
section 326(a) of title 35, United States Code, is
amended by striking ``the petition under section 323''
and inserting ``the petition under section 321''.
(C) Effective date.--The amendments made by this
paragraph shall take effect on the date of the
enactment of this Act.
(8) International applications.--
(A) Amendments.--Section 202(b) of the Patent Law
Treaties Implementation Act of 2012 (Public Law 112-
211; 126 Stat. 1536) is amended--
(i) by striking paragraph (7); and
(ii) by redesignating paragraphs (8) and (9)
as paragraphs (7) and (8), respectively.
(B) Effective date.--The amendments made by
subparagraph (A) shall be effective as if included in
title II of the Patent Law Treaties Implementation Act
of 2012 (Public Law 112-21).
SEC. 10. EFFECTIVE DATE.
Except as otherwise provided in this Act, the provisions of this Act
shall take effect on the date of the enactment of this Act, and shall
apply to any patent issued, or any action filed, on or after that date.
Purpose and Summary
The Leahy-Smith America Invents Act (AIA), signed into law
just over 2 years ago, was a landmark Act that made fundamental
changes to American patent law. Its principal provisions, such
as its adoption of the first-inventor-to-file system of
establishing a patent's priority date, its simplified
definition of prior art, and its creation of a limited prior
user right, are reforms that were literally decades in the
making. Other provisions, such as the AIA's comprehensive
revision of existing administrative proceedings for post-
issuance review of patents, and its creation of several new
administrative proceedings, will ensure that such proceedings
are efficient alternatives to civil litigation that are fair to
both patent owners and accused infringers. The AIA addressed
scores of matters both large and small, updating or abrogating
statutory provisions and judicial constructions from as
recently as the last few years to as far back as the first half
of the 19th century.
Despite the breadth and depth of the AIA's reforms,
however, it was apparent even before the Act was signed into
law that further legislative work remained to be done. The harm
inflicted on American innovation and manufacturing by various
abusive patent-enforcement practices has been widely known and
acknowledged for most of the last decade. Some of these
problems clearly have grown worse even since the AIA's
enactment. What has been absent in the past, however, is a
consensus among different American industrial and technological
sectors as to how to cure these abuses without undermining the
patent system's purpose of encouraging research and innovation.
The present bill--the Innovation Act--represents the
emergence of a new consensus. As reflected in hearings held
before this Committee and the Subcommittee on Courts,
Intellectual Property, and the Internet earlier this year,\1\
industry leaders from different sectors have reached broad
agreement on a common set of reforms that will address the most
serious abuses currently afflicting the patent-enforcement
system. Some of these reforms reflect new thinking about ways
of addressing the burden and expense of litigation. Others are
variants of proposals that were included in preliminary
versions of the AIA itself or its various precursors, but which
were omitted from the final public law. Still others address
problems that have arisen only in the time since the AIA's
enactment. Finally, the Innovation Act corrects several
important technical problems that have become apparent during
the course of the implementation of the AIA.
---------------------------------------------------------------------------
\1\See Abusive Patent Litigation: The Impact on American Innovation
and Jobs, and Potential Solutions: Hearing Before the Subcomm. on
Courts, Intellectual Property, and the Internet of the H. Comm. on the
Judiciary, 113th Cong. (2013) [hereinafter March hearing]; Abusive
Patent Litigation: The Issues Impacting American Competitiveness and
Job Creation at the International Trade Commission and Beyond: Hearing
Before the Subcomm. on Courts, Intellectual Property, and the Internet
of the H. Comm. on the Judiciary, 113th Cong. (2013) [hereinafter April
hearing]; H.R. 3309: Improving the Patent System to Promote American
Innovation and Competitiveness: Hearing Before the H. Comm. on the
Judiciary, 113th Cong. (2013) [hereinafter October hearing].
---------------------------------------------------------------------------
Every member of this Committee wishes to see the patent
system fulfill its constitutional mandate to ``promote the
progress of science and the useful arts.'' As one industry
leader noted during the Subcommittee on Courts, Intellectual
Property, and the Internet's hearings earlier this year, the
proper goal of reform legislation
is to ensure that the patent system fairly rewards
those who contribute to our society through the
invention and development of new and useful products
and processes. A fair, efficient, and reliable patent
system will continue to stimulate the investment in
innovation that is necessary in today's technologically
complex world to create the new products and processes
that will lead to better lives for Americans and the
rest of the world. In addition, the best promise for
preserving and enhancing our place in an increasingly
competitive global marketplace will be to stimulate
U.S. investment in research by universities and small
and large companies.\2\
---------------------------------------------------------------------------
\2\March hearing at 61 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform).
While the particular focus of the Innovation Act is to cure
the misuse of various patent-enforcement mechanisms, the
Committee remains mindful of the importance of preserving a
---------------------------------------------------------------------------
strong and efficient patent system. As the same witness noted,
Research based companies are rational decision makers
when it comes to deciding whether and how much to
invest in R&D. . . . In determining the expected return
on investment, a critical element is the likelihood
that meaningful patent protection will be accorded to
deserving inventions resulting from the project, the
degree and duration of exclusivity that resulting
products or processes will enjoy, and the likelihood
that the involved patents will either be respected by
competitors, or can be promptly and successfully
enforced in the event of infringement. When such
projections indicate that the return on investment
exceeds a threshold commensurate with the risk
involved, the investment is, or continues to be, made.
When it does not, the project is not begun, or is
cancelled.\3\
---------------------------------------------------------------------------
\3\Id.; see also March hearing at 81 (Statement of Dana Rao, Vice
President of Intellectual Property and Litigation, Adobe Systems)
(``the patent system gives us the freedom to invest in R&D, knowing
that our key differentiating innovations can be protected and that the
patent system will be there to help us earn a return on that
investment.'').
It is the goal of this Committee to ensure that American
manufacturing, small businesses, and start ups are protected
against patent-enforcement abuse, while also ensuring that the
patent system continue to protect and encourage American
ingenuity. The Innovation Act, which has earned the support of
a broad coalition of America's most innovative companies,
recalibrates the Nation's patent-enforcement mechanisms in a
manner that strikes a balance between these overlapping and
sometimes conflicting goals, and ensures that the Nation's
patent system continues to drive technological innovation and
economic growth.
Background and Need for the Legislation
Testimony before this Committee and the Subcommittee on
Courts, Intellectual Property, and the Internet has established
that misuse of various patent-enforcement mechanisms is a
serious problem--and one that has grown worse in recent years.
One witness who appeared before this Committee noted how the
processes and the expense of patent litigation often make
pursuit of even meritorious defenses or claims a difficult
business decision. He commented on
the sad state of affairs that exists under current U.S.
patent law and practice--enforcement of a valid patent,
or pursuit of a winning defense to a manifestly invalid
patent, can each be an economically irrational choice
on account of the delays, costs, and unpredictability
of doing so under the rules and procedures defining the
conduct of patent litigation.\4\
---------------------------------------------------------------------------
\4\October hearing, Statement of Robert A. Armitage, Former General
Counsel, Eli Lilly & Co., at *i. Because the record of the October 29
hearing has not been published as of the publication of this report,
citations to the testimony and other material in that record are to the
material as submitted, rather than to the pages of the GPO print, and
are identified by asterisks.
Another witness described how the cost of patent
litigation--due to its technical nature and complexity--can
lead to settlements driven by the economics of litigation
rather than the merits of the case. He noted the ``common
---------------------------------------------------------------------------
complaint'' that in patent litigation,
too many specious claims or defenses are filed solely
for the purpose of forcing an unjust settlement,
typically at a cost that is less than the cost of
successfully completing the litigation. While this type
of abuse no doubt exists in other types of litigation,
it may be more effective in patent litigation, where
the subject matter is complex, extensive document
discovery is available, a large number of potential
witnesses may be deposed, and expert testimony is a
practical necessity. Coupled with the difficulty in
patent cases of distinguishing specious from
meritorious claims and defenses, many parties choose to
settle rather than litigate to a final conclusion.\5\
---------------------------------------------------------------------------
\5\March hearing at 64 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform).
Other witnesses noted that the volume and character of
patent litigation has grown worse in the last several years.
---------------------------------------------------------------------------
One witness described his company's recent experience:
Growing and systematic abuse has led to increasing
waste, inefficiency, and unfairness. The historical
trend of litigation illustrates the problem well. . . .
[F]rom 1995, when Yahoo was founded, through 2006,
Yahoo had between two to four defensive patent cases on
its active docket at any given time. In stark contrast,
since the beginning of 2007, Yahoo has had between 20
to 25 cases on its active docket at any given time.
That is a tenfold increase in patent litigation.\6\
---------------------------------------------------------------------------
\6\October hearing, Statement of Kevin Kramer, Vice President and
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *2;
see also id. at *3 (``Along with the increase in numbers, Yahoo has
seen a decrease in the substantive merits of the cases filed against
it.'').
Similarly, a witness testifying on behalf of a major
retailer described the growth in patent litigation and misuse
---------------------------------------------------------------------------
that her company has seen:
When I joined the company 4 years ago, JCPenney had no
patent cases. Over the last 4 years, the company has
had to defend or settle over two dozen patent
infringement lawsuits that have nothing to do with the
products JCPenney actually sells. . . . [T]his number
does not include those claims that are settled upon
receipt of demand letters.\7\
---------------------------------------------------------------------------
\7\March hearing at 39 (statement of Janet L. Dhillon, Executive
Vice President, General Counsel and Corporate Secretary, JCPenney).
The fact that a representative of a major retailer
testified before the Subcommittee about patent-litigation
abuses is illustrative of another recent phenomenon: problems
with the patent-enforcement system have reached beyond the
industrial sectors that are directly involved in technological
innovation. Increasingly, patent lawsuits have affected
businesses that one ordinarily does not expect to be involved
with the patent system. Concerns about abusive litigation
practices have been expressed to this Committee by
constituencies as diverse as the National Retail Federation,\8\
the Food Marketing Institute (which conducts programs on food
safety for food retailers and wholesalers),\9\ the National
Association of Realtors,\10\ and the American Bankers
Association.\11\
---------------------------------------------------------------------------
\8\Id. at 122 (``In recent years, over 200 retailers have contacted
NRF about this issue because they have been, or are currently, the
target of patent trolls' abusive practices.'').
\9\Id. at 163.
\10\March hearing at 160.
\11\Id. at 220-221.
---------------------------------------------------------------------------
Witnesses who appeared before the Subcommittee also
described how recent trends in patent litigation have
negatively affected small businesses:
In response to the wave of patent troll cases, we have
changed our business practices. [F]or example, in the
past, . . . we might have considered licensing
technology from a small inventor, . . . [a] few guys in
a garage who are putting together a very exciting idea
about technology. . . . [But now,] we are taking a
second look at that. . . . [W]e [often] do not license
that technology because we are concerned that that
young inventor, that startup, may not have the
wherewithal to defend and indemnify us in a patent
troll case. And I think that that is a very unfortunate
thing for innovation in general.\12\
---------------------------------------------------------------------------
\12\March hearing at 140-141 (statement of Janet L. Dhillon,
Executive Vice President, General Counsel and Corporate Secretary,
JCPenney); see also April hearing at 46 (Statement of Colleen V. Chien,
Assistant Professor, Santa Clara University Law School) (``Allowing
suits against customers as we currently do puts small suppliers in a
difficult position-- . . . they make small suppliers unattractive,
because of their inability to indemnify large companies.'').
Others have noted that ``[c]ompanies that make $10 million
or less in revenue are the majority of unique defendants''--and
that ``[s]tartups are particularly vulnerable. Although
startups are a crucial source of new jobs, [patent-troll]
demands have impacted their ability to hire and meet other
milestones, caused them to change their products, and shut down
lines of business.''\13\
---------------------------------------------------------------------------
\13\April hearing at 42 (Statement of Colleen V. Chien, Assistant
Professor, Santa Clara University Law School).
---------------------------------------------------------------------------
Finally, one witness with deep experience of the patent
system offered the following stark warning about the risks
posed by these problems to the system as a whole:
Absent resolution, the concerns over the existing
patent litigation rules and procedures--producing
litigation consequences that often bedevil both
plaintiffs and defendants alike--seem certain to doom
the broad public support for the patent system.\14\
---------------------------------------------------------------------------
\14\October hearing, Statement of Robert A. Armitage, Former
General Counsel, Eli Lilly & Co., at *12.
The inefficiencies and inequities currently afflicting the
Nation's patent-enforcement system are a problem that calls for
this Committee's attention.\15\
---------------------------------------------------------------------------
\15\The Committee notes, but declines to rely on, the oft-cited--
and surprisingly specific--figure that patent-troll litigation costs
United States businesses $29 billion annually. The study upon which
that figure is based has been questioned. See, e.g., March hearing at
111 (statement of Graham Gerst, Partner, Global IP Law Group). It
appears to be derived from the survey responses of just 82 companies, a
sample that would not appear to be statistically significant, and that
would appear to be prone to selection bias. Legislation cannot be
permitted to be based on academic pseudoscience. The counsel of trusted
industry leaders with direct experience of the patent-enforcement
system, and views expressed by respected trade associations
representing diverse industrial sectors, are thus the principal
``data'' on which the Committee places reliance.
---------------------------------------------------------------------------
Patent Infringement Actions
1. Attorney's Fees
Witnesses who appeared before this Committee and the
Subcommittee on Courts, Intellectual Property, and the Internet
repeatedly described how the high cost of mounting a defense to
a complaint of patent infringement can force a defendant to
settle the case and pay the plaintiff--even when the defendant
has good reason to believe that it would have prevailed at
trial on a defense of noninfringement or invalidity. Witnesses
also predicted that allowing more liberal shifting of
attorney's fees against losing parties would reduce the
frequency of such nuisance settlements, and would allow more
defendants to challenge patents that are invalid or that have
been asserted beyond what their claims reasonably allow. As one
witness stated at the March 14 Subcommittee hearing:
Given that it costs $5 million to defend [against] a
patent through trial, and the average settlement demand
is less than $1 million, the [patent-assertion
entities] have an economic advantage over the targeted
defendants. If, however, the PAEs faced the real
possibility that the $5 million would be shifted to
them if they were unsuccessful, I believe they would
think twice about bringing lawsuits based on meritless
patents. And it would just take one defendant out of
the hundreds of targets to challenge them to take the
profit out of the aggressive litigation model.\16\
---------------------------------------------------------------------------
\16\March hearing at 89 (Statement of Dana Rao, Vice President of
Intellectual Property and Litigation, Adobe Systems); see also October
hearing, Statement of Kevin Kramer, Vice President and Deputy General
Counsel for Intellectual Property, Yahoo! Inc., at *6 (``Without that
threat of fees, there is no disincentive for plaintiffs to file weak
cases or, worse yet, bring weak cases to trial. Congress's providing
clarity as to when courts should shift fees will force patent
plaintiffs to act more responsibly during litigation and when
contemplating whether to file suit at all.''); March hearing at 105
(Statement of John Boswell, Senior Vice President and General Counsel,
SAS) (``If Congress did something to [expand the availability of fee
awards], then we would have less incentive to settle. We would be
inclined to take the cases until you got a decision. As soon as you do
that, the entire business model of the patent trolls changes, because
they use early settlements to fund litigation. And as soon as people
stop settling, the whole paradigm shifts.'').
Witnesses appearing before the Subcommittee also urged that
any new fee-shifting standard be applied evenhandedly to
plaintiffs and defendants, and recommended that the law not
attempt to discriminate among patent business models. As one
witness noted, ``non-meritorious litigation positions are no
more acceptable coming in the form of specious infringement
defenses or counterclaims pled by an accused infringer, and no
more acceptable coming from a patent owner that practices its
patent than from a non-practicing entity.''\17\
---------------------------------------------------------------------------
\17\April hearing at 14 (Statement of Kevin H. Rhodes, Vice
President and Chief Intellectual Property Counsel of 3M Company); see
also March hearing at 74 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform) (``abusive litigation behavior
should be targeted regardless of the party that engages in it. With
respect to patent owners, there is no basis to single out [non-
practicing entites] for special treatment as opposed to patent owners
who practice their inventions--if either type of patent owner takes an
unjustified litigation position, fee shifting is warranted.'').
---------------------------------------------------------------------------
Another industry witness urged the Committee to adopt a
clear standard for fee awards, rather than leaving such matters
to the whim of the district judge. He noted that ``patent
trolls file cases in jurisdictions where judges are disinclined
to award attorney fees. Providing greater discretion to judges
who are not using the discretion they currently have does not
seem to be particularly helpful.''\18\
---------------------------------------------------------------------------
\18\March hearing at 241 (Answer of John G. Boswell, Senior Vice
President, Chief Legal Officer, and Corporate Secretary, SAS, to
Questions for the Record from Ranking Member Melvin Watt). Such
concerns militate against adoption of the standard employed by the
Copyright Act, which one Court of Appeals has interpreted to provide
that ``[a] district court has discretion to decline to award attorney's
fees even when the plaintiff's copyright infringement case is quite
weak.'' Airframe Sys., Inc. v. L-3 Commc'ns, 658 F.3d 100, 109 (1st
Cir. 2011).
---------------------------------------------------------------------------
Finally, one leading industry coalition urged the Committee
to enact a rule that shifts fees and costs to the losing party
unless its litigation position was ``substantially justified''
or special circumstances would make a fee award unjust.\19\
This standard is the same as that of the Equal Access to
Justice Act,\20\ which has been applied since 1980 to allow
awards of attorney's fees against the Federal Government.
---------------------------------------------------------------------------
\19\March hearing at 74 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform) (``[S]ince 2006, the 21st Century
Coalition has supported amending 35 U.S.C Sec. 285 to require fee
awards to prevailing parties, unless the court makes a finding that the
losing party's position was `substantially justified' or that `special
circumstances' make the fee award `unjust.' Similar language to amend
35 U.S.C Sec. 285 was proposed first in the Patent Reform Act of 2006,
S. 3818, 109th Cong., 2d Sess. (introduced August 3, 2006).'').
\20\28 U.S.C. sec. 2412(d).
---------------------------------------------------------------------------
2. Heightened Pleading Standards
An industry witness who testified before the Committee on
October 29 described the scope of the problem of vague,
uninformative patent infringement complaints that has
confronted his company:
More often than not, when a complaint is filed against
Yahoo, we are left guessing as to the scope of the
case. Since 2007, 70 patent cases have been filed
against Yahoo. A review of those complaints reveals
that only 11 of these cases--just 16%--identified the
asserted claims of the patents. Because patent claims
are what is infringed, and not patents, it is
insufficient to identify only the asserted patent and
not the asserted claims of that patent. Furthermore,
although 52 of the complaints against us identified at
least one accused product, only 21 identified the
accused feature within the product that was alleged to
have infringed. Because asserted patents are typically
much narrower in scope than one of our products, . . .
the relevant information is the accused feature, and
that is only provided about 30% of the time. Finally,
only three patent complaints against us since 2007
provided both asserted claims and accused features of
products. Thus, only in about 4% of our cases do we
have genuine insight at the pleading stage into what
those cases are about. In the other 96% of cases, we
must guess.\21\
---------------------------------------------------------------------------
\21\October hearing, Statement of Kevin Kramer, Vice President and
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *7-8
(emphasis in original).
The same witness also described the problems that such
complaints--which fail to identify the asserted claims or
explain how they are infringed by the accused products and
features--pose for defendants. The lack of such information
undermines a defendant's ability to prepare a defense, and
---------------------------------------------------------------------------
leads to unnecessary delays and expenses:
Without knowing the asserted claims and the accused
features of products, it is very difficult for us to
begin to defend ourselves. For example, it is difficult
to identify potentially relevant witnesses in order to
institute hold notices to prevent inadvertent document
destruction. It is difficult to determine what the
potential non-infringement arguments might be in any
given case. Without knowing, we need to wait months
down the road until . . . discovery when plaintiffs are
required to provide infringement contentions or expert
reports in order to learn what the case is really
about. Accordingly, not providing the necessary
information at the beginning of a case in the complaint
slows down the litigation and makes it inefficient and
expensive for both parties.\22\
---------------------------------------------------------------------------
\22\Id.
Another industry witness who testified at the October 29
hearing explained that enhanced pleading standards will not
impose a greater burden on patent plaintiffs than that already
created by the duty to conduct an investigation and develop a
reasonable, good-faith case before filing a complaint for
---------------------------------------------------------------------------
infringement:
While current law does not require the disclosure of
infringement theories in a plaintiff's complaint, Rule
11 does require that the plaintiff have conducted due
diligence and arrived at a tenable, good-faith theory
of infringement before filing suit. The [Innovation
Act's] heightened pleading requirement, therefore,
imposes no new burden on diligent plaintiffs; they
merely need to disclose the results of their required
analysis. But [Sec. 281A] will have a real effect on
those plaintiffs who are not as diligent, barring them
at the outset from filing suit where they have
conducted no proper due diligence and ensuring that the
plaintiff has in fact conducted an analysis, and that
the plaintiff has a real basis for filing suit.\23\
---------------------------------------------------------------------------
\23\October hearing, Statement of Krish Gupta, Senior Vice
President and Deputy General Counsel, EMC Corporation, at *9. During
the course of the consideration of this Act, some have questioned
Congress's authority to legislate with regard to pleading standards for
patent-infringement actions and other matters of Federal judicial
procedure. ``From almost the founding days of this country,'' however,
``it has been firmly established that Congress, acting pursuant to its
authority to make all laws `necessary and proper' to the[]
establishment [of the lower Federal courts], also may enact laws
regulating the conduct of those courts and the means by which their
judgments are enforced.'' Willy v. Coastal Corp., 503 U.S. 131, 136
(1992); see also Sibbach v. Wilson & Co., 312 U.S. 1, 9 (1941)
(``Congress has undoubted power to regulate the practice and procedure
of Federal courts . . .''); Paul Taylor, Congress's Power to Regulate
the Federal Judiciary: What the First Congress and the First Federal
Courts Can Teach Today's Congress and Courts, 37 Pepp. L. Rev. 847
(2010).
3. Limiting Discovery to Claim Construction
Testimony presented before the Committee explained the need
for limiting discovery in patent cases to issues concerning
claim construction during the period before a necessary claim
construction has been entered:
In patent cases, an early ruling by the judge
construing the claims of the asserted patent often is
case-dispositive. The plaintiff's infringement theory
may rely on a particular interpretation of a claim
term, or a defendant may place significant emphasis on
a prior art reference that is only within the scope of
the claims under a particular construction. And in any
event, before the court construes the claims, it is
often difficult to know what the theories of
infringement or invalidity will be.
[Limits on pre-claim-construction discovery] will help
prevent wasted effort by either eliminating the need
for discovery entirely (where, for example, the court's
claim construction order effectively resolves the
case), or at minimum by focusing the parties on truly
relevant discovery, which can only be known after the
court has told the parties how the claims will be
interpreted.\24\
---------------------------------------------------------------------------
\24\October hearing, Statement of Krish Gupta, Senior Vice
President and Deputy General Counsel, EMC Corporation, at *10; see also
id., Statement of Kevin Kramer, Vice President and Deputy General
Counsel for Intellectual Property, Yahoo! Inc., at *10 (``Claim
construction represents a decisive point in most patent cases. Once the
court construes the claims at issue in the case, the parties have much
more clarity as to the issues and the arguments to be litigated, if
any. In fact, claim construction can and often is determinative of the
issue of infringement.''). But see id., Statement of Robert A.
Armitage, Former General Counsel, Eli Lilly & Co., at *17 (``In some
patent infringement litigations, the Markman Ruling can be dispositive
of the infringement issues in the litigation; in other patent
infringement litigations, the Markman Ruling is inconsequential to the
ultimate resolution of the lawsuit. A one-size-fits-all statute tying
the commencement of available discovery to the initial Markman Ruling
would make sense in some litigations, but possibly not in others.'').
---------------------------------------------------------------------------
Transparency of Patent Ownership
A witness who testified before the Subcommittee on Courts,
Intellectual Property, and the Internet on March 14 catalogued
the reasons why the Patent Act should require greater
disclosure as to who owns or has a financial interest in a
patent. The witness explained that greater transparency would
allow a party seeking to practice a technology to more readily
and completely determine whether other patents also need to be
evaluated and possibly licensed, and noted that such ownership
information would aid in identifying relevant prior art:
There are many costs associated with an incomplete
ownership record, as well as benefits associated with a
complete ownership record. First, the lack of
transparency throughout the life of the patent hinders
the public's ability to accurately assess the risk of
entering into a new technology market and increases the
cost of performing patent clearance analyses. Second,
parties may not necessarily achieve a meaningful
``patent peace'' in settlements or licenses because
they have no way of double-checking the true extent of
the other party's patent holdings, and therefore might
not negotiate a broad enough license to foreclose
future conflicts. Third, a similar double-checking
problem may occur in the context of standard setting,
where some entities may try to hide standard-essential
patents. Fourth, a complete ownership record would
benefit the USPTO by providing examiners with another
tool to search for prior art, and to make accurate
prior art determinations in the context of the [common-
ownership] exceptions. Finally, having a complete
ownership record would facilitate the use of post-grant
proceedings at the USPTO by giving potential
petitioners more information to assess the benefits or
risks of filing petitions and to locate the most
relevant prior art (which is crucial because of the
estoppel provisions of these proceedings).\25\
---------------------------------------------------------------------------
\25\March hearing at 98 (Statement of Dana Rao, Vice President of
Intellectual Property and Litigation, Adobe Systems); see also id. at
99 (``as defendants, we should know who is getting the ultimate
economic benefit from the patents that are being asserted against
us.'').
The same witness also described how some patent owners try
to conceal information about which patents they own or hold a
financial interest in, in order to forestall review of those
---------------------------------------------------------------------------
patents:
[T]he large patent aggregation entities are typically
holding the patents in other names or shell companies,
because they don't want to draw attention to the size
of their portfolio. . . . [T]hey also want to ensure
that . . . declaratory judgment actions and
reexamination proceedings [are not] initiated against
them.\26\
---------------------------------------------------------------------------
\26\Id.
A witness who appeared before this Committee on October 29
described the difficulties posed when ownership and financial-
interest information is withheld: defendants do not know whom
they are negotiating with or who has the authority to settle
---------------------------------------------------------------------------
the case.
In most cases, a defendant goes to court knowing who is
on the other side. In stark contrast, the [patent-
assertion entity] model is such that a patent defendant
often does not know, beyond the name of a shell
corporation plaintiff, who has an interest in the
litigation and the patent at issue. Yet this is
knowledge that will inform decisions around every facet
of a case, including key decisions such as when and
whether to settle a case.
[O]ur experience plays a role in our viewpoint on this
issue. In several cases, settlement has been
complicated by the ``investors'' or ``partners'' that
had a financial interest in a litigation. . . . This
often comes to light during mediation or settlement
talks when a plaintiff reveals that it cannot accept a
lower offer because it would not satisfy unnamed
investors in the endeavor. Transparency into the
ownership stakes in a patent or in the plaintiff would
help to avoid these issues and help to ensure that the
parties at the bargaining table are the ones with the
power and authority to settle the litigation.\27\
---------------------------------------------------------------------------
\27\October hearing, Statement of Kevin Kramer, Vice President and
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *9.
The same witness also emphasized the special obligation of
transparency and disclosure that attends any government-granted
---------------------------------------------------------------------------
property right:
[A] patent is a government grant. Like real property or
any other government grant, it is reasonable to expect
that the government's records disclose who owns that
right. If anything, the expectation [of transparency]
should be greater in patent cases given the ability to
enforce that right through litigation and the strict
liability for infringement.\28\
---------------------------------------------------------------------------
\28\Id.
The Customer-Suit Exception
A leading industry witness, testifying at the Subcommittee
on Courts, Intellectual Property, and the Internet's March 14
hearing, described the phenomenon of patent infringement suits
that are filed against the customer who uses an allegedly
infringing product, rather than against the manufacturer who
made the product. The witness noted the potentially coercive
nature of such suits--and their potential to overcompensate the
plaintiff:
A patent litigation practice that has been sharply
criticized is the institution of suits against large
numbers of assemblers, distributors, or retailers
rather than the original manufacturer or provider of
the component or product alleged to infringe. This
tactic takes advantage of the fact that such suits
threaten defendants with the disruption of aspects of
their businesses that are at best tangentially related
to the invention which is the subject of the patent,
and that each individual defendant has less motivation
to litigate the issue to final conclusion than the
manufacturer of the product at issue. The result can be
to collect enormous sums as the result of a very large
number of small settlements whose cumulative value far
exceeds the amount that could have been recovered from
the original manufacturer.\29\
---------------------------------------------------------------------------
\29\March hearing at 65 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform); see also id. at 250 (Answers of
Philip S. Johnson, Chief Intellectual Property Counsel, Johnson &
Johnson, to Questions for the Record from Ranking Member Melvin Watt);
April hearing at 45 (Statement of Colleen V. Chien, Assistant
Professor, Santa Clara University Law School).
Similarly, a witness at the Subcommittee's April 16 hearing
described how ``[b]y targeting multiple customers or end users,
a [patent-assertion entity] may create increased settlement
opportunities, particularly when the customers or end users
lack sufficient technical knowledge of the accused product or
sufficient resources to litigate.''\30\ The same witness noted
that current law's remedies for such abuses have proven
inadequate: ``the stay of a customer suit . . . is not
automatic, but rather is committed to the discretion of the
district court. Unfortunately, courts have been inconsistent in
their willingness to stay such customer suits, thus encouraging
their filing.''\31\
---------------------------------------------------------------------------
\30\April hearing at 36-38 (Statement of Kevin H. Rhodes, Vice
President and Chief Intellectual Property Counsel of 3M Company); see
also March hearing at 76 (Statement of Philip S. Johnson, Chief
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st
Century Coalition for Patent Reform); October hearing, Statement of
Krish Gupta, Senior Vice President and Deputy General Counsel, EMC
Corporation, at *10-11; March hearing at 122 (Statement for the Record
of the National Retail Federation and Shop.org).
\31\Id.
---------------------------------------------------------------------------
Another Subcommittee witness described the following
infamous example of the abuse of lawsuits against customers.
His example involved infringement actions that have been
brought by a patent owner against small businesses that offer
their customers wireless Internet access:
The [patent-assertion entity's] plan was to assert the
patents against users of equipment that provides a form
of wireless Internet access commonly known as ``Wi-
Fi.'' By the time the patents were assigned to the PAE,
however, the patents had already been broadly cross-
licensed to competitors and were nearing the end of
their patent terms. Additionally, the prior owners [of
the patents] had made binding contractual commitments
to license all comers on fair and reasonable terms.
Its targets--it has sent over 13,000 letters
threatening litigation--often are nonprofits, local and
state governments, and small and medium-sized
businesses including retirement homes, children's
health clinics, coffee shops, cafes, restaurants, and
convenience stores. These entities are targets because
they (like most every modern business) provide Wi-Fi on
their premises, using equipment supplied by Cisco and
other manufacturers. Some of this equipment is already
licensed under the patents-in-suit because of broad
licenses previously granted by the previous owners. But
the PAE doesn't tell their targets this, or that the
patents are subject to commitments to license on a
reasonable and nondiscriminatory basis to all comers.
Instead, the PAE tells these targets, who may have
spent as little as $40 on their wireless equipment,
that, unless they pay at least $2,000 or $3,000 per
location within 2 weeks, they will be sued and have to
engage counsel to review thousands of pages of
documents.\32\
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\32\March hearing at 15-16 (Statement of Mark Chandler, Senior Vice
President and General Counsel, Cisco Systems Inc.). Although the suits
described by this witness clearly appear to be abusive, the Committee
recognizes that in some situations, a patent owner will have legitimate
reason to sue users of a product rather than the manufacturer of the
product. For example, as one witness who appeared before the
Subcommittee noted, ``[w]hen a product is made and sold abroad but then
used in the U.S., the downstream user may be the only entity that is
subject to U.S. patent law.'' March hearing at 244 (Answer of Graham
Gerst, Partner, Global IP Law Group, LLC to Questions for the Record
from Ranking Member Melvin Watt). The same witness also described the
scenario in which ``it is clear that the downstream user is infringing,
but there is no way to know who manufactured the device the downstream
user is using. In those cases, the end user is the only one to sue.''
Id. Another Subcommittee witness explained why the law should not
immunize end users against suits for infringement: ``It may be the case
that, due to the nature of the patented invention, infringement depends
on how a customer uses, installs, or integrates a product with other
products.'' April hearing at 36-38 (Statement of Kevin H. Rhodes, Vice
President and Chief Intellectual Property Counsel of 3M Company). The
same witness also noted that ``end user immunity might run the risk
that would-be infringers could game the system, with the manufacturer
stopping just short of selling an infringing product so that the
customer who is immune from infringement can complete the assembly of
what would otherwise be an infringing device.'' Id.
Other industry witnesses noted that the phenomenon of
abusive suits brought against customers who use allegedly
infringing products is a problem that has grown worse in recent
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years:
Increasingly, these suits are directed at our
customers, who in turn look to us to indemnify them of
liability for using our products. Since 2009, Adobe has
received more than 100 such indemnification requests.
In one recent example, hundreds of retailers were sued
by a particular [patent-assertion entity]. Each of
these retailers faced the choice of settling for
relatively low amounts, less than $100,000, or ending
up in expensive protracted litigation costing as much
as $5 million per suit.\33\
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\33\March hearing at 86 (Statement of Dana Rao, Vice President of
Intellectual Property and Litigation, Adobe Systems); see also March
hearing at 246 (Answer of Graham Gerst, Partner, Global IP Law Group,
LLC to Questions for the Record from Ranking Member Melvin Watt)
(``[T]he tactic of suing a large number of targets with bogus claims
only became common over the last few years.'').
Despite Federal Circuit precedent recognizing a customer-
suit exception,\34\ a review of recent district-court decisions
confirms Subcommittee witnesses' characterization of the courts
as inconsistent in their application of the law. The current
caselaw is a dog's breakfast of overlapping, inconsistent, and
conflicting decisions. Even in the relatively simple scenario
of the customer who uses or sells the manufacturer's product,
and a patent that has claims covering that very product or the
process used to make the product,\35\ courts have refused to
stay an infringement suit against the customer despite the
participation of the manufacturer in a suit involving the same
patent. Some courts have denied a stay in such circumstances on
the ground that the manufacturer has been sued in the same
court as the customer.\36\ Other courts, by contrast, have
denied a stay when the manufacturer files a declaratory-
judgment action challenging the patent in another district.
These courts have held that a stay should be denied if the
manufacturer could have intervened in the suit against the
customer.\37\ Of course, these lines of cases could be
alternately applied in every customer suit to deny a stay
regardless of where the manufacturer filed suit or intervened.
---------------------------------------------------------------------------
\34\See Katz v. Lear Siegler, Inc., 909 F.2d 1459 (Fed. Cir. 1990).
\35\The customer is liable for infringement in such a situation
under 35 U.S.C. Sec. 271(g).
\36\See, e.g., Heinz Kettler GmbH & Co. v. Indian Indus., Inc., 575
F.Supp.2d 728, 730 (E.D. Va. 2008) (``the customer suit exception is
inapplicable in this case . . . [b]ecause plaintiffs have
simultaneously sued both the manufacturer (Escalade) and the customer
(Sears) of the allegedly infringing table-tennis tables'') (emphasis in
original); Alloc, Inc. v. Unilin Decor N.V., 2005 WL 3448060, at *3
(E.D. Wis. Dec. 15, 2005) (no customer-suit stay because ``the
allegedly infringing manufacturers . . . and the allegedly infringing
customer . . . are defending claims of infringement in the same
consolidated suit in the same jurisdiction'') (emphasis in original);
IP Innovation L.L.C. v. Dell Computer Corp., 2004 WL 784792, at *2
(N.D. Ill. Apr. 9, 2004); Watson Indus., Inc. v. Canon, Inc., 2003 WL
23218401, at *1 (W.D. Wis. Nov. 24, 2003); Beck Sys., Inc. v. Marimba,
Inc., 2001 WL 1502338, at *2 (N.D. Ill. Nov. 20, 2001) (``When all
parties are joined in one simultaneous action, the same problems are
not presented, and the rationale underlying the customer suit exception
does not apply.''); Bingo Brain, Inc. v. California Concepts, Inc.,
2000 WL 690227, at *2 (N.D. Ill. May 24, 2000). Contra, In re Papst
Licensing GmbH & Co. KG Litig., 767 F.Supp.2d 1 (D.D.C. 2011) (allowing
a stay despite the manufacturer and customer's being sued in the same
district).
\37\See, e.g., Largan Precision Co., Ltd. v. Fujinon Corp., 2011 WL
1226040, at *5 (N.D. Cal. Mar. 31, 2011); BBC Int'l Ltd. v. Lumino
Designs, Inc., 441 F.Supp. 2d 438, 443 (E.D.N.Y. 2006) (``[T]he
customer suit exception does not apply because BBC could have been sued
for infringement in the Northern District of Illinois.''); Air Prods.
and Chems., Inc. v. MG Nitrogen Servs., Inc., 133 F.Supp.2d 354, 356-57
(D. Del. 2001); Emerson Elec. Co. v. The Black & Decker Mfg. Co., 606
F.2d 234, 242 (8th Cir. 1979) (Markey, J).
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Another source of inconsistency in courts' application of
customer-suit stays has been patent infringement actions that
assert only method claims. In this scenario, the customer uses
or sells the manufacturer's product, and that product is
uniquely made to carry out the patented process. For example,
if a patent claims the use of wireless Internet access, and the
product is a router that enables such access, the router itself
does not directly infringe under Sec. 271(a) because the patent
does not claim the product. Instead, it is the customer who
purchases the router and installs it at home who is the only
direct infringer, because he is the one who is `using wireless
Internet access.' The retailer is liable only ``indirectly,''
as a contributory infringer,\38\ because he sells a product
that is specially made or adapted to implement the patented
process and that lacks substantial noninfringing use.
---------------------------------------------------------------------------
\38\See 35 U.S.C. Sec. 271(c).
---------------------------------------------------------------------------
Although a customer who buys and uses a router is the only
direct infringer of a method claim, the true infringer in this
scenario is the manufacturer of the router. Typically, it is
the manufacturer who understands the product and is in the best
position to defend against allegations of infringement.
A number of courts, unfortunately, have held that when the
customer is sued as a direct infringer of a process patent, and
the manufacturer could only be sued as an indirect infringer,
the customer-suit exception is inapplicable and no stay of the
customer suit is permitted. These cases effectively immunize
almost all method patent claims against the customer-suit
exception.\39\ Other courts, by contrast, have recognized that
a customer accused of infringing a method claim by using a
manufacturer's product is still a customer, and that a stay of
the customer suit in favor of an action to which the
manufacturer is a party is appropriate.\40\
---------------------------------------------------------------------------
\39\See, e.g., Lodsys, LLC v. Brother Int'l Corp., 2013 WL 1338767,
at *11 (E.D. Tex. Jan. 14, 2013); Teleconference Sys. v. Proctor &
Gamble Pharm., Inc., 676 F.Supp.2d 321, 327 (D. Del. 2009) (customer-
suit exception inapplicable ``because plaintiff alleges that Cisco's
customer are not mere resellers but are direct infringers''); Privasys,
Inc. v. Visa Int'l, 2007 WL 3461761, at *4 (N.D. Cal. Nov. 14, 2007)
(agreeing that parties ``are not mere customers'' if they are
``involved in carrying out the infringement of the patented method'');
In re Laughlin Prods., Inc., 265 F.Supp.2d 525, 537 (E.D. Pa. 2003)
(``[W]here the patentee alleges that the customers themselves have
directly infringed the method or process disclosed in the patent, the
customer suit exception does not apply.''); Air Prods. and Chems., Inc.
v. MG Nitrogen Servs., Inc., 133 F.Supp.2d 354, 357 (D. Del. 2001)
(denying a stay where the customer's use of a product ``directly
infringes the claims-in-suit, while [the manufacturer's] sale of the
equipment only induces or contributes to infringement''); Am. Acad. of
Sci. v. Novell, Inc., 1992 WL 313101, at *3 (N.D. Cal. July 9, 1992)
(customer-suit exception inapplicable ``where the patent owner seeks to
hold the manufacturer liable solely on a theory of inducement/
contributory infringement, claiming direct infringement only against
the customer'').
\40\See, e.g., Select Retrieval, LLC v. L.L. Bean, Inc., 2013 WL
1099754, at *5 (D. Me. Mar. 15, 2013); Thermapure, Inc. v. Temp-Air,
Inc., 2010 WL 5419090, at *9-10 (N.D. Ill. Dec. 22, 2010); Card
Activation Techs. v. Pier 1 Imports, Inc., 2009 WL 2956926, at *4 (N.D.
Ill. Sep. 14, 2009).
---------------------------------------------------------------------------
Another scenario that has resulted in inconsistent
application of the customer-suit exception involves a component
that causes a larger product to infringe when the component is
incorporated into the product. If patent claims are drafted
broadly to cover the final product ``with'' the component, the
component itself does not directly infringe the patent--only
the final product incorporating the component directly
infringes. Unfortunately, a line of cases holds that even if a
component incorporated into the final product is the principal
cause of infringement, and the manufacturer of the component is
a party to a suit involving the patent, a customer-suit stay
must be denied if the patent's claims are drawn to cover the
larger product.\41\ Other courts, however, have recognized that
a stay remains appropriate in such a scenario.\42\
---------------------------------------------------------------------------
\41\See, e.g., GeoTag, Inc. v. Frontier Commc'ns Corp., 2013 WL
693852, at *2 n.2 (E.D. Tex. Feb. 26, 2013) (customer-suit exception
inapplicable where no evidence that ``Microsoft and Google supply the
entire accused system''); Cadence Design Sys., Inc. v. OEA Int'l, Inc.,
2011 WL 4403619, at *2 (N.D. Cal. Sep. 20, 2011) (``The [customer suit]
exception is . . . inapplicable when a manufacturer makes but a
component of an end product, where the end product is accused of
infringement''); Microsoft Corp. v. Commonwealth Scientific and Indus.
Research Org., 2007 WL 4376104, at *2-3 (E.D. Tex. Dec. 13, 2007) (even
though manufacturer's computer chip ``does the `inventive magic,'''
customer-suit stay is denied because chip is ``only a component of the
end product and therefore does not and cannot directly infringe'');
Viking Injector Co., Inc. v. Chemtron, Inc., 1993 WL 625543, at *3
(M.D. Pa. Nov. 9, 1993).
\42\See, e.g., Pragmatus Telecom, LLC v. Advanced Store Co., Inc.,
2012 WL 2803695, at *3-4 (D.Del. July 10, 2012); Honeywell Int'l Inc.
v. Audivox Commc'ns Corp., 2005 WL 2465898, at *1, 3 (D. Del. May 18,
2005); Commissariat a L'Energie Atomique v. Dell Computer Corp., 2004
WL 1554382 (D. Del. May 13, 2004); and Ricoh Co., Ltd. v. Aeroflex
Inc., 279 F.Supp.2d 554 (D. Del. 2003).
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A final circumstance that has bedeviled the district courts
is that of a customer who is also accused of inducement of
infringement. As an illustrative example, consider again the
case of the router and the patent that covers the process of
using wireless Internet access. If the owner of such a patent
sues a retailer under Sec. 271(c) for selling routers that
infringe a claim to using wireless Internet access, the patent
owner also could sue the retailer, per Sec. 271(b), for
inducing infringement by purchasers of the router who install
the router and directly infringe the patent by using wireless
Internet service. Some district courts have held that when such
a retailer-customer provides instructions to downstream
customers (which would normally support an inducement claim),
this creates a ``separate interest'' in proceeding against the
retailer-customer that precludes a customer-suit stay.\43\
Other courts, however, have recognized that adding inducement
claims to an action should not defeat the customer-suit
exception with respect to a party that otherwise qualifies as a
customer.\44\
---------------------------------------------------------------------------
\43\See, e.g., Alloc, Inc. v. Unilin Decor N.V., 2005 WL 3448060,
at *3 (E.D. Wis. Dec. 15, 2005).
\44\See, e.g., Ultra Prods., Inc. v. Best Buy Co., Inc., 2009 WL
2843888, at *4-6 (D.N.J. Sep. 1, 2009); Delphi Corp. v. Auto. Techs.
Int'l, Inc., 2008 WL 2941116, at *5 (E.D. Mich. July 25, 2008); Beck
Sys., Inc. v. Marimba, Inc., 2001 WL 1502338, at *1 (N.D. Ill. Nov. 20,
2001) (customer-suit stay denied on other grounds); Tri-Tronics Co.,
Inc. v. MacGregor & Co., Inc., 1990 WL 114738, at *3 (N.D. Ill. July
25, 1990).
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Finally, the Committee notes that although the Innovation
Act's new Sec. 296 only stays, rather than terminates, suits
against customers--and thus contemplates the possibility of
subsequent actions against customers after the manufacturer
suit is concluded--in the vast majority of cases, a suit
involving the manufacturer will eliminate all potential
infringement liability of the customer.
First of all, if the patent is found invalid or not
infringed by the manufacturer's goods in the suit between the
patent owner and the manufacturer, no further cause of action
lies against the customer with respect to the same patents and
goods.\45\
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\45\See MGA, Inc. v. General Motors Corp., 827 F.2d 729, 734 (Fed.
Cir. 1987) (``The Kessler doctrine bars a patent infringement action
against a customer of a seller who has previously prevailed against the
patentee because of invalidity or noninfringement of the patent'')
(citing Kessler v. Eldred, 206 U.S. 285 (1907)); Blonder-Tongue Labs.,
Inc. v. Univ. of Ill. Found., 402 U.S. 313, 349-50 (1971).
---------------------------------------------------------------------------
On the other hand, if the patent is found infringed and not
invalid in the suit between the patent owner and the
manufacturer, a cause of action still lies against the
customer--but in the vast majority of cases, no further damages
can be recovered from the customer. Principles of claim
preclusion do not bar litigating a second action against the
customer.\46\ Rather, while the patent owner who prevails in
his action against the manufacturer may proceed with a suit
against the customer,\47\ any such customer suit is sharply
limited by the single-recovery rule. That rule provides that
although ``a patentee is entitled to full compensation for
related acts of infringement, . . . the patentee, like any tort
victim, is not entitled to multiple recoveries for the same
injury.''\48\ Therefore, ``a patentee may not sue users of an
infringing product for damages if he has collected actual
damages from a manufacturer or seller, and those damages fully
compensate the patentee for infringement by users.''\49\
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\46\See Transclean Corp. v. Jiffy Lube Int'l, Inc., 474 F.3d 1298,
1306 (Fed. Cir. 2007) (``[A] manufacturer or seller of a product who is
sued for patent infringement typically is not in privity with a party,
otherwise unrelated, who does no more than purchase and use the
product. . . . [and therefore] a patentee's suit against one would
[not] bar a second action against the other under the doctrine of claim
preclusion.'').
\47\See Shockley v. Arcan, Inc., 248 F.3d 1349, 1364 (Fed. Cir.
2001).
\48\Jerry R. Selinger & Jessica W. Young, Suing an Infringing
Competitor's Customers: Or, Life under the Single Recovery Rule, 31 J.
Marshall L.Rev. 19, 29 (1997).
\49\Transclean, 474 F.3d at 1303.
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In almost all cases, a successful suit against the
manufacturer will fully compensate the patent owner for
infringing activity by the manufacturer's customers. This is
true whether indirect-infringement claims\50\ or direct-
infringement claims were successfully litigated against the
manufacturer.\51\
---------------------------------------------------------------------------
\50\See Glenayre Elecs., Inc. v. Jackson, 443 F.3d 851, 858-59
(Fed. Cir. 2006) (citing Selinger, supra) (``[W]here a patentee alleges
that a manufacturer contributes to and induces infringement by its
customers simply because it sells infringing products to its customers,
damages assessed for indirect infringement normally will be the same as
damages that would be assessed had the patentee sued and obtained a
judgment against the customers.'').
\51\See id. at 872 (``[W]here a patentee has enforced its patent
against a direct infringer and collected damages sufficient to put him
in the same position he would have been in had there not been
infringement, the patentee cannot thereafter collect actual damages
from an alleged indirect infringer.''); see also Selinger, supra, at 52
(``In view of the modern theory of damages, it appears that efforts to
procure recovery from different levels in the distribution (or user)
chain will be difficult to accomplish, so long as the manufacturer is
solvent.''); October hearing, Statement of Robert A. Armitage, Former
General Counsel, Eli Lilly & Co., at *17-18 (``In many situations, the
patent owner can be--and ultimately will be--made whole for any acts of
infringement that have taken place, or will take place, by suing the
manufacturer of an accused product. In this and like situations,
separate infringement lawsuits brought against customers may serve no
legitimate purpose--at least where the manufacturer is willing and able
to stand in the shoes of its customers and the customer agrees that its
interests would be served by having the manufacturer take over the
defense of the patent.'').
---------------------------------------------------------------------------
Therefore, although Sec. 296 only stays (rather than
terminates) a separate cause of action against the customer,
the Committee anticipates that in almost all cases, resolution
of the manufacturer suit pending the stay will eliminate any
possibility of further litigation against the customer.
Recommendations to the Judicial Conference
1. Discovery
An industry witness who testified at the Subcommittee on
Courts, Intellectual Property, and the Internet's April 16
hearing aptly summarized the problems posed by some discovery
requests in patent-infringement litigation. He noted that
plaintiffs who do not practice the claimed invention often lack
reciprocal discovery burdens, and therefore feel unconstrained
in their imposition of such burdens on defendants:
The costs and burdens of discovery can be enormous in
any patent case. But in cases brought by [patent-
assertion entities], the asymmetry of such costs and
burdens increases the risk of litigation abuse. Such
patent owners typically have few documents and
witnesses, so they may propound extremely burdensome
discovery to corporate defendants without fearing that
they will be on the receiving end of corresponding
burdens. Exacerbating that burden are frequently vague
and overreaching infringement allegations, making it
difficult for a defendant to determine the metes and
bounds of its obligation to preserve evidence, and
highly disruptive to comply with that obligation.
Coupled with the growth of electronically stored
information that is an easy target for burdensome
discovery requests, the costs of litigation can
mushroom out of control and force defendants to settle
simply to avoid intrusive discovery.\52\
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\52\April hearing at 32-33 (Statement of Kevin H. Rhodes, Vice
President and Chief Intellectual Property Counsel of 3M Company).
Another Subcommittee witness described the particular
burden imposed by requests for electronic discovery--and again
emphasized the lack of reciprocal burdens confronted by non-
---------------------------------------------------------------------------
practicing plaintiffs:
In the case of my company, it is really not an
overstatement to say that we communicate almost
completely electronically--by email, text, IM, you name
it. So, when, in the context of patent litigation, we
must respond to an electronic discovery request, we are
instantly looking at legal and consulting bills that
will run into the millions of dollars if we choose not
to settle. In contrast, patent trolls have no
witnesses, they have no documents, they have no
evidence to discover. In short, there is an asymmetry
in the patent troll context.\53\ Patent trolls can and
do pursue litigation strategies that make the
litigation as expensive as possible because that same
tactic cannot be used against them. With no documents
to produce and no witnesses to depose, they have very
little cost associated with their obligation to respond
to discovery requests.\54\
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\53\Other witnesses appearing before the Subcommittee also
emphasized the lack of reciprocal burdens borne by patent plaintiffs
who do not practice the claimed technology. See, e.g., April hearing at
114 (Statement of Russell W. Binns, Jr., Associate General Counsel, IP
Law & Litigation, Avaya Inc.) (``A licensing entity typically doesn't
have very many employees. It doesn't have a terribly large number of
documents. It usually has all the documents prepared on a CD before
they even start the suit . . .''); March hearing at 74-75 (Statement of
Philip S. Johnson, Chief Intellectual Property Counsel, Johnson &
Johnson, on behalf of the 21st Century Coalition for Patent Reform)
(``[Patent plaintiffs who do not practice the invention] typically have
few documents and little to disclose in discovery, so they may propound
extremely burdensome discovery to corporations without fearing that
they will be on the receiving end of corresponding burdens.''); March
hearing at 86 (Statement of Dana Rao, Vice President of Intellectual
Property and Litigation, Adobe Systems) (``Suits by [patent-assertion
entities] take advantage of lopsidedness in our litigation system. . .
. PAEs typically have very little in discovery costs but at the same
time they have the ability to make defendants like Adobe spend a lot of
resources responding to very broad discovery requests.'').
\54\March hearing at 44-47 (statement of John Boswell, Senior Vice
President and General Counsel, SAS).
The same witness offered the following example of the
massive costs imposed by wasteful and unnecessary discovery in
a particular case--and the Hobson's choice that faces a company
---------------------------------------------------------------------------
confronted with such costs:
The number of electronic documents that we had to
collect exceeded 10 million. The cost to collect those
documents, before considering the attorney's fees to
review and make production determinations, was about
$1.5 million. Again, $1.5 million was just the cost to
collect; considering attorney's fees, the cost of the
collection was easily double that amount. Of those
documents, only 1,873 documents, or .000183%, appeared
on an evidence list as possibly being introduced at
trial. These are not documents that were actually used,
and it is debatable whether any of the 10 million
documents collected were even read by the
[plaintiff].\55\
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\55\See also October hearing, Statement of Kevin Kramer, Vice
President and Deputy General Counsel for Intellectual Property, Yahoo!
Inc., at *6 (``In a typical troll case, we are asked to provide
hundreds of thousands of pages of documents, including emails from
anyone with relevant information, their attachments to those emails,
such as word processing documents, spreadsheets, and presentations. . .
. [I]n my experience, less than 1 percent of the electronic documents
that get produced actually get used at trial.'') (emphasis in
original).
SAS won summary judgment in this case and it is now on
appeal to the Federal Circuit. So far this case has
cost us in excess of $8 million. If SAS ultimately wins
this case, it will be a Pyrrhic victory at best. We
spent $8 million and huge amounts of developer time and
executive time, for what? This victory does not resolve
the other patent troll cases that we face, or will face
in the future. This $8 million and the millions more
that we are spending on other cases is money that SAS
no longer has to invest in people, facilities,
research, or product development; and we are a
relatively small player in this world. In short, the
cost to us, and to the economy as a whole, is simply
---------------------------------------------------------------------------
staggering.
The dilemma here is that when a company like SAS
receives a complaint from a patent troll, it is faced
with a Hobson's choice: defend the litigation, which
will cost literally millions of dollars, or settle, for
a smaller, but not insignificant, amount of money. If
you do settle, then the company develops a reputation
for being an easy target, which just invites more
extortion attempts from the patent-troll community.\56\
---------------------------------------------------------------------------
\56\March hearing at 44-47 (statement of John Boswell, Senior Vice
President and General Counsel, SAS).
2. LProtection of Intellectual Property Licenses in
Bankruptcy
Section 365(n) of title 11 prevents a bankruptcy trustee
from terminating licenses to patents and other intellectual-
property of the debtor. When the 100th Congress enacted
Sec. 365(n) in 1989, it recognized that allowing patent and
other intellectual-property licenses to be revoked in
bankruptcy would be extremely disruptive to the economy and
damaging both to patent owners and licensing manufacturers.
Manufacturers often invest billions of dollars in reliance
on their right to practice a technology pursuant to a license.
Allowing the license to be eliminated in bankruptcy would
create commercial uncertainty and would undermine manufacturing
investment. Also, under such a regime, inventors would be
pressured to transfer their entire interest in a patent, rather
than simply provide a license, because only a complete transfer
would provide a secure right to practice the patented
technology. Use of transfers rather than licensing would both
reduce the inventor's return on a valuable patent, and would
effectively limit who could practice the technology. For all of
these reasons, the 100th Congress concluded that allowing
intellectual-property licenses to be voided in bankruptcy ``is
a fundamental threat to the creative process that has nurtured
innovation in the United States,''\57\ and enacted Sec. 365(n)
to put an end to such bankruptcy practices.
---------------------------------------------------------------------------
\57\S. Rep. No. 100-505, at 3 (1989).
---------------------------------------------------------------------------
In recent years, some parties have tried to subvert the
protections of Sec. 365(n) by filing for bankruptcy in a
foreign country, and requesting that U.S. courts extend
``comity'' to the foreign court's termination of licenses to
U.S. intellectual property. Chapter 15 of the Bankruptcy Code
creates procedures for recognizing and extending comity to
foreign bankruptcy proceedings. Foreign trustees have cited the
fact that Chapter 15 does not list Sec. 365(n) among the
mandatory provisions that must apply when a U.S. court
recognizes a foreign proceeding as a reason to deny such
protections to U.S. licensees when a patent owner files for
bankruptcy abroad. They also have argued that Sec. 365(n) does
not fall within Chapter 15's public-policy exception to
recognizing foreign proceedings.\58\ This determination
currently must be litigated on a case-by-case basis, and
district courts are given discretion in applying the public-
policy exception. Such piecemeal litigation and its inherent
risks create uncertainty that undermines intellectual-property
licensees' ability to rely on their licenses--and, ultimately,
undermines the fundamental purposes of Sec. 365(n).
---------------------------------------------------------------------------
\58\See 11 U.S.C. Sec. 1506.
---------------------------------------------------------------------------
U.S. law's failure to clearly protect intellectual-property
licenses in Chapter 15 proceedings also creates disincentives
for manufacturers to invest in the United States. If the right
to practice a technology under a U.S. patent remains
uncertain--while other nations provide firm guarantees that
licenses to their patents will be protected in a bankruptcy
proceeding, whether domestic or foreign to such nation--a
manufacturer contemplating building a fabrication plant would
face powerful incentives to invest his resources overseas
rather than in the United States. U.S. bankruptcy law must not
be permitted to deter investment in plants, equipment, and
manufacturing jobs in the United States.
Corrections and Improvements to the America Invents Act
1. Repeal of Section 145
Section 145 of title 35 allows a patent applicant whose
claims have been rejected, and who has appealed to the Patent
Trial and Appeal Board and lost, to challenge the Board's
decision in a Federal district court rather than appealing to
the Federal Circuit. Section 145 was first authorized by the
Patent Act of 1839,\59\ long before modern administrative law
and procedure was developed. In the intervening years,
administrative proceedings have expanded to allow applicants to
present any relevant evidence of patentability to the Patent
Office, and the district courts hearing Sec. 145 actions had
adopted procedural rules that effectively (and reasonably)
required applicants to exhaust those administrative remedies in
the first instance.\60\
---------------------------------------------------------------------------
\59\Patent Act of 1839, Ch. 88, 5 Stat. 353-355 (March 3, 1839).
Previous Acts only authorized civil actions for interference. It is
Sec. 10 of the 1839 Act that first provided that the action for
interference ``shall extend to all cases where patents are refused for
any reason whatever.''
\60\See Hyatt v. Doll, 576 F.3d 1246, 1271, 1273-74 (Fed. Cir.
2009), vacated, Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010).
---------------------------------------------------------------------------
In its decision in Kappos v. Hyatt,\61\ however, the
Supreme Court swept aside those understood limits on the
presentation of new evidence under Sec. 145. Apparently
constrained by its own 19th Century precedents, the Court
determined that ``there are no limitations on a patent
applicant's ability to introduce new evidence in a Sec. 145
proceeding''--and ``[m]oreover, if new evidence is presented on
a disputed question of fact, the district court must make de
novo factual findings that take account of both the new
evidence and the administrative record before the PTO.''\62\
---------------------------------------------------------------------------
\61\132 S.Ct. 1690 (April 18, 2012).
\62\Id. at 1700-01.
---------------------------------------------------------------------------
Though perhaps well suited to antebellum America, the
Supreme Court's revival of an unrestrained Sec. 145 action
presents several problems in the present age. First and
foremost, this version of Sec. 145 effectively allows
applicants to withhold evidence from the PTO. It allows
applicants to ignore the administrative process and present
their evidence of patentability in the first instance to a
district judge, who is required to review it de novo. This puts
the judge, who rarely has relevant technical training, in the
difficult position of evaluating a new technology and
conducting a patent examination--all without the benefit of the
views of the agency that Congress created and designated to
conduct such reviews.
Moreover, such an approach is unnecessary. Today,
applicants have ample administrative routes provided by statute
for offering new evidence, including testimony, if a claim is
rejected. Even after a Board decision by an administrative
patent judge affirming an examiner's rejections, an applicant
can file a continuation application, and can introduce new
evidence of patentability in that continuation.\63\
---------------------------------------------------------------------------
\63\In the AIA's new contested proceedings--inter partes review and
post-grant review--the petitioner may challenge a patent using expert
evidence in the form of affidavits or declarations, and the patent
owner therefore may need to depose such witnesses. These proceedings,
however, authorize deposition of witnesses submitting affidavits or
declarations. See 35 U.S.C. Sec. Sec. 316(a)(5)(A) and 326(a)(5).
---------------------------------------------------------------------------
Finally, the wide-open authority to present any new
evidence of patentability in district court is wasteful. By
permitting an applicant to present his case for patentability
for the first time in the district court, Sec. 145 makes PTO
examination and Board proceedings irrelevant and consumes
disproportionate PTO litigation resources.\64\ PTO has
developed detailed procedural rules to encourage the timely
presentation of evidence; Sec. 145 renders those rules
meaningless.
---------------------------------------------------------------------------
\64\See October hearing, Statement of Robert A. Armitage, Former
General Counsel, Eli Lilly & Co., at *8 (``[T]he benefits to the few
patent applicants who would seek [Sec. 145] relief does not seem . . .
to justify the disproportionate burden placed upon the Office to build
and maintain the capability to try these cases.'').
---------------------------------------------------------------------------
Since applicants already have administrative avenues for
presenting their evidence of patentability, and may seek
appellate review at the U.S. Court of Appeals for the Federal
Circuit under Sec. 141, Sec. 145 no longer serves any purpose.
Section 145 has outlived its utility and should be repealed.
2. Obviousness-Type Double Patenting
The double-patenting doctrine was developed by the courts
to control the effects of exceptions to prior art that permit a
patentee to obtain multiple patents for obvious variations of
the same invention.\65\ An inventor can obtain such obvious-
variant patents because his own unpublished patent applications
are not prior art to his subsequent applications. As a result,
absent the double-patenting doctrine, an inventor could obtain
multiple patents for what is basically the same invention, and
then sell those patents to different parties, requiring others
to obtain multiple licenses from multiple parties in order to
practice what is substantially the same invention.
---------------------------------------------------------------------------
\65\The earliest appearance of the double-patenting doctrine--at
least in the Supreme Court's opinions--appears to be in O'Reilly v.
Morse, 56 U.S. 62 (1853). See id. at 114 (observing that if Morse's
broad claim to ``the use of the motive power of . . . electro-
magnetism, however developed, for making or printing intelligible
characters, letters, or signs, at any distance'' were valid, then a
second, narrower improvement patent would necessarily be ``illegal and
void'' as ``extend[ing] his monopoly beyond the period limited by
law'').
---------------------------------------------------------------------------
Also, under the pre-URAA\66\ system, in which a patent's
term ran 17 years from its issuance, patents could expire 30,
40, or even 50 years after the date that the patent was
originally sought. Inventors, by filing a series of continuing
applications, could delay prosecution. Without double-patenting
rules, patent protection for essentially the same subject
matter could remain in force for decades.
---------------------------------------------------------------------------
\66\The Uruguay Round Agreements Act, Pub. L. No. 103-465, 108
Stat. 4809 (1994).
---------------------------------------------------------------------------
The double-patenting doctrine precludes such practices by
requiring patentees to disclaim the right to enforce any later-
issued obvious-variant patents separately, and to disclaim the
right to enforce such later-issued patents beyond the term of
the earliest-issuing (and therefore, earliest expiring)
obvious-variant patent.
As recently as the 1980's, double patenting was a
relatively simple and straightforward doctrine, and was limited
by several key principles. The first among these--which traces
its origins to the Judge Taft's 1897 decision in Thomson-
Houston Elec. Co. v. Ohio Brass Co.\67\--is that the double-
patenting bar does not apply to an inventor's patents if the
same patents could have validly issued to separate inventors.
Ohio Brass recognized that if ``the personality of the owner of
two different patents [were to] affect the validity of either,
then the anomalous result would follow that the owner of one
patent would avoid it by acquiring ownership of another.'' \68\
The court dismissed the notion that such a ``unity of title
avoid[s] the main patent'' as a ``reductio ad absurdum.''\69\
---------------------------------------------------------------------------
\67\80 F. 712 (6th Cir. 1897).
\68\Id. at 727.
\69\Id.
---------------------------------------------------------------------------
Ohio Brass also recognized that it is ``well settled that a
patent may issue for an improvement on an earlier invention
either to the original inventor or a stranger''--and rejected
the notion that ``if, by some chance, the application for the
fundamental patent is delayed in its course through the patent
office until a patent on the avowed improvement has issued,
then the patent on the fundamental invention is void.''\70\
Noting that the ``the course of an application for a generic or
broad invention may legitimately take longer in its course
through the patent office than a comparatively unimportant
improvement,''\71\ Ohio Brass established that the inventor had
the right to rely on the order of invention (i.e., pre-AIA
priority), rather than the order of issuance, to determine if
the later-issued patent should be subject to a double-patenting
limit.
---------------------------------------------------------------------------
\70\Id. at 724.
\71\Id. at 727.
---------------------------------------------------------------------------
A final double-patenting principle, reflected in the PTO's
1967 Official Gazette Notice, is that ``[t]he term `double
patenting' is properly applicable only to cases involving two
or more applications and/or patents of the same inventive
entity.''\72\ The Notice emphasized that in cases involving
different inventors, sections 102 and 103 of title 35 already
operate to prevent the issuance of patents that are the same or
obvious in view of one another, thus precluding the need to
apply double-patenting principles.
---------------------------------------------------------------------------
\72\Double Patenting, 834 O.G. 1615 (Jan. 31, 1967).
---------------------------------------------------------------------------
These three fundamental principles--that double patenting
is not a bar where the patents could have validly issued to
separate inventors, does not apply where Sec. 103 already
operates to prevent the issuance of obvious-variant patents,
and that order of priority (rather than issuance) must be used
to determine which patent is subject to a double-patenting
limit--found expression in a series of CCPA decisions following
the adoption of the 1952 Act, creating a relatively simple and
rational double-patenting landscape.\73\
---------------------------------------------------------------------------
\73\See Robert A. Armitage, Everything You Ever Wanted to Know
About Double Patenting . . . But Never Realized that You Needed to Ask
(From The Makers Of Prozac), 2001, at **8-17 [hereinafter Armitage ODP
article]. This paper was presented at a conference of the Intellectual
Property Owners Association but has not been published. A revised and
updated version of the paper will be printed in the record of the
October 29 hearing.
---------------------------------------------------------------------------
The Patent Law Amendments Act of 1984,\74\ by enacting the
common-ownership exception to prior art that now appears at
Sec. 102(b)(1)(C), unsettled this landscape by requiring the
courts to expand the double-patenting doctrine to encompass
this new, broader exception to prior art.\75\ This resulted in
a series of court decisions during the 1990's that drastically
restricted access to the ``two-way'' test for double
patenting--and that ultimately congealed into a rule that
violates basic principles of the double-patenting doctrine that
trace their origins to Ohio Brass.\76\
---------------------------------------------------------------------------
\74\Pub. L. No. 98-622 (1984).
\75\See Armitage ODP article at **18-19.
\76\Id. at **19-28.
---------------------------------------------------------------------------
Under the so-called one-way test, an earlier-filed but
later-issuing commonly owned patent or application can be
invalidated for double patenting even if the earlier-issued
patent is nonobvious over the later-issuing patent as prior
art.\77\ In other words, the related inventors of the two
patents are punished for making two separate and nonobvious
inventions that, had they been made separately by unrelated
inventors, would have been entirely valid and separately
enforceable for their full respective terms.
---------------------------------------------------------------------------
\77\See, e.g., Eli Lilly and Co. v. Barr Labs., 251 F.3d 955, 967-
68 (Fed. Cir. 2001). Under the two-way test, the double-patenting bar
does not apply unless the later-filed but earlier-issued patent also is
obvious in view of the earlier-filed but later-issued patent. See In re
Berg, 140 F.3d 1428, 1432 (Fed. Cir. 1998).
---------------------------------------------------------------------------
Under current jurisprudence, the two-way test is available
only in the ``unusual circumstance'' where the USPTO is
``solely responsible for the delay in causing the second-filed
application to issue prior to the first''\78\--it is a ``narrow
exception'' that is rendered inapplicable even when the timing
of two applications is driven not by ``nefarious intent,'' but
rather by ordinary business decisions.\79\
---------------------------------------------------------------------------
\78\Lilly v. Barr, 251 F.3d at 968 n.7 (emphasis in original).
\79\In re Fallaux, 564 F.3d 1313, 1317 (Fed. Cir. 2009).
---------------------------------------------------------------------------
By reversing Ohio Brass's allowance of an order-of-priority
test, the recent jurisprudence also abandons the principle that
double-patenting does not apply if the patents could have
validly issued to separate inventors--embracing a principle
that Ohio Brass itself had dismissed as a ``reductio ad
absurdum.'' And finally, recent decisions also extend the
double-patenting doctrine to cases where the patents did, in
fact, issue to separate inventors, and thus already operated as
prior art against one another.\80\ For example, the very recent
decision of In re Hubbell applied the double-patenting doctrine
to destroy the earlier-filed application of a university
research team for a broad invention because two of its joint
inventors later participated in another research team that
filed a later, narrow improvement application that issued
before the first application did.\81\ The court reached the
absurd result of invalidating the earlier-sought basic
invention because of a later-discovered improvement that
already was required to be nonobvious over the basic invention.
---------------------------------------------------------------------------
\80\See, e.g., Lilly v. Barr, 251 F.3d 955; In re Hubbell, 709 F.3d
1140, 1146-48 (Fed. Cir. 2013); see also Armitage ODP article at *27
(``[under these cases,] double patenting would now infect two patents
even if the two patented inventions were patentably distinct because
the non-obviousness test operated, i.e., one of the two patented
inventions was prior art to the other.'').
\81\In re Hubbell, 709 F.3d at 1142-43, 1146-48.
---------------------------------------------------------------------------
The one-way test, when properly applied, serves the
salutary purpose of allowing the courts to rein in the
potential for abuse of rules that fail to limit the filing of
continuing applications--even decades after an initial patent
on an invention has issued.\82\ Some of the courts' decisions
took note of this special justification for employing the one-
way test, suggesting that this approach might be confined to
the pre-URAA patents.\83\
---------------------------------------------------------------------------
\82\See, e.g., In re Basell Poliolefine Italia, S.P.A., 547 F.3d
1371, 1373-74 (Fed. Cir. 2008) (invalidating for double patenting a
patent that issued in 2002 from an application claiming priority to
1954).
\83\See Takeda Pharm. Co., Ltd. v. Doll, 561 F.3d 1372, 1377 n.1
(Fed. Cir. 2009); Boehringer Ingelheim Int'l GmbH v. Barr Labs., Inc.,
592 F.3d 1340, 1346 (Fed. Cir. 2010).
---------------------------------------------------------------------------
In 2009, however, the Federal Circuit made clear that it
would not ``disregard'' its recent precedents--as opposed to
the logic underpinning the double-patenting doctrine--and would
continue to apply the one-way test's ``ad hoc nullification
machine''\84\ to modern patents that run 20 years from their
filing.\85\
---------------------------------------------------------------------------
\84\Hill v. Colorado, 530 U.S. 703, 742 (2000) (Scalia, J.,
dissenting).
\85\In re Fallaux, 564 F.3d at 1318-1319.
---------------------------------------------------------------------------
The URAA makes it all but impossible for applicants to
obtain the type of pre-URAA patent-term extensions that have
been cited as justifying a liberal application of the one-way
test. Given the unfairness of invalidating an earlier-filed
patent because of a later-filed patent, especially in the case
of first-inventor-to-file patents for which prior art is
dictated by the order of patent filing, it is appropriate to
eliminate continuing application of the one-way test in favor
of a rule of law that is consistent with Ohio Brass and the
double-patenting doctrine's foundational principles.
3. LUse of District-Court Claim Construction in Inter
Partes and Post-Grant Reviews
In the course of the development of the Innovation Act, the
Committee also considered proposals to require the PTAB to
follow a district-court claim construction that has been
entered with respect to a patent. Such an approach would have
the virtue of ensuring that a patent is construed in the same
way in all relevant fora. As a result, all risk would be
eliminated that a patent might be subject to challenge in a
PTAB proceeding for claiming subject matter than the patent
owner already had been denied the right to enforce.
Such an approach, however, poses problems of its own.
District courts themselves are not bound by a previous district
court's claim construction or a party's stipulation. Certainly,
the second-deciding court does not follow a first-deciding
court's claim construction if it believes the earlier
construction to be clearly erroneous. Some inconsistency in
claim construction is thus inevitable in the district courts
themselves. A requirement to follow constructions entered into
or stipulated to in a district court could also be subject to
abuse. A party could enter into a self-serving stipulation to
an unreasonably narrowed claim construction in a settlement
with another party that is not concerned about obtaining a
proper claim construction. Such a construction would not bind
the patent owner or other courts in other infringement
actions--but could insulate the patent from PTAB review.
Finally, such an approach presents practical difficulties:
district courts can and do adopt claim constructions during the
pendency of PTAB proceedings. If the PTAB were required to
always follow claim constructions entered by a district court,
it would be forced to restart the case whenever a new claim
construction were entered--and would effectively find it
impossible to comply with the AIA's 12- to 18-month deadline
for completing these proceedings.
For the foregoing reasons, the Committee declines to
mandate that the PTAB adopt district-court claim constructions
in review proceedings under chapters 31 and 32. The Committee
nevertheless expects that the PTO will implement the present
amendments not only in their letter, but also in their spirit
of narrowing the gap between what a patent is construed to
claim when it is enforced, and what it claims when subject to
challenge before the PTAB. To this end, the Committee expects
that the PTAB will strongly consider adopting as its own any
previously-entered district-court claim construction that it
finds to be at least a reasonable interpretation of the claims
in a patent.\86\
---------------------------------------------------------------------------
\86\Conversely, the Committee expects that U.S. District Courts
will give at least persuasive weight to claim constructions previously
entered by the technically-trained jurists of the PTAB.
---------------------------------------------------------------------------
Although covered business method reviews are a subspecies
of post-grant review, the unique nature of those proceedings
precludes a need to employ district-court standards of claim
construction in them. Only business-method patents are eligible
for CBM review. Because such patents are not directed at the
application of scientific or mathematical principles,\87\ they
are generally incapable of creating reproducible results, and
are thus inherently unpatentably abstract, as that standard
recently was clarified in Bilski v. Kappos.\88\ In light of
Bilski's restoration of the historic bar on the patenting of
business methods, the Committee finds it unnecessary to burden
the Board with applying district courts' additional claim-
construction criteria in CBM proceedings to define the precise
metes and bounds of the unpatentable subject matter claimed in
such patents.
---------------------------------------------------------------------------
\87\The Committee is aware of the Supreme Court's recent
pronouncement that inventions relying on the application natural laws
are unpatentable when ``the relation itself exists in principle apart
from any human action.'' Mayo Collaborative Servs. v. Prometheus Labs.,
Inc., 132 S.Ct. 1289, 1297 (2012). The Court applied the ``laws of
nature'' exception to subject-matter patentability to invalidate a
patent that disclosed determining the appropriate dose of a drug to
treat an autoimmune disease on the basis of measurements of the levels
of metabolites in the patient's blood. See id. at 1295. Prometheus
poses several quandaries, however. It is not entirely clear why the
Court concluded that the discovery of a means of determining the amount
of a drug that will cure--rather than kill--the patient is an invention
inherently unworthy of a patent. The Court's reliance on the trio of
Benson, Flook, and Diehr to guide its Sec. 101 analysis--despite the
fact that the latter clearly overruled the first two, and that none of
the three is particularly coherent--does not contribute to clarity in
this area of law. But most fundamentally, were the Committee to take
seriously the suggestion that an invention is unpatentable if it adds
``nothing of significance'' to the natural laws that control its
operation, id. at 1302, it must also conclude that the Patent Office
should be deauthorized, for nothing would remain patentable other than
whatever business methods survive Bilski. It is thus unsurprising that
the patent bar, particularly in the life sciences, has greeted
Prometheus as the jurisprudential equivalent of the bombing of Dresden.
The Committee will continue to monitor developments in this area and
evaluate whether corrective action is necessary.
\88\130 S.Ct. 3218 (2010). The respondent in that case, during the
Committee's October 29 hearing, described another problematic aspect of
the patenting of business methods: ``patents covering methods of doing
business . . . inherently cover all technology solving the affected
business problem.'' October hearing, Statement of David J. Kappos,
Former Under Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office, at *5. Such
patents inevitably are parasitic of the hard work and ingenuity of the
inventor of the technological product or feature that implements the
business-method ``invention.''
---------------------------------------------------------------------------
4. PTO Patent Reviews
During the course of the Committee's consideration of the
present bill, a ``technical'' but serious defect in AIA Sec. 18
was brought to the Committee's attention.\89\ AIA
Sec. 18(a)(1)(C) delineates the types of prior art that may be
employed in a covered business method patent review of a first-
to-invent business-method patent. Subparagraph (C) ensures that
the Metallizing Engineering doctrine, and other discovery-
intensive pre-AIA loss-of-right rules, cannot be asserted in a
CBM proceeding. Subparagraph (C) bases its definition of the
prior art that may be cited against a first-to-invent patent on
pre-AIA Sec. 102(a) and (b). The subparagraph neglects,
however, to incorporate pre-AIA Sec. 102(e).
---------------------------------------------------------------------------
\89\See Patents Post-Grant Blog, ``The Statutory Defect That May
Doom Your CBM Petition,'' Sept. 23, 2013.
---------------------------------------------------------------------------
This omission precludes using patents and published
applications in a CBM proceeding as of their effective filing
dates, rather than as of their publication or grant dates. The
word ``patented,'' as used in pre-AIA Sec. 102(a) and (b),
makes a patent effective as prior art only as of its
publication or grant date, and in any event extends only to
issued patents rather than published applications--the former
are mere ``printed publications,'' and thus effective as prior
art only as of their publication dates.\90\ Section 9(e) of the
Innovation Act corrects this legislative oversight, ensuring
that the swarm of business-method patents and abandoned-but-
published applications that followed the Federal Circuit's
State Street decision can serve as prior art in a CBM
proceeding as of the date that they were filed, rather than as
of when they were published.
---------------------------------------------------------------------------
\90\See MPEP Sec. 2126; In re Ekenstam, 256 F.2d 321, 325 (CCPA
1958); 78 FR 11059, 11074 (Feb. 14, 2013).
---------------------------------------------------------------------------
As the Committee noted in its report accompanying the AIA,
a petition to initiate a CBM review may be granted if the
petitioner is either sued for or accused of infringement.\91\
The Committee reaffirms that a demand letter or other pre-
litigation communication suggesting that infringement may have
occurred constitutes an accusation of infringement and
satisfies AIA Sec. 18(a)(1)(B)'s prerequisite for filing a
petition for review.
---------------------------------------------------------------------------
\91\See H.R. Rep. No. 112-98, at 54 (2011).
---------------------------------------------------------------------------
As to other matters concerning CBM proceedings, the
Committee has heeded the call of witnesses at the October 29
hearing to ``let sleeping dogs lie,'' and allow further
analysis of the operation of CBM review before determining
whether the duration or scope of the proceedings should be
modified.\92\ The Committee also has been persuaded that it is
unnecessary to codify the PTAB's application of the definition
of ``covered business method patent'' in SAP v. Versata,
CBM2012-00001. Since the Board's decision appears to be
entirely consistent with the statutory text, PTO's implementing
regulations, and the clear and uncontradicted explanations of
the language offered by its principal Senate sponsor, codifying
it at this time would amount to little more than legislating
for legislating's sake.\93\
---------------------------------------------------------------------------
\92\October hearing, Statement of David J. Kappos, Former Under
Secretary of Commerce for Intellectual Property and Director of the
United States Patent and Trademark Office, at *6 (``[I]t is simply too
early to say whether Section 18 needs to be made permanent.''); id.,
Statement of Robert A. Armitage, Former General Counsel, Eli Lilly &
Co., at *10, n.13 (``[A]s to proposed changes to AIA Sec. 18, the
Committee might conclude that sleeping dogs should be allowed to lie--
and the 2011 compromise on CBMP, IPR and PGR should be allowed to
remain undisturbed absent some compelling justification for moving
forward with a holistic reassessment of their operation and impact on
the patent system.'').
\93\See also Letter of Mr. Lamar Smith to Senator Schumer et al.,
September 8, 2011 (printed in 157 Cong. Rec. S7413-14 (daily ed. Nov.
14, 2011).
---------------------------------------------------------------------------
5. LClarification of Limits on Patent Term Adjustment
Subparagraph (B) of Sec. 154(b)(1) of title 35 provides a
day-for-day adjustment of the term of a patent for delays
attributable to the PTO after an application has been pending
for more than 3 years. Subparagraph (B) excludes certain events
from that adjustment, including the time consumed by a request
for continued examination (``RCE'') under Sec. 132(b). An RCE
is like a continuation application, in that it allows an
applicant to seek additional prosecution. For over a decade,
the PTO has construed subparagraph (B) to provide that no
patent term adjustment is awarded for time accrued as a result
of an RCE filing, regardless of when the RCE was filed.\94\
---------------------------------------------------------------------------
\94\See 37 CFR Sec. 1.702(b)(1) and 37 CFR Sec. 1.703(b)(1).
---------------------------------------------------------------------------
Two recent court decisions, however, have called the PTO's
interpretation into doubt. Exelixis, Inc. v. Kappos\95\ and
Novartis v. Kappos\96\ have held that adjustments for RCE time
must be provided under subparagraph (B) when the RCE is filed
more than 3 years into the pendency of the application.
---------------------------------------------------------------------------
\95\No. 1:12cv96 (E.D. Va. Nov. 1, 2012).
\96\No. 1:10cv01138 (D.D.C. Nov. 15, 2012) (following Exelixis).
---------------------------------------------------------------------------
These decisions create an unfortunate incentive for
applicants to delay filing RCEs until after the 3-year mark.
They also threaten to invite a return to the pre-URAA abuses
that had been eliminated by the adoption of a patent term that
runs from a patent's filing date rather than from its issuance.
As Mr. Lamar Smith has noted with respect to the Exelixis
decision:
The district court's interpretation of subparagraph (B)
. . . would allow patent term adjustment to accrue for
any continued examination sought after the 3-year clock
has run. Such a result, of course, would allow
applicants to postpone their patent's expiration date
through dilatory prosecution, the very submarine-
patenting tactic that Congress sought to preclude in
1994 when it adopted a 20-year patent term that runs
from an application's effective filing date.\97\
---------------------------------------------------------------------------
\97\158 Cong. Rec. E2016 (daily ed. Dec. 31, 2012).
Mr. Smith's concerns are well founded. Unless the Exelixis
decision is corrected, its interpretation of subparagraph (B)
would allow indefinite patent term adjustments for RCEs
commenced after 3 years of prosecution. Because applicants can
request multiple RCEs, Exelixis would potentially allow
applicants to extend their patent terms by many years. This
would effectively allow an unscrupulous applicant to pursue a
submarine-patenting strategy.
Moreover, when an applicant exhausts his nonfinal and final
rejections, and files an RCE (rather than appealing the final
rejection to the Board), the applicant effectively restarts
prosecution of his application. While applicants are entitled
to pursue this route, they should not receive patent-term
adjustment for time accrued after they have requested an RCE.
``Delays'' caused by the filing of an RCE are properly
attributable to the applicant's failure to submit allowable
claims in his first round of prosecution, and to his choice to
pursue an RCE rather than appealing to the Board. As written,
however, subparagraph (B) has led to litigation about what
``consumed by continued examination'' means, and whether any of
the time accrued after an RCE is requested can still create
eligibility for B-delay adjustment.
Section 9(f) of the Innovation Act clarifies that no B-
delay patent term adjustment accrues after an applicant elects
to pursue an RCE. A witness at the Committee's October
legislative hearing commented on subsection (f)'s amendments:
These USPTO-proposed amendments appear on their face to
be unobjectionable. With the advent of first-inventor-
to-file patents and the ability of patent applicants to
secure prompt action by the USPTO to get patents issued
through the Prioritized Patent Examination Program, the
original policy justification for Patent Term
Adjustment, never strong to begin with, has now all but
evaporated. If the USPTO were willing to grant
Prioritized Patent Examination to any patent applicant
meeting the current qualifications, the Committee ought
to consider whether the time has come to retire the PTA
statute in its entirety--most especially for first-
inventor-to-file patents.\98\
---------------------------------------------------------------------------
\98\October hearing, Statement of Robert A. Armitage, Former
General Counsel, Eli Lilly & Co., at *10.
6. L``Arising Under'' Jurisdiction and Gunn v. Minton
Prior to this year, Federal Circuit and regional circuit
caselaw recognized that certain causes of action, though
created by state law, effectively determine the legal force or
effect of the claims in a patent--and therefore ``arise under''
Federal patent law and are within the exclusive jurisdiction of
the Federal district courts and the Federal Circuit.
These causes of action include, for example, state-law
actions for breach of a licensing agreement in which liability
turns on whether a party has sold products that infringe a
patent.\99\ Other such causes of action include state-law
actions for business disparagement, unfair competition,
injurious falsehood, or interference with prospective economic
advantage in which liability depends on whether a patent is
infringed by a product or whether the patent is invalid or
unenforceable. Typically in such cases, a competitor sues the
patentee because the patentee has informed the competitor's
customers that the products that they have purchased from the
competitor infringe the patentee's patent.\100\
---------------------------------------------------------------------------
\99\See, e.g. Scherbatskoy v. Halliburton Co., 125 F.3d 288 (5th
Cir. 1997) (transferring appeal to the Federal Circuit); U.S. Valves,
Inc. v. Dray, 190 F.3d 811 (7th Cir. 1999) (same).
\100\See, e.g., Additive Controls & Measurement Sys., Inc. v.
Flowdata, Inc., 986 F.2d 476 (Fed. Cir. 1993); Hunter Douglas, Inc. v.
Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), overruled on
other grounds, Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d
1356 (Fed. Cir. 1999).
---------------------------------------------------------------------------
Because the Federal Circuit and regional circuits agreed
that these types of state-law causes of action, which
effectively assign legal liability based on a determination of
the scope and the validity of the claims in a patent, ``arise
under'' Federal patent law, the Federal district courts had
original (and removal) jurisdiction over such actions, and the
Federal Circuit had appellate jurisdiction over them.
The Supreme Court's recent decision in Gunn v. Minton,\101\
however, has cast doubt over whether such actions continue to
``arise under'' Federal patent law. The Court's opinion
concluded that ``arising under'' jurisdiction exists when the
validity or construction of a Federal statute is in question,
when a case's resolution will affect numerous other Federal
cases, or when a case affects the Federal Government.\102\
---------------------------------------------------------------------------
\101\133 S.Ct. 1059 (Feb. 20, 2013).
\102\See Gunn, 133 S.Ct. at 1066-67.
---------------------------------------------------------------------------
None of these factors, however, necessarily captures the
case of a state contract or tort action posing the possibility
of inconsistent determinations regarding the legal effect of a
patent's claims. Such a case does not typically turn on an
interpretation of Federal law or affect numerous other cases or
the Federal Government. If Gunn's enumeration of ``arising
under'' factors is thus treated as an exclusive listing of such
factors, ``arising under'' jurisdiction could be deemed to no
longer extend to the case merely threatening inconsistent
determinations as to the effect of a patent.
The Federal Circuit recently has suggested that its past
cases finding ``arising under'' jurisdiction for patent-related
state-law business disparagement and injurious falsehood claims
``may well have survived the Supreme Court's decision in
Gunn.''\103\ That statement, however, is only dicta, and the
matter remains unresolved in the Federal Circuit. Moreover,
some regional courts of appeals have begun to apply Gunn
broadly. They effectively have treated Gunn's partial
enumeration of the factors that can render a patent issue
``substantial'' for purposes of arising under jurisdiction as
an exclusive list of such factors.\104\ Courts such as the
Eleventh Circuit in MDS (Canada) Inc. have thus held that even
a case in which liability turns on whether a particular product
infringes a claim in a patent does not ``arise under'' the
Federal patent laws.\105\
---------------------------------------------------------------------------
\103\Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc.,
715 F.3d 1329, 1334 (Fed. Cir. 2013).
\104\See MDS (Canada) Inc. v. Rad Source Technologies, Inc., 720
F.3d 833, 842-43 (11th Cir. 2013) (``The substantiality inquiry under
Grable looks [ ] to the importance of the issue to the Federal system
as a whole,'' Gunn v. Minton, ___U.S.___, 133 S.Ct. 1059, 1066, 185
L.Ed.2d 72 (2013), and the Supreme Court has identified three factors
to assist in this inquiry. First, a pure question of law is more likely
to be a substantial Federal question. Empire Healthchoice Assur., Inc.
v. McVeigh, 547 U.S. 677, 700-01, 126 S.Ct. 2121, 2137, 165 L.Ed.2d 131
(2006). Second, a question that will control many other cases is more
likely to be a substantial Federal question. Id. Third, a question that
the government has a strong interest in litigating in a Federal forum
is more likely to be a substantial Federal question. Grable, 545 U.S.
at 315-16, 125 S.Ct. at 2368-69. All of these factors establish that
the issue of patent infringement here is not a substantial Federal
question for the purpose of section 1338.'').
\105\See id. at 846.
---------------------------------------------------------------------------
It is important that ``arising under'' jurisdiction
continue to extend to these types of cases. If it were
otherwise, a patent owner could successfully prosecute an
infringement action in Federal court with respect to a product,
yet simultaneously be held liable for ``business
disparagement'' in state court for asserting that the same
product infringes the same patent. Similarly, a licensee
manufacturer could successfully assert a defense of
noninfringement in Federal court, yet be held liable for breach
of contract in state court with respect to the same patent and
the same product. One of the principal reasons for creating the
Federal Circuit in 1982 was to prevent inconsistent
adjudications as to the legal effect of a patent--that is, to
avoid situations where one circuit finds a patent infringed by
a product and valid and another circuit finds the opposite. But
a broad reading of Gunn effectively threatens this very result.
Hearings
The Committee on the Judiciary held a hearing on H.R. 3309.
The hearing took place on October 29, 2013. Testimony was
received from Mr. Krish Gupta, Senior Vice President and Deputy
General Counsel, EMC Corporation; Mr. Kevin Kramer, Vice
President and Deputy General Counsel for Intellectual Property,
Yahoo! Inc.; Mr. David J. Kappos, Former Under Secretary of
Commerce for Intellectual Property and Director of the United
States Patent and Trademark Office; and Mr. Robert A. Armitage,
Former General Counsel, Eli Lilly & Co.
The Committee's Subcommittee on Courts, Intellectual
Property, and the Internet also conducted two separate but
related hearings on March 14, 2013 (``Abusive Patent
Litigation: The Impact on American Innovation & Jobs, and
Potential Solutions,'' Serial No. 113-13), and April 16, 2013
(``Abusive Patent Litigation: The Issues Impacting American
Competitiveness and Job Creation at the International Trade
Commission and Beyond,'' Serial No. 113-24).
Committee Consideration
On November 20, 2013, the Committee met in open session and
ordered the bill H.R. 3309 favorably reported with an
amendment, by a rollcall vote of 33-5, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following rollcall votes occurred during the Committee's
consideration of H.R. 3309.
1. The amendment to the amendment in the nature of a
substitute offered by Mr. Conyers creates a revolving fund for
PTO fees, requires disclosure of all parties with a financial
interest in a party or the patent in a patent lawsuit, allows
stays of suits against customers, instructs the PTO and others
to prepare reports on several issues, and makes technical
corrections. This amendment was defeated by a rollcall vote of
14-19.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)...............................
Mr. DeSantis (FL)..............................
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 14 19
------------------------------------------------------------------------
2. The amendment to the amendment in the nature of a
substitute offered by Mr. Conyers creates a revolving fund for
PTO fees. This amendment was defeated by a rollcall vote of 13-
17.
ROLLCALL NO. 2
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY)..............................
------------------------
Total...................................... 13 17
------------------------------------------------------------------------
3. The amendment to the amendment in the nature of a
substitute offered by Mr. Conyers strikes subsections (a)
through (c) of section 6 of the bill and replaces them with a
study. This amendment was defeated by a rollcall vote of 9-21.
ROLLCALL NO. 3
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 9 21
------------------------------------------------------------------------
4. The amendment to the amendment in the nature of a
substitute offered by Mr. Jeffries strikes the bill's repeal of
Sec. 145 of title 35. This amendment was defeated by a rollcall
vote of 13-19.
ROLLCALL NO. 4
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 13 19
------------------------------------------------------------------------
5. The amendment to the amendment in the nature of a
substitute offered by Mr. Watt makes the provision-limiting
discovery prior to claim construction discretionary. This
amendment was defeated by a rollcall vote of 8-21.
ROLLCALL NO. 5
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................
Mr. Jeffries (NY)..............................
------------------------
Total...................................... 8 21
------------------------------------------------------------------------
6. The amendment to the amendment in the nature of a
substitute offered by Mr. Watt provides for the award of
attorney's fees in ``appropriate cases.'' This amendment was
defeated by a rollcall vote of 12-23.
ROLLCALL NO. 6
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 12 23
------------------------------------------------------------------------
7. The amendment to the amendment in the nature of a
substitute offered by Mr. Johnson strikes section 6 of the
bill. This amendment was defeated by a rollcall vote of 9-25.
ROLLCALL NO. 7
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA)..................................
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 9 25
------------------------------------------------------------------------
8. The amendment to the amendment in the nature of a
substitute offered by Mr. Jeffries applies heightened standards
to the pleading of defenses of noninfringement and invalidity.
This amendment was defeated by a rollcall vote of 12-23.
ROLLCALL NO. 8
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA)..................................
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 12 23
------------------------------------------------------------------------
9. The amendment to the amendment in the nature of a
substitute offered by Mr. Jeffries provides for the award of
attorney's fees unless the position of the nonprevailing party
was reasonably justified in law and fact, and clarifies that
severe economic hardship to the inventor can qualify as a
special circumstance allowing denial of a fee award. This
amendment was adopted by a rollcall vote of 36-2.
ROLLCALL NO. 9
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 36 2
------------------------------------------------------------------------
10. The amendment to the amendment in the nature of a
substitute offered by Mr. Watt provides for consideration of
conduct that extended litigation in the award of attorney's
fees. This amendment was defeated by a rollcall vote of 17-21.
ROLLCALL NO. 10
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 17 21
------------------------------------------------------------------------
11. The bill was reported favorably, as amended, by a
rollcall vote of 33-5.
ROLLCALL NO. 11
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Mr. Smith (MO)................................. X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 33 5
------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 3309, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 27, 2013.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3309, the
``Innovation Act.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Martin von
Gnechten and Susan Willie, who can be reached at 226-2860.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 3309--Innovation Act.
As ordered reported by the House Committee on the Judiciary
on November 20, 2013.
CBO estimates that implementing H.R. 3309 would cost $3
million over the 2014-2018 period, assuming appropriation of
the necessary amounts, mainly for reports to be prepared by the
Administrative Office of the United States Courts (AOUSC) and
the Government Accountability Office and administrative costs
incurred by the AOUSC associated with new judicial procedures.
Pay-as-you-go procedures do not apply to this legislation
because it would not affect direct spending or revenues.
Based on information from the Patent and Trademark Office
(PTO), CBO also estimates that implementing H.R. 3309 would
have a gross cost to PTO of about $30 million per year.
However, PTO is authorized to collect fees sufficient to offset
its operating expenses; therefore, CBO estimates that the net
budgetary effect of PTO's activities undertaken to implement
H.R. 3309 would not be significant, assuming appropriation
actions consistent with the agency's authorities.
H.R. 3309 would change administrative and judicial
processes that support the protection of intellectual property
rights. CBO expects that, by requiring inventors to be more
specific in pleadings to the court, awarding attorney fees to
the prevailing party, and limiting discovery early in an
infringement proceeding, the bill would affect the decisions of
inventors to initiate lawsuits for patent infringement.
H.R. 3309 would make several adjustments to judicial
procedures for patent infringement cases, including which
parties may join a suit and when a court is required to grant a
motion to stay an action. Further, the bill would require the
courts to award the prevailing party reasonable fees and other
expenses incurred in connection with such cases. The bill also
would require the AOUSC to develop rules and procedures related
to the discovery of evidence in lawsuits for patent
infringement.
The bill would change procedures that PTO has in place to
examine patent applications, award patents, and determine the
validity of a patent that has already been granted. Among other
things, H.R. 3309 would specify that the agency use methods
similar to those used in district courts to evaluate the
validity of a patent. The bill also would require the agency to
develop new databases to make information about patent
ownership and litigation available on its website, perform an
additional review of certain declarations made on original
applications, and prepare several studies and reports on patent
ownership and the behavior of certain patent owners.
H.R. 3309 would impose a mandate as defined in the Unfunded
Mandates Reform Act (UMRA) on both public and private entities
because PTO would charge fees to offset the costs incurred to
collect and make some information related to patents publicly
available. Other provisions in the bill also would result in
increased patent fees. The requirement to pay those fees would
be a mandate because the Federal Government controls the patent
and trademark system, and no reasonable alternatives to that
system exist.
Based on information from PTO, CBO estimates that the
annual cost to comply with the mandate would be about $30
million, with less than $1 million of those costs accruing to
public entities and the rest accruing to private entities.
Therefore, the cost for public and private entities to comply
with the mandate would fall below the annual thresholds
established in UMRA for intergovernmental and private-sector
mandates ($75 million and $150 million in 2013, respectively,
adjusted annually for inflation).
The CBO contacts for this estimate are Susan Willie and
Martin von Gnechten (for Federal costs), Melissa Merrell (for
the impact on state and local governments), and Paige Piper/
Bach and Nathan Musick (for the private-sector impact). The
estimate was approved by Peter H. Fontaine, Assistant Director
for Budget Analysis.
Duplication of Federal Programs
No provision of H.R. 3309 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was in included in any
report from the Government Accountability Office pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that H.R. 3309 specifically directs
to be completed one specific rule making within the meaning of
5 U.S.C. 551.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
3309 amends title 35, United States Code, and the Leahy-Smith
America Invents Act, to make improvements and technical
corrections.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 3309 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
Section 1. Short title; table of contents.
This Act may be cited as the ``Innovation Act.''
Section 2. Definitions.
Section 2 defines the terms ``Director'' and ``Office.''
Section 3. Patent infringement actions.
(a) Pleading requirements
New Sec. 281A establishes heightened pleading requirements
for claims of patent infringement, to the extent that the
required information is reasonably accessible to the claimant.
(b) Attorney's fees
Subsection (a) of revised Sec. 285 provides that fees and
expenses shall be awarded to a prevailing party unless the
position and conduct of the nonprevailing party was reasonably
justified in law and fact or special circumstances (such as
economic hardship to the inventor) make a fee award unjust.
This standard reflects the Supreme Court's clarification of the
standard employed by the Equal Access to Justice Act
(EAJA),\106\ which governs the award of fees against the
Federal Government. Enacted over 30 years ago, EAJA offers a
well-developed body of caselaw to guide application of revised
Sec. 285, and sets a standard that is predictable and fair.
---------------------------------------------------------------------------
\106\28 U.S.C. Sec. 2412(d)).
---------------------------------------------------------------------------
Under this standard, there is no presumption that the
nonprevailing party's position was not reasonably justified
simply because it lost the case.\107\ Even if a plaintiff's
complaint is rejected by the judge or jury, the plaintiff is
immune from a fee award so long as its position had a
reasonable basis in law and fact.\108\ Fees cannot be awarded
if the nonprevailing party's case was justified to a degree
that could satisfy a reasonable person,\109\ or there was at
least a dispute over which reasonable minds could differ.\110\
---------------------------------------------------------------------------
\107\Norris v. SEC, 695 F.3d 1261, 1265 (Fed. Cir. 2012).
\108\Pierce v. Underwood, 487 U.S. 552, 565 (1988).
\109\Id.
\110\Norris v. SEC, 695 F.3d 1261, 1265 (Fed. Cir. 2012).
---------------------------------------------------------------------------
When a case turns on a legal question, courts have looked
to the clarity of the governing law--that is, whether judicial
decision on the issue left the status of the law unsettled, and
whether the legal issue was novel or difficult.\111\ On
questions of statutory interpretation, for example, courts have
asked whether the Federal courts were split on the matter,\112\
or whether the nonprevailing party interpreted a statute in a
manner that is contrary to its plain language and unsupported
by its legislative history.\113\
---------------------------------------------------------------------------
\111\Id.
\112\DGR Assocs., Inc. v. United States, 690 F.3d 1335, 1342 (Fed.
Cir. 2012).
\113\Patrick v. Shinseki, 668 F.3d 1325, 1330-31 (Fed. Cir. 2011).
---------------------------------------------------------------------------
Subsection (a) has been modified to further clarify that
the special circumstances that justify the denial of a fee
award to a prevailing party may include situations involving
severe economic hardship to the inventor.\114\ The courts have
discretion in special circumstances to protect from a fee
award, for example, the unsophisticated independent inventor
who brought a lawsuit to protect what he may have understood to
be his claimed invention but whose complaint was ultimately
determined not to be reasonably justified.
---------------------------------------------------------------------------
\114\The term ``inventor'' is defined at Sec. 100(f) of title 35.
---------------------------------------------------------------------------
This analysis is not conducted issue by issue; rather, the
nonprevailing party's litigation position is reviewed in the
overall context.\115\ While the parties' postures on individual
matters may be more or less justified, the reasonable-
justification test favors treating a case as an inclusive
whole, rather than as atomized line-items.\116\ Also, when
determining whether a party is prevailing party that is
entitled to a fee award, courts consider the degree of success
obtained by that party. A party whose ``success'' consists of a
damage award that is only a very small fraction of what it
originally sought is not entitled to a fee award.\117\
---------------------------------------------------------------------------
\115\DGR Assocs., 690 F.3d at 1343.
\116\Id. (quoting I.N.S. v. Jean, 496 U.S. 154, 161-62 (1990)).
\117\See, e.g., Hubbard v. United States, 480 F.3d 1327 (Fed. Cir.
2007).
---------------------------------------------------------------------------
As under the EAJA, a district court's decision to grant or
deny a fee award under Sec. 285(a) is reviewed for an abuse of
discretion.\118\ This deferential standard, however, ``does not
mean that a mistake of law is beyond appellate correction. A
district court by definition abuses its discretion when it
makes an error of law.''\119\
---------------------------------------------------------------------------
\118\Pierce v. Underwood, 487 U.S. at 562-63.
\119\Koon v. U.S., 518 U.S. 81, 100 (1996) (citation omitted); see
also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 402 (1990). Plenary
review of the reasonableness of a nonprevailing litigant's position on
a legal question is particularly appropriate in the patents context, in
light of the amounts likely to be at stake, the specialized nature of
patent law and the Federal Circuit's familiarity with it, and the need
to provide guidance to litigants as to, for example, what types of
claim-construction and obviousness arguments, even if ultimately
unsuccessful, are nevertheless reasonably justified.
---------------------------------------------------------------------------
Subsection (b) of Sec. 285 provides that any party to the
action may, upon motion, require another party to certify
whether or not it will be able to satisfy a fee award in the
event that such an award is made against such other party. This
subsection also provides that a party joined in the action
pursuant to Sec. 299(d) may be required to pay the unsatisfied
portion of a fee award.
Subsection (c) of Sec. 285 closes a potential loophole that
an abusive litigant otherwise might be able to exploit to
impose substantial costs on the opposing party with an
unjustified complaint while evading accountability under
subsection (a). Under the Supreme Court's Buckhannon decision,
the ``prevailing party'' that is potentially entitled to a fee
award includes only a party that has obtained from the court an
``enforceable judgment on the merits'' or a ``court-ordered
consent decree.''\120\ A defendant's ``voluntary change in
conduct,'' even if spurred by the plaintiff's lawsuit, is
insufficient to make the plaintiff a prevailing party.\121\
---------------------------------------------------------------------------
\120\Buckhannon Bd. and Care Home, Inc. v. West Virginia Dep't of
Health and Human Resources, 532 U.S. 598, 604 (2001).
\121\Id. at 605.
---------------------------------------------------------------------------
Under Federal Circuit precedent,\122\ moreover, a patent
owner can deprive a court of Article III jurisdiction over an
accused infringer's counterclaims for invalidity or
noninfringement by giving the accused infringer a covenant not
to sue for infringement--and thereby preclude the defendant
from becoming a ``prevailing party'' on the basis of those
counterclaims.\123\ Highway Equipment also held, however, that
such a covenant does not deprive the court of jurisdiction over
the patent owner's infringement complaint,\124\ and that fees
may be awarded to the defendant if the covenant results in
dismissal of the complaint with prejudice.\125\ Highway
Equipment would thus appear to allow a defendant to obtain
prevailing-party status and hold a plaintiff accountable for an
unjustified litigation position.
---------------------------------------------------------------------------
\122\Highway Equipment Co., Inc. v. FECO, Ltd, 469 F.3d 1027 (Fed.
Cir. 2006).
\123\Id. at 1033 n.1; see also Cisco Sys., Inc. v. Alberta
Telecomms. Research Ctr., No. 2012-1687, 2013 WL 4563117, at *4 (Aug.
29, 2013).
\124\Highway Equip. Co., 469 F.3d at 1033 n.1.
\125\Id. at 1035-36.
---------------------------------------------------------------------------
Courts have also held, however, that a defendant is not a
prevailing party if a complaint is dismissed without
prejudice\126\--and district courts have discretion to
determine whether a complaint is dismissed with or without
prejudice.\127\ Moreover, Highway Equipment itself notes that
the regional courts of appeals are divided as to whether even a
dismissal with prejudice makes the defendant a prevailing party
and potentially eligible for a fee award.\128\ And finally,
several regional courts of appeals have held that when a case
is dismissed as moot--which a covenant not to sue would appear
to require--the defendant is not a prevailing party and no fees
may be awarded.\129\
---------------------------------------------------------------------------
\126\See Jeroski v. Federal Mine Safety and Health Review Comm'n,
697 F.3d 651 (7th Cir. 2012); Newport News Holdings Corp. v. Virtual
City Vision, Inc., 650 F.3d 423, 444 (4th Cir. 2011).
\127\See Highway Equip. Co., 469 F.3d at 1034; Wright & Miller's
Federal Practice and Procedure Sec. 2364.
\128\See Highway Equip. Co., 469 F.3d at 1032, 1036.
\129\Doe v. Nixon, 716 F.3d 1041, 1050-51 (8th Cir. 2013); Dionne
v. Floormasters Enters., Inc., 667 F.3d 1199, 1205-06 (11th Cir. 2012);
Demis v. Sniezek, 558 F.3d 508, 513 (6th Cir. 2009); Ma v. Chertoff,
547 F.3d 342, 344 (2nd Cir. 2008); Biodiversity Conservation Alliance
v. Stem, 519 F.3 1226, 1230 (10th Cir. 2008) (O'Connor, J.). A
dismissal on account of the plaintiff's extension of a covenant not to
sue--whether with or without prejudice--also appears to tread closely
to mooting the action through a voluntary cessation of conduct--the
scenario that Buckhannon found to make a party immune from a fee award.
---------------------------------------------------------------------------
To avoid subjecting patent litigants to the uncertainty
surrounding this still-developing area of the law, subsection
(c) provides that an infringement claimant who unilaterally
extends a covenant not to sue to the opposing party shall be
deemed to be the nonprevailing party for purposes of subsection
(a). Subsection (c) applies only if the plaintiff acts
unilaterally--it does not apply if, for example, the parties
jointly stipulate to dismissal of the case. Subsection (c)
protects the rights of a defendant who believes that he has
been the target of an abusive complaint, and who would have
preferred to continue the litigation in order to hold the
plaintiff accountable for his position or conduct under
subsection (a). Subsection (c), by deeming the defendant the
prevailing party, preserves only the possibility of a fee
award. A plaintiff deemed nonprevailing under subsection (c)
would not be subject to a fee award if its position and conduct
were reasonably justified or special circumstances would make
an award unjust.
An exception is made to subsection (c) for a plaintiff who
seeks dismissal of his claims early in the litigation, when he
would be allowed to do so without a court order under Rule 41.
A patentee who timely reconsiders the wisdom of his
infringement claims, extends a covenant not to sue to the
opposing party, and seeks such early dismissal of his complaint
would remain immune from the possibility of an award of
attorney's fees. The abusive litigant, however, who delays and
forces the defendant to incur large costs--and who subsequently
dismisses his complaint and unilaterally extends a covenant not
to sue in order to moot the defendant's counterclaims--could be
held to account under subsection (a).\130\
---------------------------------------------------------------------------
\130\It is clear that a defendant in an infringement action whose
success in a copending reexamination or review proceeding results in
dismissal of the civil action is regarded as the prevailing party in
the civil action. See, e.g., Inland Steel Co. v. LTV Steel Co., 364
F.3d 1318, 1320-21 (Fed. Cir. 2004). This rule is legally well-grounded
and is sound policy, given the extent to which such proceedings
increasingly serve as an alternative to, and are statutorily
intertwined with, district-court actions. See, e.g., 35 U.S.C.
Sec. 315(b). The Committee thus declines to displace or disturb this
rule.
---------------------------------------------------------------------------
Section 3(b)(2)(B) of the Innovation Act strikes
subsections (f) and (g) of Sec. 273 of title 35. Subsection (f)
deems particular cases ``exceptional'' for purposes of
Sec. 285--a standard that will no longer be employed by
Sec. 285. Subsection (g) provides that a patent shall not be
deemed invalid solely because a defense is established under
Sec. 273. The subsection appears to have been enacted to
address ``a point of uncertainty''\131\ regarding whether a
secret use of an invention that established a Sec. 273 defense
also would establish the invalidity of the patent at issue.
Because it is now clear that the activities of an inventor who
suppresses or conceals his invention cannot establish a pre-AIA
Sec. 102(g) defense,\132\ however, Sec. 273(g) no longer serves
any purpose.
---------------------------------------------------------------------------
\131\H.R. Rep. No. 106-287, at 49 (1999).
\132\See Dow Chem. Co. v. Astro-Valcour, Inc., 267 F.3d 1334, 1342
(Fed. Cir. 2001).
---------------------------------------------------------------------------
Section 3(b)(3) of the Act applies revised Sec. 285 to
cases filed on or after the date that is 6 months prior to the
enactment of the Act. This is in accord with precedents
applying new fee-shifting statutes to pending cases,\133\ and
will preclude an unseemly rush to file cases in the period
immediately prior to the enactment of the Act.
---------------------------------------------------------------------------
\133\See Bradley v. School Bd. of City of Richmond, 416 U.S. 696
(1974); Hutto v. Finney, 437 U.S. 678, 694 n.23 (1978) (``this court's
general practice'' is to apply newly enacted fee-shifting statutes to
``all cases pending on the date of enactment'').
---------------------------------------------------------------------------
(c) Joinder
New Sec. 299(d) of title 35 provides that if a plaintiff is
unable to pay fees and expenses awarded pursuant to Sec. 285,
the court may join in the action any interested party of that
plaintiff. Joinder may be sought only if the plaintiff is a
patent-assertion entity--i.e., a party that does not use, make,
or sell the subject matter of the claimed invention, and that
acquired the patent or patents at issue for the sole purpose of
asserting them against alleged infringers.
(d) Discovery prior to claim construction
New Sec. 299A of title 35 provides that in a case in which
the court determines that a claim construction is necessary,
discovery shall be limited to issues concerning such claim
construction until the construction is entered. This limit will
not apply in all cases. In many cases, it will be clear that a
claim construction is required early in the case in order to
bring the dispute into focus, and Sec. 299A will limit
discovery to information relevant to that construction. In
other cases, however, a party may need broader discovery in
order to sharpen its infringement or invalidity contentions and
bring into relief which claim terms and interpretations are
relevant, and thus an early construction is not required.
(e) Effective date
This subsection applies the amendments made by section 3 to
cases filed on or after the enactment of the Innovation Act,
except where the individual subsections of section 3 supply
their own effective dates.
(f) Sense of congress
This subsection states the sense of congress regarding
demand letters.
(g) Demand letters
This subsection adds an undesignated paragraph to the end
of Sec. 284 of title 35 that provides that pre-suit
notification of infringement may not be relied on to establish
willfulness unless such notification identifies with
particularity the patent and the accused products or process
and explains why a claim is infringed to the extent possible
following a reasonable inquiry.
Section 4. Transparency of patent ownership.
New Sec. 290(b) of title 35 requires disclosure, upon the
filing an infringement action, of the real-parties-in interest
to the patent and its enforcement. In the event of
noncompliance, awards of attorney's fees, and recovery of
enhanced damages incurred during periods of non-compliance, are
barred, and the adverse party may recover attorney's fees that
it incurred in the course of uncovering correct ownership
information.
Section 5. Customer-suit exception.
Revised Sec. 296 of title 35 codifies and strengthens the
common-law customer-suit exception to a patent plaintiff's
presumptive entitlement to his choice of venue. It requires
grant of a timely motion to stay the suit against the customer
if the manufacturer and the customer agree to a stay, the
manufacturer has joined the suit or filed a related suit, and
the customer agrees to be bound by the final resolution of
issues in the manufacturer's suit that the customer and
manufacturer have in common.
Section 296 is voluntary--it allows a stay only if the
customer and manufacturer have agreed that the manufacturer
most appropriately bears the burden of defending against the
infringement suit. Section 296 also eliminates inconsistencies
in current law's application of the customer-suit exception. It
authorizes a stay whether the manufacturer is a party to the
customer suit or to a separate related action, and it allows
the customer and manufacturer to obtain a stay despite the fact
that the customer is the only party accused of directly
infringing a method claim, the customer is accused of
infringing because of its incorporation of a component into its
own product, or the customer has been accused of inducement of
infringement.\134\
---------------------------------------------------------------------------
\134\``[E]fficiency and judicial economy'' have been described as
the ``guiding principles'' for interpreting and applying the common-law
customer suit exception. Lonestar Inventions, L.P. v. Sony Elecs. Inc.,
2011 WL 3880550 (E.D. Tex. 2011). With the hope that a similar judicial
solipsism will not infect the interpretation of Sec. 296, the Committee
emphasizes that the purpose of the statutory customer-suit stay--as
expressed by witnesses testifying before the Committee and
Subcommittee--is to protect customers against the inherently coercive
nature of infringement suits directed at products or processes that the
defendant did not develop or design.
---------------------------------------------------------------------------
Subsection (c)(1) creates a limited exception to the
customer and manufacturer's entitlement to a stay. Subparagraph
(A) allows an exception for situations in which the
manufacturer's action will not resolve a major issue in the
suit against the customer. This would include, for example, a
suit involving only method claims in which the manufacturer
does not contest the validity of the patent or its alleged
infringement by the customer, and instead contends only that
the manufacturer is not liable for infringement because its
product has substantial noninfringing use. It would also
include a case in which it is clear that the major dispute over
infringement or invalidity will concern components or materials
in the covered customer's product or process other than those
supplied by the covered manufacturer.
Subparagraph (B) allows an exception when a stay
unreasonably prejudices and would be manifestly unjust to the
patent plaintiff. This would include, for example, a case in
which it is clear that the manufacturer would be unable to
satisfy a substantial damages judgment and the patent owner's
only true recourse is against infringing customers.
Once a stay is imposed, the customer nevertheless remains a
party to the suit, and limited discovery may be sought from the
customer to the extent necessary to prove the case against the
manufacturer. Thus, for example, when the manufacturer is sued
for indirect infringement, discovery may be necessary to show
that prerequisite direct infringement has, in fact, occurred.
Customer discovery also may be necessary to identify all
suppliers of allegedly infringing products, components, or
materials.
The original version of Sec. 296, which was enacted in 1992
and attempted to address the Eleventh Amendment immunity of
states, was voided in its entirety in 1999 by the Supreme Court
in its decision in Florida Prepaid Postsecondary Education
Expense Board v. College Savings Bank.\135\ The Innovation Act
reclaims this long-dormant code section. To the extent that
states and their subdivisions do not enjoy Eleventh Amendment
immunity against patent-infringement actions, that liability is
codified and preserved by Sec. 271(h) of title 35, which
continues to provide that liability for patent infringement
extends to ``any State, any instrumentality of a State, and any
officer or employee of a State or instrumentality of a State
acting in his official capacity.''
---------------------------------------------------------------------------
\135\527 U.S. 627 (1999).
---------------------------------------------------------------------------
Section 6. Procedures and practices to implement and recommendations to
the Judicial Conference.
Subsection (a) provides for an exchange of discovery of the
core documents in a patent case. Costs of document discovery
beyond the core documents would be shifted to the party that
requests the discovery. In response to concerns expressed by
witnesses at hearings before the Committee and
Subcommittee,\136\ this provision has been modified to provide
the Judicial Conference with the authority to make
modifications to these rules.
---------------------------------------------------------------------------
\136\See, e.g., October hearing, Statement of David J. Kappos,
Former Under Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office, at *4; id.,
Statement of Robert A. Armitage, Former General Counsel, Eli Lilly &
Co., at *18.
---------------------------------------------------------------------------
Subsection (b) requires the Judicial Conference to develop
case-management procedures for patent cases. The Committee
requests that the Conference, in the course of developing such
procedures, address Rule 56(b), which relates to the time for
filing a motion for summary judgment. Some district courts have
declined to timely rule on or even allow early motions for
summary judgment, thereby compounding the burden and expense of
patent litigation. The Committee also suggests that Conference
clarify that a litigant has an obligation under Rule 11 to
withdraw a claim that has become frivolous.
Subsection (c) requires the Supreme Court to eliminate its
current short-form patent complaint--Form 18--from the Appendix
of the Federal Rules of Civil Procedure, and provides that the
Court may prescribe a new form that, at minimum, notifies
accused infringers of the asserted claim or claims, the
products or services accused of infringement, and the
plaintiff's theory as to how an accused product or service
meets each limitation of each asserted claim.
Subsection (d), by adding 11 U.S.C. Sec. 365(n) to the
mandatory provisions that must apply in a Chapter 15 bankruptcy
proceeding when relevant, provides certainty to licensees of
patents and other intellectual property by guaranteeing that
such licenses cannot be terminated in the United States via a
foreign bankruptcy proceeding. The amendment also clarifies
that trademark licenses are protected against being voided in
bankruptcy, effectively codifying the Seventh Circuit's
approach in Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC.\137\
Because of the importance of providing certainty to
manufacturers that they will be allowed to practice licensed
technology in the United States, the amendment is made fully
retroactive, applying to cases pending at any level of appeal
or review.
---------------------------------------------------------------------------
\137\686 F.3d 372 (7th Cir. 2012) (Easterbrook, J.).
---------------------------------------------------------------------------
Section 7. Small business education, outreach, and information access.
Subsection (a) establishes a small business education and
outreach program and directs the PTO to provide information to
small businesses to address concerns arising from patent
infringement. Subsection (b) directs the PTO to provide to the
public on a website information about patent ownership that has
been disclosed to the Office as a result of litigation.
Section 8. Studies on patent transactions, quality, and examination.
Subsection (a) directs the PTO to conduct a study of the
developing secondary market for patents in the United States,
and to make recommendations as to how to promote transparency
and fairness in such markets.
Subsection (b) directs the PTO to conduct a study of
patents owned by the United States, how such patents are
licensed, and how different agencies maintain records of such
licenses, and to provide recommendations as to whether
restrictions should be imposed on the transfer of patents by
the United States.
Subsection (c) directs the Comptroller General to conduct a
study of patent examination and relevant technology.
Subsection (d) requires the Director of the Administrative
Office of the United States Courts to conduct a study regarding
proposals to create a patent small-claims court.
Subsection (e) requires the PTO to conduct a study
regarding demand letters.
Subsection (f) directs the Comptroller General to conduct a
study of litigation involving business-method patents.
Section 9. Improvements and corrections to the America Invents Act.
(a) Repeal of section 145
This subsection repeals the cause of action authorized by
Sec. 145 of title 35. The repeal applies with respect to any
proceeding in which the Patent Trial and Appeal Board has
issued a decision, whether on appeal or on rehearing, after the
date of enactment of this Act.
(b) LRepeal of could-have-raised estoppel for civil
litigation following post-grant review
This subsection corrects the so-called scrivener's error in
Sec. 325(e)(2) of title 35, repealing the could-have-raised
estoppel that was inadvertently applied by the AIA to civil
litigation following the completion of a post-grant review.
Estoppel in civil litigation will henceforth be limited to
those issues that were actually raised and decided in the post-
grant review. Could-have-raised estoppel will continue to apply
to other PTO proceedings following the completion of a post-
grant review, and to all proceedings following completion of an
inter partes review.
(c) LUse of district-court claim construction in post-grant
and inter partes reviews
This subsection directs the PTO to follow civil-litigation
standards of claim construction, currently authoritatively
described in Phillips v. AWH Corp.,\138\ in all inter partes
and post-grant reviews. The PTO will be permitted to continue
to give claims their broadest reasonable interpretation during
examination and in other administrative proceedings.\139\ This
subsection also requires the PTAB to consider an existing
district-court claim construction of relevant terms in a patent
when the PTAB is construing those terms, but allows the Board
to reject a district-court interpretation that it finds to be
clearly erroneous.
---------------------------------------------------------------------------
\138\415 F.3d 1303 (Fed. Cir. 2005).
\139\Use of the broadest reasonable interpretation of claims is
appropriate during prosecution and reexamination of a patent because,
during such proceedings, ``a patent applicant has the opportunity and
the responsibility to remove any ambiguity in claim term meaning by
amending the application.'' In re Bigio, 381 F.3d 1320, 1324 (Fed. Cir.
2004). ``Only in this way can uncertainties of claim scope be removed,
as much as possible, during the administrative process.'' In re Zletz,
893 F.2d 319, 321 (Fed. Cir. 1990). By requiring the patentee or
applicant to address at least those ambiguities identified by the
examiner during the administrative process, the PTO thus avoids leaving
``the public to guess about which language the drafter deems necessary
to his claimed invention and which language is merely superfluous,
nonlimiting elaboration.'' Bicon, Inc. v. The Straumann Co., 441 F.3d
945, 950 (Fed. Cir. 2006).
---------------------------------------------------------------------------
Regulations implementing this subsection's amendments, like
all regulations promulgated pursuant to Sec. Sec. 316 and 326
of title 35, must, pursuant to subsection (b) of those
sections, be implemented with consideration of ``the efficient
administration of the Office'' and ``the ability of the Office
to timely complete proceedings instituted under'' chapters 31
and 32. District-court claim construction therefore must be
adapted to the unique nature of inter partes and post-grant
reviews, and should not be accompanied in those proceedings by
unnecessary and time-consuming procedures such as a formal
Markman hearing.
(d) Obviousness-type double patenting
This subsection codifies and reforms the doctrine of double
patenting as it applies it to first-inventor-to-file
patents.\140\ New Sec. 106 is anchored in the foundational
principles of double-patenting law that are reflected in the
Sixth Circuit's decision in Thomson-Houston Elec. Co. v. Ohio
Brass Co.,\141\ and in the PTO's 1967 Official Gazette Notice
on double patenting.\142\
---------------------------------------------------------------------------
\140\Same-invention double patenting is based on Sec. 101's
``whoever invents'' requirement and is thus already ``codified'' with
respect to all patents.
\141\80 F. 712 (6th Cir. 1897).
\142\Double Patenting, 834 O.G. 1615 (Jan. 31, 1967).
---------------------------------------------------------------------------
Section 106 adopts as a threshold requirement for double
patenting to exist with respect to two patents that, for at
least one claimed invention in each of the two patents, neither
claimed invention represents prior art to the other under
Sec. 102(a).\143\ Section 106 also adopts, at paragraph (1),
the rule that a first patent's claimed invention can subject a
second patent's claimed invention to the consequences from
double patenting under Sec. 106 only if the first was
effectively filed on or before the effective filing date of the
second. A subsequently-filed patent or application will never
be the basis for imposing double-patenting consequences on an
earlier-filed application's claimed invention. Thus a broad
patent for a basic invention cannot be invalidated for double
patenting simply because a subsequently-filed improvement
patent issued before the basic patent was granted.
---------------------------------------------------------------------------
\143\Claimed inventions in respective patents can be prior art to
one another under either Sec. 102(a)(1) or Sec. 102(a)(2).
---------------------------------------------------------------------------
In the case of patents arising from patent filings on the
same day that name the same inventor,\144\ each of the two
patents will be considered as the ``second patent'' vis-a-vis
the other, and both patents will be separately subject to the
Sec. 106 consequences from double patenting. Similarly, each of
two patents is separately subject to Sec. 106 double-patenting
consequences vis-a-vis the other if the respective claimed
inventions of the two patents have the same effective filing
date and, had the effective filing dates not been the same, a
claimed invention of one of the two patents nevertheless would
have been subject to a Sec. 102(b)(2) prior art exception with
respect to the other.
---------------------------------------------------------------------------
\144\Section 106(2)(A) applies double-patenting limits to
situations where the first and second patents name the same
``inventor.'' The term ``inventor'' is defined by Sec. 100(f) to mean
the entire inventive entity.
---------------------------------------------------------------------------
Finally, Sec. 106 confines double patenting's reach to
situations where Sec. 103 does not apply to limit the issuance
of obvious-variant patents. Where Sec. 103 does apply of its
own force--where no prior-art exception applies--then Sec. 106
does not apply.\145\
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\145\Although Sec. 106(2) cites Sec. 102(b)(2), only the exclusions
under subparagraphs (A) and (C) of Sec. 102(b)(2) can invoke the
application of Sec. 106. Any application or patent that is excluded
from prior art by subparagraph (B) also is necessarily anticipated by
the prior public disclosure of the inventor or a joint inventor of the
second patent, and thus cannot issue as a valid patent and cause the
second patent to be a ``double patent.''
---------------------------------------------------------------------------
The possible consequences of double patenting under
Sec. 106 are that the claimed invention of the first patent
that is not otherwise prior art to the claimed invention of the
second patent will become prior art for Sec. 103 purposes,\146\
or that the second patent will need to contain a Sec. 106(3)
disclaimer of the right to independently enforce the second
patent.
---------------------------------------------------------------------------
\146\Section 106 also applies the novelty analysis inherent in a
Sec. 103 obviousness analysis, anticipation being ``the epitome of''--
and is necessarily embraced by--obviousness. In re McDaniel, 293 F.3d
1379, 1385 (Fed. Cir. 2002).
---------------------------------------------------------------------------
Section 106 also replaces recent caselaw's parallel
universe of double-patenting obviousness analysis with an
ordinary Sec. 103 analysis. The recent common law has an
``export version'' quality, resembling, but lacking some of the
precision of, conventional obviousness analysis.\147\ Section
106 requires courts reviewing potential double patents to
employ the conventional Sec. 103 analysis.
---------------------------------------------------------------------------
\147\See, e.g., Takeda Pharm. Co., Ltd. v. Doll, 561 F.3d 1372,
1375 (Fed. Cir. 2009); Amgen Inc. v. F. Hoffman-La Roche Ltd., 580 F.3d
1340, 1355, 1358 (Fed. Cir. 2009).
---------------------------------------------------------------------------
Some features of the common-law double-patenting doctrine
are preserved in Sec. 106. Section 106 looks only to the
``claimed invention'' as prior art. Also, the safe harbor of
Sec. 121 continues to apply--as do the courts' byzantine
consonance and other requirements for the application of that
section. No change is made in the requirements or practices
regarding the content and filing of terminal disclaimers, other
than that Sec. 106 gives the Director the authority to
promulgate regulations consistent with the statute. Thus in the
case of a second patent that is commonly owned with a first
patent, paragraph (3)'s requirement of a disclaimer of
independent enforcement can be satisfied by disclaiming the
enforcement of the second patent except for periods when the
patents are commonly owned.
Section 9(d)(4) of the Innovation Act makes common-law
obviousness-type double-patenting rules inapplicable to any
patent that is subject to Sec. 106. Whether a particular first-
inventor-to-file ``second patent'' is subject to Sec. 106 will
depend, however, on whether the ``first patent'' that is
asserted against the second patent is a first-to-invent patent
or a first-inventor-to-file patent. In the case of a family of
commonly-owned patents and applications whose effective-filing
dates cross the first-inventor-to-file rule's March 16, 2013
effective date, a first-inventor-to-file ``second patent'' may
be subject both to Sec. 106 and to nonstatutory double
patenting rules, depending on when the ``first patents'' at
issue were effectively filed. In such a scenario, of course,
the applicant could, pursuant to Sec. 3(n)(1) of the AIA,
convert his first-to-invent applications into first-inventor-
to-file applications by amending them to claim subject matter
with an effective filing date after March 16, 2013, thereby
ensuring that any ``second patent'' is subject to Sec. 106
alone.
Section 9(d)(5) of the Innovation Act applies Sec. 106 to
both patents and applications, thereby preserving PTO's
authority to reject an application on double-patenting grounds
if it would, once issued, contain a claim that is invalid under
Sec. 106.
(e) PTO patent reviews
This subsection amends AIA Sec. 18(a)(1)(C) to allow
patents and published applications to be effective as prior art
against a first-to-invent business-method patent as of their
effective filing dates.
(f) LClarification of limits on patent term adjustment
The amendments made by this subsection clarify that no B-
delay patent-term adjustment may be awarded for time consumed
by a request for continued examination (RCE), regardless of
when the RCE was requested. The amendments also clarify that B
delay may not be awarded for any of the time accrued after the
applicant has restarted prosecution by filing an RCE.
(g) Clarification of jurisdiction
To preclude a broad reading of Gunn v. Minton,\148\ this
subsection establishes that avoiding inconsistent judgments as
to the legal effect of the claims in a patent is a substantial
Federal interest that is important to the Federal system--the
test for ``arising under'' jurisdiction applied by Gunn--and
that such cases therefore ``arise under'' Federal patent law.
This subsection thus clarifies that it is not necessary to
exclusive Federal patent jurisdiction that a case also require
interpretation of a Federal statute or affect numerous parties
or the Federal Government. This provision effectively codifies
the Federal Circuit's recent dicta in Forrester Environmental
Services,\149\ and ensures the continuing viability of the
Federal Circuit and regional circuits' pre-Gunn precedents
recognizing patents ``arising under'' jurisdiction over certain
state-law business-disparagement and breach-of-contract
actions.\150\
---------------------------------------------------------------------------
\148\133 S.Ct. 1059 (Feb. 20, 2013).
\149\715 F.3d 1329, 1334 (Fed. Cir. 2013) (noting that ``arising
under'' jurisdiction over particular ``state law claims premised on
allegedly false statements about patents . . . may well have survived
the Supreme Court's decision in Gunn'').
\150\See, e.g., Scherbatskoy v. Halliburton Co., 125 F.3d 288 (5th
Cir. 1997); U.S. Valves, Inc. v. Dray, 190 F.3d 811 (7th Cir. 1999);
Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 986 F.2d
476 (Fed. Cir. 1993); Hunter Douglas, Inc. v. Harmonic Design, Inc.,
153 F.3d 1318 (Fed. Cir. 1998), overruled on other grounds, Midwest
Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999).
---------------------------------------------------------------------------
This clarification is applied to all pending and future
cases. It is applied to pending cases so that courts will not
be required to determine whether Gunn's enumeration of
``substantiality'' factors is intended to be exclusive, or what
exactly Gunn means--in the absence of this subsection--with
respect to state-law breach of contract and unfair competition
cases that turn on whether a product or process infringes a
patent. An exception is made, however, for cases in which a
Federal court already has determined its ``arising under''
patents jurisdiction--those courts will not be required to
revisit such determinations, despite the enactment of this
provision.
(h) Extension of patent pilot program
This subsection extends by an additional 10 years the
duration of the patent pilot program operating in certain
district courts that was established by Public Law No. 111-349
(2011).
(i) Technical corrections
(1) Sec. 102
This paragraph makes a nonsubstantive stylistic correction
to the Patent Code. It amends Sec. 102 so that it consistently
uses the term ``the inventor or a joint inventor or another,''
rather than alternating between that phrase and ``the inventor
or joint inventor or by another.'' The change has no
substantive effect, and creates linguistic uniformity and
eliminates a potential ambiguity in the section.
(2) Inventor's oath or declaration
Section 115 of title 35 was substantially revised by
Sec. 4(a) of the AIA, and was further modified by the AIA
technical amendments.\151\ This paragraph makes two further
changes to Sec. 115. Section 115 currently represents a merely
formal requirement that the inventor file an oath or
declaration prior to the payment of the issue fee (i.e., the
fee that is paid after the examination of a patent application
has been completed). The amendment made by clause (i)
eliminates the Sec. 115 requirement for applications that are
filed by the inventor's assignee, rather than by the inventor.
Section 4(b) of the AIA amended Sec. 118 of title 35 to permit
the patent owner to seek a patent in cases where the inventor
has assigned the right to seek a patent. For assignee-
applicants, the filing of the separate assignment of the
invention from the inventor to the assignee renders any
additional Sec. 115 requirement redundant. The amendment made
by clause (ii) allows the Director to dispense with the filing
of the Sec. 115 statement as he deems appropriate. This could
include, for example, with respect to continuing applications
for patent under Sec. Sec. 120 and121, where the separate
Sec. 115 requirement can be a redundancy. The amendments thus
remove unnecessary paperwork from the patent examination
process.
---------------------------------------------------------------------------
\151\Pub. L. No. 112-274 (2013).
---------------------------------------------------------------------------
(3) Assignee filers
Section 4(b) of the AIA amended 35 U.S.C. Sec. 118 to
broadly authorize assignees (rather than just inventors) to
file their own patent applications. Per section 4(e) of the
AIA, this authorization applies to all applications filed on or
after the date that is 1 year after the enactment of the AIA
(i.e., September 16, 2012).
The AIA neglected, however, to make a conforming change to
Sec. 119(e)(1) to allow the assignee filer to claim the benefit
of the filing date of an earlier provisional application. That
section still requires that the application claiming the
earlier date be filed ``by an inventor or inventors named'' in
the provisional application. Although the courts might overlook
this legislative mistake (which would otherwise vitiate the
effect of the AIA's changes to Sec. 118 for provisional
filers), the Committee thinks it best to simply correct this
oversight in the present bill.
This paragraph also amends the language of Sec. 120 to make
a stylistic change similar to that made by paragraph (1), while
also reenacting AIA Sec. 3(f)'s conforming amendment for
assignee filers and giving the new conforming amendment a
proper effective date. The AIA amended Sec. 120 that authorize
assignee applicants (rather than just inventor applicants) to
claim the benefit of the filing date of a parent application in
a continuation application. Unfortunately, however, this
conforming change to Sec. 120 was included in Sec. 3(f) of the
AIA. Per Sec. 3(n) of the AIA, the changes made by AIA
Sec. 3(f) apply only to first-inventor-to-file patents. A large
number of patents filed after September 16, 2012, however, will
continue to be first-to-invent patents. Absent the revision
made by this paragraph, there could be a substantial number of
first-to-invent patents filed by assignees after September 16,
2012 whose owners would later discovered that they are unable
to claim the benefit of a parent application's priority date.
The revisions made by this paragraph ensure that the conforming
change accommodating assignee filers will apply to all patents
(including first-to-invent patents) for which Sec. 4(b) of the
AIA authorizes assignee filing.
This paragraph also conforms Sec. 120 to the proper
linguistic formulation: ``the inventor or a joint inventor.''
Sections 100(f) and (g) of title 35 now define ``inventor'' and
``joint inventor.'' The former refers to the entire inventive
entity (i.e., all of the joint inventors), and thus should
always be preceded by the definite article. The latter (``a
joint inventor'') is necessarily one of the several who
invented the subject matter. This paragraph's edits, though
nonsubstantive, ensure usage consistent with these meanings.
(4) Derived patents
This paragraph makes the same nonsubstative stylistic
change to Sec. 291(b) of title 35 that paragraph (1) makes to
Sec. 102 of that title.
(5) Specification
This paragraph amends the effective date of the AIA's
addition of subsections and titles to Sec. 112 so that the new
citation format will be used in all proceedings and matters
after enactment of the present bill. This will simplify
citation to Sec. 112, which currently is understood to be
required to be cited by its pre-AIA, undesignated paragraphs
for patents issuing from an application filed before September
16, 2012: Biosig Instruments, Inc. v. Nautilus, Inc.,\152\
recently held that the AIA's addition of substructure to
Sec. 112 applies only with respect to patents issued after
September 16, 2012.\153\ The only rational purpose of adding
substructure to Sec. 112, however, is to simplify citation to
it--a purpose that is entirely defeated by the current
approach. Under Biosig, the patent bar would be required, for
the next quarter century, to first identify the issue date of a
patent before it could determine whether to cite to the
subsections of current Sec. 112 or to the undesignated
paragraphs of pre-AIA Sec. 112. This paragraph avoids such
absurdities by making the AIA's addition of subsections and
titles to Sec. 112 immediately applicable in all proceedings
and matters, and thereby eliminating the need to ever again
cite to the undesignated paragraphs of pre-AIA Sec. 112.
---------------------------------------------------------------------------
\152\715 F.3d 891 (Fed. Cir. 2013).
\153\See id. at 897, n.3.
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(6) Time limit for commencing misconduct proceedings
This paragraph adds an additional year to the time by which
the Director must commence a proceeding under 35 U.S.C. Sec. 32
once the misconduct forming the basis for the proceeding is
made known to an officer or employee of the Office. The
amendment applies to all such proceedings commenced after the
enactment of this Act.
(7) Patent owner response
Sections 316(a)(8) and 326(a)(8) of title 35 each provide
for ``the filing by the patent owner of a response to the
petition under section 313 [or 323] after a . . . review has
been instituted.'' The citation to Sec. Sec. 313 and 323 is
incorrect--reviews are instituted under Sec. Sec. 311 and 321.
Sections 313 and 323 only authorize the patent owner to file a
preliminary response to the petition before the review is
instituted. These amendments correct this miscitation.
(8) International applications
Paragraph (7) of section 202(b) of the Patent Law Treaties
Implementation Act (``PLTIA'') amends 35 U.S.C. Sec. 361(c) to
``authorize'' the Director to allow the filing of a PCT
application in a language other than English. The PCT and its
regulations would require the USPTO to review such an
application for errors and to process requests for
incorporation by reference. The USPTO has indicated, however,
that
[t]he United States Receiving Office is simply not
currently capable of conducting the review and
processing required by the PCT for PCT applications
filed in a language other than English. Creating a
procedure under the PCT to provide for the initial
filing of a non-English-language PCT application and
later filing of an English-language translation for the
purpose of subsequent review and processing would,
under the provisions of the PCT and PCT Regulations,
result in the resetting of the International Filing
Date to the later date of submission of the English-
language translation of the non-English-language PCT
application.\154\
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\154\Changes to Implement the Patent Law Treaty, 78 Fed. Reg.
62368, 62390 (Oct. 21, 2013).
This paragraph repeals PLTIA Sec. 202(b)(7)'s amendments to
35 U.S.C. Sec. 361(c), thereby relieving the United States
Receiving Office of its authority to review PCT applications
for errors and process requests for incorporation by reference
in a language other than English.
Section 10. Effective date.
Except as otherwise provided in this Act, the amendments
made by the Act shall be effective upon enactment of the Act,
and shall apply to any patent issued or any action filed on or
after such effective date.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 35, UNITED STATES CODE
* * * * * * *
PART I--UNITED STATES PATENT AND TRADEMARK OFFICE
* * * * * * *
CHAPTER 3--PRACTICE BEFORE PATENT AND TRADEMARK OFFICE
* * * * * * *
Sec. 32. Suspension or exclusion from practice
The Director may, after notice and opportunity for a
hearing, suspend or exclude, either generally or in any
particular case, from further practice before the Patent and
Trademark Office, any person, agent, or attorney shown to be
incompetent or disreputable, or guilty of gross misconduct, or
who does not comply with the regulations established under
section 2(b)(2)(D), or who shall, by word, circular, letter, or
advertising, with intent to defraud in any manner, deceive,
mislead, or threaten any applicant or prospective applicant, or
other person having immediate or prospective business before
the Office. The reasons for any such suspension or exclusion
shall be duly recorded. The Director shall have the discretion
to designate any attorney who is an officer or employee of the
United States Patent and Trademark Office to conduct the
hearing required by this section. A proceeding under this
section shall be commenced not later than the earlier of either
the date that is 10 years after the date on which the
misconduct forming the basis for the proceeding occurred, or [1
year] 2 years after the date on which the misconduct forming
the basis for the proceeding is made known to an officer or
employee of the Office as prescribed in the regulations
established under section 2(b)(2)(D). The United States
District Court for the Eastern District of Virginia, under such
conditions and upon such proceedings as it by its rules
determines, may review the action of the Director upon the
petition of the person so refused recognition or so suspended
or excluded.
* * * * * * *
PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
* * * * * * *
CHAPTER 10--PATENTABILITY OF INVENTIONS
* * * * * * *
Sec.
100. Definitions.
* * * * * * *
106. Prior art in cases of double patenting.
* * * * * * *
Sec. 102. Conditions for patentability; novelty
(a) * * *
(b) Exceptions.--
(1) Disclosures made 1 year or less before the
effective filing date of the claimed invention.--A
disclosure made 1 year or less before the effective
filing date of a claimed invention shall not be prior
art to the claimed invention under subsection (a)(1)
if--
(A) the disclosure was made by [the
inventor or joint inventor or by another] the
inventor or a joint inventor or another who
obtained the subject matter disclosed directly
or indirectly from the inventor or a joint
inventor; or
* * * * * * *
Sec. 106. Prior art in cases of double patenting
A claimed invention of a patent issued under section 151
(referred to as the ``first patent'') that is not prior art to
a claimed invention of another patent (referred to as the
``second patent'') shall be considered prior art to the claimed
invention of the second patent for the purpose of determining
the nonobviousness of the claimed invention of the second
patent under section 103 if--
(1) the claimed invention of the first patent was
effectively filed under section 102(d) on or before the
effective filing date of the claimed invention of the
second patent;
(2) either--
(A) the first patent and second patent name
the same inventor; or
(B) the claimed invention of the first
patent would constitute prior art to the
claimed invention of the second patent under
section 102(a)(2) if an exception under section
102(b)(2) were deemed to be inapplicable and
the claimed invention of the first patent was,
or were deemed to be, effectively filed under
section 102(d) before the effective filing date
of the claimed invention of the second patent;
and
(3) the patentee of the second patent has not
disclaimed the rights to enforce the second patent
independently from, and beyond the statutory term of,
the first patent.
* * * * * * *
CHAPTER 11--APPLICATION FOR PATENT
* * * * * * *
Sec. 115. Inventor's oath or declaration
(a) Naming the Inventor; Inventor's Oath or Declaration.--
An application for patent that is filed under section 111(a) or
commences the national stage under section 371 shall include,
or be amended to include, the name of the inventor for any
invention claimed in the application. [Except as otherwise
provided] Except for an application filed under section 118 or
as otherwise provided in this section, each individual who is
the inventor or a joint inventor of a claimed invention in an
application for patent [shall execute] may be required by the
Director to execute an oath or declaration in connection with
the application.
* * * * * * *
Sec. 119. Benefit of earlier filing date; right of priority
(a) * * *
* * * * * * *
(e)(1) An application for patent filed under section 111(a)
or section 363 for an invention disclosed in the manner
provided by section 112(a) (other than the requirement to
disclose the best mode) in a provisional application filed
under section 111(b), [by an inventor or inventors named] that
names the inventor or a joint inventor in the provisional
application, shall have the same effect, as to such invention,
as though filed on the date of the provisional application
filed under section 111(b), if the application for patent filed
under section 111(a) or section 363 is filed not later than 12
months after the date on which the provisional application was
filed and if it contains or is amended to contain a specific
reference to the provisional application. No application shall
be entitled to the benefit of an earlier filed provisional
application under this subsection unless an amendment
containing the specific reference to the earlier filed
provisional application is submitted at such time during the
pendency of the application as required by the Director. The
Director may consider the failure to submit such an amendment
within that time period as a waiver of any benefit under this
subsection. The Director may establish procedures, including
the payment of a surcharge, to accept an unintentionally
delayed submission of an amendment under this subsection during
the pendency of the application.
* * * * * * *
Sec. 120. Benefit of earlier filing date in the United States
An application for patent for an invention disclosed in the
manner provided by section 112(a) (other than the requirement
to disclose the best mode) in an application previously filed
in the United States, or as provided by section 363, which
[names an inventor or joint inventor] names the inventor or a
joint inventor in the previously filed application shall have
the same effect, as to such invention, as though filed on the
date of the prior application, if filed before the patenting or
abandonment of or termination of proceedings on the first
application or on an application similarly entitled to the
benefit of the filing date of the first application and if it
contains or is amended to contain a specific reference to the
earlier filed application. No application shall be entitled to
the benefit of an earlier filed application under this section
unless an amendment containing the specific reference to the
earlier filed application is submitted at such time during the
pendency of the application as required by the Director. The
Director may consider the failure to submit such an amendment
within that time period as a waiver of any benefit under this
section. The Director may establish procedures, including the
payment of a surcharge, to accept an unintentionally delayed
submission of an amendment under this section.
* * * * * * *
CHAPTER 13--REVIEW OF PATENT AND TRADEMARK OFFICE DECISIONS
* * * * * * *
[145. Civil action to obtain patent.]
* * * * * * *
Sec. 141. Appeal to Court of Appeals for the Federal Circuit
(a) Examinations.--An applicant who is dissatisfied with
the final decision in an appeal to the Patent Trial and Appeal
Board under section 134(a) [may appeal the Board's decision to]
may appeal the Board's decision only to the United States Court
of Appeals for the Federal Circuit. [By filing such an appeal,
the applicant waives his or her right to proceed under section
145.]
* * * * * * *
[Sec. 145. Civil action to obtain patent
[An applicant dissatisfied with the decision of the Patent
Trial and Appeal Board in an appeal under section 134(a) may,
unless appeal has been taken to the United States Court of
Appeals for the Federal Circuit, have remedy by civil action
against the Director in the United States District Court for
the Eastern District of Virginia if commenced within such time
after such decision, not less than sixty days, as the Director
appoints. The court may adjudge that such applicant is entitled
to receive a patent for his invention, as specified in any of
his claims involved in the decision of the Patent Trial and
Appeal Board, as the facts in the case may appear and such
adjudication shall authorize the Director to issue such patent
on compliance with the requirements of law. All the expenses of
the proceedings shall be paid by the applicant.]
* * * * * * *
CHAPTER 14--ISSUE OF PATENT
* * * * * * *
Sec. 154. Contents and term of patent; provisional rights
(a) * * *
(b) Adjustment of Patent Term.--
(1) Patent term guarantees.--
(A) Guarantee of prompt patent and
trademark office responses.--Subject to the
limitations under paragraph (2), if the issue
of an original patent is delayed due to the
failure of the Patent and Trademark Office to--
(i) * * *
* * * * * * *
(iii) act on an application within
4 months after the date of a decision
by the Patent Trial and Appeal Board
under section 134 or 135 or a decision
by a Federal court under [section 141,
145, or 146] section 141 or 146 in a
case in which allowable claims remain
in the application; or
* * * * * * *
(B) Guarantee of no more than 3-year
application pendency.--Subject to the
limitations under paragraph (2), if the issue
of an original patent is delayed due to the
failure of the United States Patent and
Trademark Office to issue a patent within 3
years after the actual filing date of the
application under section 111(a) in the United
States or, in the case of an international
application, the date of commencement of the
national stage under section 371 in the
international application, [not including--]
the term of the patent shall be extended 1 day
for each day after the end of that 3-year
period until the patent is issued, not
including--
(i) any time [consumed by continued
examination of the application
requested by the applicant] consumed
after continued examination of the
application is requested by the
applicant under section 132(b);
* * * * * * *
(iii) any delay in the processing
of the application by the United States
Patent and Trademark Office requested
by the applicant except as permitted by
paragraph (3)(C)[,].
[the term of the patent shall be extended 1 day
for each day after the end of that 3-year
period until the patent is issued.]
* * * * * * *
PART III--PATENTS AND PROTECTION OF PATENT RIGHTS
* * * * * * *
CHAPTER 28--INFRINGEMENT OF PATENTS
* * * * * * *
Sec. 273. Defense to infringement based on prior commercial use
(a) * * *
* * * * * * *
[(f) Unreasonable Assertion of Defense.--If the defense
under this section is pleaded by a person who is found to
infringe the patent and who subsequently fails to demonstrate a
reasonable basis for asserting the defense, the court shall
find the case exceptional for the purpose of awarding attorney
fees under section 285.
[(g) Invalidity.--A patent shall not be deemed to be
invalid under section 102 or 103 solely because a defense is
raised or established under this section.]
* * * * * * *
CHAPTER 29--REMEDIES FOR INFRINGEMENT OF PATENT, AND OTHER ACTIONS
Sec.
281. Remedy for infringement of patent.
281A. Pleading requirements for patent infringement actions.
* * * * * * *
[285. Attorney fees.]
285. Fees and other expenses.
* * * * * * *
[290. Notice of patent suits.]
290. Notice of patent suits; disclosure of interests.
* * * * * * *
[296. Liability of States, instrumentalities of States, and State
officials for infringement of patents.]
296. Stay of action against customer.
* * * * * * *
299A. Discovery in patent infringement action.
* * * * * * *
Sec. 281A. Pleading requirements for patent infringement actions
(a) Pleading Requirements.--Except as provided in
subsection (b), in a civil action in which a party asserts a
claim for relief arising under any Act of Congress relating to
patents, a party alleging infringement shall include in the
initial complaint, counterclaim, or cross-claim for patent
infringement, unless the information is not reasonably
accessible to such party, the following:
(1) An identification of each patent allegedly
infringed.
(2) An identification of each claim of each patent
identified under paragraph (1) that is allegedly
infringed.
(3) For each claim identified under paragraph (2),
an identification of each accused process, machine,
manufacture, or composition of matter (referred to in
this section as an ``accused instrumentality'') alleged
to infringe the claim.
(4) For each accused instrumentality identified
under paragraph (3), an identification with
particularity, if known, of--
(A) the name or model number of each
accused instrumentality; or
(B) if there is no name or model number, a
description of each accused instrumentality.
(5) For each accused instrumentality identified
under paragraph (3), a clear and concise statement of--
(A) where each element of each claim
identified under paragraph (2) is found within
the accused instrumentality; and
(B) with detailed specificity, how each
limitation of each claim identified under
paragraph (2) is met by the accused
instrumentality.
(6) For each claim of indirect infringement, a
description of the acts of the alleged indirect
infringer that contribute to or are inducing the direct
infringement.
(7) A description of the authority of the party
alleging infringement to assert each patent identified
under paragraph (1) and of the grounds for the court's
jurisdiction.
(8) A clear and concise description of the
principal business, if any, of the party alleging
infringement.
(9) A list of each complaint filed, of which the
party alleging infringement has knowledge, that asserts
or asserted any of the patents identified under
paragraph (1).
(10) 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, and whether the United
States Government or a foreign government has imposed
specific licensing requirements with respect to such
patent.
(b) Information Not Readily Accessible.--If information
required to be disclosed under subsection (a) is not readily
accessible to a party, that information may instead be
generally described, along with an explanation of why such
undisclosed information was not readily accessible, and of any
efforts made by such party to access such information.
(c) Confidential Information.--A party required to disclose
information described under subsection (a) may file, under
seal, information believed to be confidential, with a motion
setting forth good cause for such sealing. If such motion is
denied by the court, the party may seek to file an amended
complaint.
(d) Exemption.--A civil action that includes a claim for
relief arising under section 271(e)(2) shall not be subject to
the requirements of subsection (a).
* * * * * * *
Sec. 284. Damages
(a) In General.--Upon finding for the claimant the court
shall award the claimant damages adequate to compensate for the
infringement, but in no event less than a reasonable royalty
for the use made of the invention by the infringer, together
with interest and costs as fixed by the court.
(b) Assessment by Court; Treble Damages.--When the damages
are not found by a jury, the court shall assess them. In either
event the court may increase the damages up to three times the
amount found or assessed. Increased damages under this
paragraph shall not apply to provisional rights under section
154(d).
(c) Willful Infringement.--A claimant seeking to establish
willful infringement may not rely on evidence of pre-suit
notification of infringement unless that notification
identifies with particularity the asserted patent, identifies
the product or process accused, and explains with
particularity, to the extent possible following a reasonable
investigation or inquiry, how the product or process infringes
one or more claims of the patent.
(d) Expert Testimony.--The court may receive expert
testimony as an aid to the determination of damages or of what
royalty would be reasonable under the circumstances.
[Sec. 285. Attorney fees
[The court in exceptional cases may award reasonable
attorney fees to the prevailing party.]
Sec. 285. Fees and other expenses
(a) Award.--The court shall award, to a prevailing party,
reasonable fees and other expenses incurred by that party in
connection with a civil action in which any party asserts a
claim for relief arising under any Act of Congress relating to
patents, unless the court finds that the position and conduct
of the nonprevailing party or parties were reasonably justified
in law and fact or that special circumstances (such as severe
economic hardship to a named inventor) make an award unjust.
(b) Certification and Recovery.--Upon motion of any party
to the action, the court shall require another party to the
action to certify whether or not the other party will be able
to pay an award of fees and other expenses if such an award is
made under subsection (a). If a nonprevailing party is unable
to pay an award that is made against it under subsection (a),
the court may make a party that has been joined under section
299(d) with respect to such party liable for the unsatisfied
portion of the award.
(c) Covenant Not to Sue.--A party to a civil action that
asserts a claim for relief arising under any Act of Congress
relating to patents against another party, and that
subsequently unilaterally extends to such other party a
covenant not to sue for infringement with respect to the patent
or patents at issue, shall be deemed to be a nonprevailing
party (and the other party the prevailing party) for purposes
of this section, unless the party asserting such claim would
have been entitled, at the time that such covenant was
extended, to voluntarily dismiss the action or claim without a
court order under Rule 41 of the Federal Rules of Civil
Procedure.
* * * * * * *
Sec. 290. Notice of patent [suits] suits; disclosure of interests
[The clerks] (a) Notice of Patent Suits._The clerks of the
courts of the United States, within one month after the filing
of an action under this title shall give notice thereof in
writing to the Director, setting forth so far as known the
names and addresses of the parties, name of the inventor, and
the designating number of the patent upon which the action has
been brought. If any other patent is subsequently included in
the action he shall give like notice thereof. Within one month
after the decision is rendered or a judgment issued the clerk
of the court shall give notice thereof to the Director. The
Director shall, on receipt of such notices, enter the same in
the file of such patent.
(b) Initial Disclosure.--
(1) In general.--Except as provided in paragraph
(2), upon the filing of an initial complaint for patent
infringement, the plaintiff shall disclose to the
Patent and Trademark Office, the court, and each
adverse party the identity of each of the following:
(A) The assignee of the patent or patents
at issue.
(B) Any entity with a right to sublicense
or enforce the patent or patents at issue.
(C) Any entity, other than the plaintiff,
that the plaintiff knows to have a financial
interest in the patent or patents at issue or
the plaintiff.
(D) The ultimate parent entity of any
assignee identified under subparagraph (A) and
any entity identified under subparagraph (B) or
(C).
(2) Exemption.--The requirements of paragraph (1)
shall not apply with respect to a civil action filed
under subsection (a) that includes a cause of action
described under section 271(e)(2).
(c) Disclosure Compliance.--
(1) Publicly traded.--For purposes of subsection
(b)(1)(C), if the financial interest is held by a
corporation traded on a public stock exchange, an
identification of the name of the corporation and the
public exchange listing shall satisfy the disclosure
requirement.
(2) Not publicly traded.--For purposes of
subsection (b)(1)(C), if the financial interest is not
held by a publicly traded corporation, the disclosure
shall satisfy the disclosure requirement if the
information identifies--
(A) in the case of a partnership, the name
of the partnership and the name and
correspondence address of each partner or other
entity that holds more than a 5-percent share
of that partnership;
(B) in the case of a corporation, the name
of the corporation, the location of
incorporation, the address of the principal
place of business, and the name of each officer
of the corporation; and
(C) for each individual, the name and
correspondence address of that individual.
(d) Ongoing Duty of Disclosure to the Patent and Trademark
Office.--
(1) In general.--A plaintiff required to submit
information under subsection (b) or a subsequent owner
of the patent or patents at issue shall, not later than
90 days after any change in the assignee of the patent
or patents at issue or an entity described under
subparagraph (B) or (D) of subsection (b)(1), submit to
the Patent and Trademark Office the updated
identification of such assignee or entity.
(2) Failure to comply.--With respect to a patent
for which the requirement of paragraph (1) has not been
met--
(A) the plaintiff or subsequent owner shall
not be entitled to recover reasonable fees and
other expenses under section 285 or increased
damages under section 284 with respect to
infringing activities taking place during any
period of noncompliance with paragraph (1),
unless the denial of such damages or fees would
be manifestly unjust; and
(B) the court shall award to a prevailing
party accused of infringement reasonable fees
and other expenses under section 285 that are
incurred to discover the updated assignee or
entity described under paragraph (1), unless
such sanctions would be unjust.
(e) Definitions.--In this section:
(1) Financial interest.--The term ``financial
interest''--
(A) means--
(i) with regard to a patent or
patents, the right of a person to
receive proceeds related to the
assertion of the patent or patents,
including a fixed or variable portion
of such proceeds; and
(ii) with regard to the plaintiff,
direct or indirect ownership or control
by a person of more than 5 percent of
such plaintiff; and
(B) does not mean--
(i) ownership of shares or other
interests in a mutual or common
investment fund, unless the owner of
such interest participates in the
management of such fund; or
(ii) the proprietary interest of a
policyholder in a mutual insurance
company or of a depositor in a mutual
savings association, or a similar
proprietary interest, unless the
outcome of the proceeding could
substantially affect the value of such
interest.
(2) Proceeding.--The term ``proceeding'' means all
stages of a civil action, including pretrial and trial
proceedings and appellate review.
(3) Ultimate parent entity.--
(A) In general.--Except as provided in
subparagraph (B), the term ``ultimate parent
entity'' has the meaning given such term in
section 801.1(a)(3) of title 16, Code of
Federal Regulations, or any successor
regulation.
(B) Modification of definition.--The
Director may modify the definition of
``ultimate parent entity'' by regulation.
Sec. 291. Derived Patents
(a) * * *
(b) Filing Limitation.--An action under this section may be
filed only before the end of the 1-year period beginning on the
date of the issuance of the first patent containing a claim to
the allegedly derived invention and naming an individual
alleged to have derived such invention as the inventor [or
joint inventor] or a joint inventor.
* * * * * * *
[Sec. 296. Liability of States, instrumentalities of States, and State
officials for infringement of patents
[(a) In General.--Any State, any instrumentality of a
State, and any officer or employee of a State or
instrumentality of a State acting in his official capacity,
shall not be immune, under the eleventh amendment of the
Constitution of the United States or under any other doctrine
of sovereign immunity, from suit in Federal court by any
person, including any governmental or nongovernmental entity,
for infringement of a patent under section 271, or for any
other violation under this title.
[(b) Remedies.--In a suit described in subsection (a) for a
violation described in that subsection, remedies (including
remedies both at law and in equity) are available for the
violation to the same extent as such remedies are available for
such a violation in a suit against any private entity. Such
remedies include damages, interest, costs, and treble damages
under section 284, attorney fees under section 285, and the
additional remedy for infringement of design patents under
section 289.]
Sec. 296. Stay of action against customer
(a) Stay of Action against Customer.--Except as provided in
subsection (d), in any civil action arising under any Act of
Congress relating to patents, the court shall grant a motion to
stay at least the portion of the action against a covered
customer related to infringement of a patent involving a
covered product or process if the following requirements are
met:
(1) The covered manufacturer and the covered
customer consent in writing to the stay.
(2) The covered manufacturer is a party to the
action or to a separate action involving the same
patent or patents related to the same covered product
or process.
(3) The covered customer agrees to be bound by any
issues that the covered customer has in common with the
covered manufacturer and are finally decided as to the
covered manufacturer in an action described in
paragraph (2).
(4) The motion is filed after the first pleading in
the action but not later than the later of--
(A) the 120th day after the date on which
the first pleading in the action is served that
specifically identifies the covered product or
process as a basis for the covered customer's
alleged infringement of the patent and that
specifically identifies how the covered product
or process is alleged to infringe the patent;
or
(B) the date on which the first scheduling
order in the case is entered.
(b) Applicability of Stay.--A stay issued under subsection
(a) shall apply only to the patents, products, systems, or
components accused of infringement in the action.
(c) Lift of Stay.--
(1) In general.--A stay entered under this section
may be lifted upon grant of a motion based on a showing
that--
(A) the action involving the covered
manufacturer will not resolve a major issue in
suit against the covered customer; or
(B) the stay unreasonably prejudices and
would be manifestly unjust to the party seeking
to lift the stay.
(2) Separate manufacturer action involved.--In the
case of a stay entered based on the participation of
the covered manufacturer in a separate action involving
the same patent or patents related to the same covered
product or process, a motion under this subsection may
only be made if the court in such separate action
determines the showing required under paragraph (1) has
been met.
(d) Exemption.--This section shall not apply to an action
that includes a cause of action described under section
271(e)(2).
(e) Consent Judgment.--If, following the grant of a motion
to stay under this section, the covered manufacturer seeks or
consents to entry of a consent judgment relating to one or more
of the common issues that gave rise to the stay, or declines to
prosecute through appeal a final decision as to one or more of
the common issues that gave rise to the stay, the court may,
upon grant of a motion, determine that such consent judgment or
unappealed final decision shall not be binding on the covered
customer with respect to one or more of such common issues
based on a showing that such an outcome would unreasonably
prejudice and be manifestly unjust to the covered customer in
light of the circumstances of the case.
(f) Rule of Construction.--Nothing in this section shall be
construed to limit the ability of a court to grant any stay,
expand any stay granted under this section, or grant any motion
to intervene, if otherwise permitted by law.
(g) Definitions.--In this section:
(1) Covered customer.--The term ``covered
customer'' means a party accused of infringing a patent
or patents in dispute based on a covered product or
process.
(2) Covered manufacturer.--The term ``covered
manufacturer'' means a person that manufactures or
supplies, or causes the manufacture or supply of, a
covered product or process or a relevant part thereof.
(3) Covered product or process.--The term ``covered
product or process'' means a product, process, system,
service, component, material, or apparatus, or relevant
part thereof, that--
(A) is alleged to infringe the patent or
patents in dispute; or
(B) implements a process alleged to
infringe the patent or patents in dispute.
* * * * * * *
Sec. 299. Joinder of parties
(a) * * *
* * * * * * *
(d) Joinder of Interested Parties.--
(1) Joinder.--In a civil action arising under any
Act of Congress relating to patents in which fees and
other expenses have been awarded under section 285 to a
prevailing party defending against an allegation of
infringement of a patent claim, and in which the
nonprevailing party alleging infringement is unable to
pay the award of fees and other expenses, the court
shall grant a motion by the prevailing party to join an
interested party if such prevailing party shows that
the nonprevailing party has no substantial interest in
the subject matter at issue other than asserting such
patent claim in litigation.
(2) Limitation on joinder.--
(A) Discretionary denial of motion.--The
court may deny a motion to join an interested
party under paragraph (1) if--
(i) the interested party is not
subject to service of process; or
(ii) joinder under paragraph (1)
would deprive the court of subject
matter jurisdiction or make venue
improper.
(B) Required denial of motion.--The court
shall deny a motion to join an interested party
under paragraph (1) if--
(i) the interested party did not
timely receive the notice required by
paragraph (3); or
(ii) within 30 days after receiving
the notice required by paragraph (3),
the interested party renounces, in
writing and with notice to the court
and the parties to the action, any
ownership, right, or direct financial
interest (as described in paragraph
(4)) that the interested party has in
the patent or patents at issue.
(3) Notice requirement.--An interested party may
not be joined under paragraph (1) unless it has been
provided actual notice, within 30 days after the date
on which it has been identified in the initial
disclosure provided under section 290(b), that it has
been so identified and that such party may therefore be
an interested party subject to joinder under this
subsection. Such notice shall be provided by the party
who subsequently moves to join the interested party
under paragraph (1), and shall include language that--
(A) identifies the action, the parties
thereto, the patent or patents at issue, and
the pleading or other paper that identified the
party under section 290(b); and
(B) informs the party that it may be joined
in the action and made subject to paying an
award of fees and other expenses under section
285(b) if--
(i) fees and other expenses are
awarded in the action against the party
alleging infringement of the patent or
patents at issue under section 285(a);
(ii) the party alleging
infringement is unable to pay the award
of fees and other expenses;
(iii) the party receiving notice
under this paragraph is determined by
the court to be an interested party;
and
(iv) the party receiving notice
under this paragraph has not, within 30
days after receiving such notice,
renounced in writing, and with notice
to the court and the parties to the
action, any ownership, right, or direct
financial interest (as described in
paragraph (4)) that the interested
party has in the patent or patents at
issue.
(4) Interested party defined.--In this subsection,
the term ``interested party'' means a person, other
than the party alleging infringement, that--
(A) is an assignee of the patent or patents
at issue;
(B) has a right, including a contingent
right, to enforce or sublicense the patent or
patents at issue; or
(C) has a direct financial interest in the
patent or patents at issue, including the right
to any part of an award of damages or any part
of licensing revenue, except that a person with
a direct financial interest does not include--
(i) an attorney or law firm
providing legal representation in the
civil action described in paragraph (1)
if the sole basis for the financial
interest of the attorney or law firm in
the patent or patents at issue arises
from the attorney or law firm's receipt
of compensation reasonably related to
the provision of the legal
representation; or
(ii) a person whose sole financial
interest in the patent or patents at
issue is ownership of an equity
interest in the party alleging
infringement, unless such person also
has the right or ability to influence,
direct, or control the civil action.
Sec. 299A. Discovery in patent infringement action
(a) Discovery in Patent Infringement Action.--Except as
provided in subsection (b), in a civil action arising under any
Act of Congress relating to patents, if the court determines
that a ruling relating to the construction of terms used in a
patent claim asserted in the complaint is required, discovery
shall be limited, until such ruling is issued, to information
necessary for the court to determine the meaning of the terms
used in the patent claim, including any interpretation of those
terms used to support the claim of infringement.
(b) Discretion To Expand Scope of Discovery.--
(1) Timely resolution of actions.--If, under any
provision of Federal law (including the amendments made
by the Drug Price Competition and Patent Term
Restoration Act of 1984 (Public Law 98-417)),
resolution within a specified period of time of a civil
action arising under any Act of Congress relating to
patents will necessarily affect the rights of a party
with respect to the patent, the court shall permit
discovery, in addition to the discovery authorized
under subsection (a), before the ruling described in
subsection (a) is issued as necessary to ensure timely
resolution of the action.
(2) Resolution of motions.--When necessary to
resolve a motion properly raised by a party before a
ruling relating to the construction of terms described
in subsection (a) is issued, the court may allow
limited discovery in addition to the discovery
authorized under subsection (a) as necessary to resolve
the motion.
(3) Special circumstances.--In special
circumstances that would make denial of discovery a
manifest injustice, the court may permit discovery, in
addition to the discovery authorized under subsection
(a), as necessary to prevent the manifest injustice.
* * * * * * *
CHAPTER 31--INTER PARTES REVIEW
* * * * * * *
Sec. 316. Conduct of inter partes review
(a) Regulations.--The Director shall prescribe
regulations--
(1) * * *
* * * * * * *
(8) providing for the filing by the patent owner of
a response to [the petition under section 313] the
petition under section 311 after an inter partes review
has been instituted, and requiring that the patent
owner file with such response, through affidavits or
declarations, any additional factual evidence and
expert opinions on which the patent owner relies in
support of the response;
* * * * * * *
(12) setting a time period for requesting joinder
under section 315(c)[; and];
(13) providing the petitioner with at least 1
opportunity to file written comments within a time
period established by the Director[.]; and
(14) providing that for all purposes under this
chapter--
(A) each claim of a patent shall be
construed as such claim would be in a civil
action to invalidate a patent under section
282(b), including construing each claim of the
patent 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
(B) if a court has previously construed the
claim or a claim term in a civil action in
which the patent owner was a party, the Office
shall consider such claim construction.
* * * * * * *
CHAPTER 32--POST-GRANT REVIEW
* * * * * * *
Sec. 325. Relation to other proceedings or actions
(a) * * *
* * * * * * *
(e) Estoppel.--
(1) * * *
(2) Civil actions and other proceedings.--The
petitioner in a post-grant review of a claim in a
patent under this chapter that results in a final
written decision under section 328(a), or the real
party in interest or privy of the petitioner, may not
assert either in a civil action arising in whole or in
part under section 1338 of title 28 or in a proceeding
before the International Trade Commission under section
337 of the Tariff Act of 1930 that the claim is invalid
on any ground that the petitioner raised [or reasonably
could have raised] during that post-grant review.
* * * * * * *
Sec. 326. Conduct of post-grant review
(a) Regulations.--The Director shall prescribe
regulations--
(1) * * *
* * * * * * *
(8) providing for the filing by the patent owner of
a response to [the petition under section 323] the
petition under section 321 after a post-grant review
has been instituted, and requiring that the patent
owner file with such response, through affidavits or
declarations, any additional factual evidence and
expert opinions on which the patent owner relies in
support of the response;
* * * * * * *
(11) requiring that the final determination in any
post-grant review be issued not later than 1 year after
the date on which the Director notices the institution
of a proceeding under this chapter, except that the
Director may, for good cause shown, extend the 1-year
period by not more than 6 months, and may adjust the
time periods in this paragraph in the case of joinder
under section 325(c)[; and];
(12) providing the petitioner with at least 1
opportunity to file written comments within a time
period established by the Director[.]; and
(13) providing that for all purposes under this
chapter--
(A) each claim of a patent shall be
construed as such claim would be in a civil
action to invalidate a patent under section
282(b), including construing each claim of the
patent 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
(B) if a court has previously construed the
claim or a claim term in a civil action in
which the patent owner was a party, the Office
shall consider such claim construction.
* * * * * * *
----------
TITLE 11, UNITED STATES CODE
CHAPTER 1--GENERAL PROVISIONS
Sec. 101. Definitions
In this title the following definitions shall apply:
(1) * * *
* * * * * * *
(35A) The term ``intellectual property'' means--
(A) * * *
* * * * * * *
(E) work of authorship protected under
title 17; [or]
(F) mask work protected under chapter 9 of
[title 17;] title 17; or
(G) a trademark, service mark, or trade
name, as those terms are defined in section 45
of the Act of July 5, 1946 (commonly referred
to as the ``Trademark Act of 1946'') (15 U.S.C.
1127);
to the extent protected by applicable nonbankruptcy
law.
* * * * * * *
CHAPTER 3--CASE ADMINISTRATION
* * * * * * *
SUBCHAPTER IV--ADMINISTRATIVE POWERS
* * * * * * *
Sec. 365. Executory contracts and unexpired leases
(a) * * *
* * * * * * *
(n)(1) * * *
(2) If the licensee elects to retain its rights, as
described in paragraph (1)(B) of this subsection, under such
contract--
(A) * * *
(B) the licensee shall make all [royalty payments]
royalty or other payments due under such contract for
the duration of such contract and for any period
described in paragraph (1)(B) of this subsection for
which the licensee extends such contract; [and]
(C) the licensee shall be deemed to waive--
(i) * * *
(ii) any claim allowable under section
503(b) of this title arising from the
performance of such contract[.]; and
(D) in the case of a trademark, service mark, or
trade name, the trustee shall not be relieved of a
contractual obligation to monitor and control the
quality of a licensed product or service.
* * * * * * *
CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES
* * * * * * *
SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
* * * * * * *
Sec. 1520. Effects of recognition of a foreign main proceeding
(a) Upon recognition of a foreign proceeding that is a
foreign main proceeding--
(1) * * *
* * * * * * *
(3) unless the court orders otherwise, the foreign
representative may operate the debtor's business and
may exercise the rights and powers of a trustee under
and to the extent provided by sections 363 and 552[;
and];
(4) section 552 applies to property of the debtor
that is within the territorial jurisdiction of the
United States[.]; and
(5) section 365(n) applies to intellectual property
of which the debtor is a licensor or which the debtor
has transferred.
* * * * * * *
----------
SECTION 1295 OF TITLE 28, UNITED STATES CODE
Sec. 1295. Jurisdiction of the United States Court of Appeals for the
Federal Circuit
(a) The United States Court of Appeals for the Federal
Circuit shall have exclusive jurisdiction--
(1) * * *
* * * * * * *
(4) Of an appeal from a decision of--
(A) the Patent Trial and Appeal Board of
the United States Patent and Trademark Office
with respect to a patent application,
derivation proceeding, reexamination, post-
grant review, or inter partes review under
title 35, at the instance of a party who
exercised that party's right to participate in
the applicable proceeding before or appeal to
the Board, [except that an applicant or a party
to a derivation proceeding may also have remedy
by civil action pursuant to section 145 or 146
of title 35; an appeal under this subparagraph
of a decision of the Board with respect to an
application or derivation proceeding shall
waive the right of such applicant or party to
proceed under section 145 or 146 of title 35;]
except that a party to a derivation proceeding
may also have remedy by civil action under
section 146 of title 35; an appeal under this
subparagraph of a decision of the Board with
respect to a derivation proceeding shall waive
the right of such party to proceed under
section 146 of title 35;
* * * * * * *
(C) a district court to which a case was
directed pursuant to [section 145, 146, or]
section 146 or 154(b) of title 35;
* * * * * * *
----------
LEAHY-SMITH AMERICA INVENTS ACT
* * * * * * *
SEC. 18. TRANSITIONAL PROGRAM FOR COVERED BUSINESS METHOD PATENTS.
(a) Transitional Program.--
(1) Establishment.--Not later than the date that is
1 year after the date of the enactment of this Act, the
Director shall issue regulations establishing and
implementing a transitional post-grant review
proceeding for review of the validity of covered
business method patents. The transitional proceeding
implemented pursuant to this subsection shall be
regarded as, and shall employ the standards and
procedures of, a post-grant review under chapter 32 of
title 35, United States Code, subject to the following:
(A) [Section 321(c)] Sections 321(c) and
326(a)(13) of title 35, United States Code, and
subsections (b), (e)(2), and (f) of section 325
of such title shall not apply to a transitional
proceeding.
* * * * * * *
(C) A petitioner in a transitional
proceeding who challenges the validity of 1 or
more claims in a covered business method patent
on a ground raised under section 102 or 103 of
title 35, United States Code, as in effect on
the day before the effective date set forth in
section 3(n)(1), may support such ground only
on the basis of--
(i) prior art that is described by
[section 102(a)] subsection (a) or (e)
of section 102 of such title (as in
effect on the day before such effective
date); or
* * * * * * *
----------
ACT OF JANUARY 4, 2011
(Public Law 111-349)
AN ACT To establish a pilot program in certain United States district
courts to encourage enhancement of expertise in patent cases among
district judges.
SECTION 1. PILOT PROGRAM IN CERTAIN DISTRICT COURTS.
(a) * * *
* * * * * * *
[(c) Duration.--The program established under subsection
(a) shall terminate 10 years after the end of the 6-month
period described in subsection (b).]
(c) Duration.--The program established under subsection (a)
shall be maintained using existing resources, and shall
terminate 20 years after the end of the 6-month period
described in subsection (b).
* * * * * * *
----------
PATENT LAW TREATIES IMPLEMENTATION ACT OF 2012
* * * * * * *
TITLE II--PATENT LAW TREATY IMPLEMENTATION
* * * * * * *
SEC. 202. CONFORMING AMENDMENTS.
(a) * * *
(b) Relief in Respect of Time Limits and Reinstatement of
Right.--Title 35, United States Code, is amended--
(1) * * *
* * * * * * *
[(7) in section 361, by striking subsection (c) and
inserting the following:
[``(c) International applications filed in the Patent and
Trademark Office shall be filed in the English language, or an
English translation shall be filed within such later time as
may be fixed by the Director.'';]
[(8)] (7) in section 364, by striking subsection
(b) and inserting the following:
``(b) An applicant's failure to act within prescribed time
limits in connection with requirements pertaining to an
international application may be excused as provided in the
treaty and the Regulations.''; and
[(9)] (8) in section 371(d), in the third sentence,
by striking ``, unless it be shown to the satisfaction
of the Director that such failure to comply was
unavoidable''.
* * * * * * *
Dissenting Views
We strongly oppose H.R. 3309, the ``Innovation Act.''
Although we believe certain legislative changes are needed to
respond to litigation asymmetries when so-called patent
trolls--also referred to as non-practicing entities (NPE's) or
patent assertion entities (PAE's)--unfairly target small
businesses and end users,\1\ the overall legislation is
unbalanced and will discourage innovation. In particular, we
oppose the legislation because:
---------------------------------------------------------------------------
\1\Because many NPEs do not manufacture or run businesses with a
substantial number of employees, they do not experience the disruptive
effect that litigation may impose on businesses that do. Whether NPEs
assert valid or dubious patents, they are more likely to settle, both
prior to and after filing a lawsuit, for sums less than the estimated
cost of litigation, which gives them greater leverage over alleged
infringers. Also, because NPEs generally do not have corporate
customers or consumers, they do not face the same reputational harms
that operating companies do. See generally Brian T. Yeh, An Overview of
the ``Patent Troll'' Debate, CRS R42668 (April 16, 2013) (describing
NPEs and subsets of such entities, and analyzing the debate on their
effect on innovation and role in litigation).
(i)
it has been considered pursuant to a rushed and
unfair process;
(ii)
it excludes the single most important step we
can take to improve patent quality and protect
against abusive litigation--ending US Patent
and Trademark Office (PTO) fee diversion;
(iii)
it includes a number of one-sided changes to
our civil justice system that apply to limit
the rights of all patent holders, not just
cases involving ``trolls''; and
(iv)
it violates our system of separation of powers
by imposing unnecessary mandates on the Federal
courts.
There are few economic issues Congress will face that are
more important than our patent system. Intellectual property
intensive industries account for over a third of our Nation's
gross domestic product, about 5 trillion dollars, and
contribute over 40 million jobs to the U.S. economy.\2\ Our
patent system, while not perfect, is the envy of the world and
a significant driver of growth in our economy. While we support
common sense changes to improve and enhance the system, we
cannot support the changes included in H.R. 3309 which taken as
a whole will unbalance the patent system for all patent owners
(not just patent ``trolls''), disrupt comity with our coequal
judicial branch of government, and discourage the very
innovation that is the lifeblood of our economy.
---------------------------------------------------------------------------
\2\Economics and Statistics Administration and the U.S. Patent and
Trademark Office, 2012, ``Intellectual Property and the U.S. Economy:
Industries in Focus,'' at vii.
---------------------------------------------------------------------------
Our concerns are shared by a wide and deep range of
participants and stakeholders in the patent system who have
issued letters opposing or expressing numerous serious concerns
with the legislation, including the Federal Judicial
Conference, the American Bar Association (ABA), the American
Intellectual Property Law Association (AIPLA), the Patent
Officers Professional Association (POPA), the American
Association of Universities (AAU), the Biotechnology Industry
Association (BIO), the Coalition for Twenty-First Century
Patent Reform (21C), the Innovation Alliance, the American
Association for Justice (AAJ), the Pharmaceutical Research and
Manufacturers Association (PhRMA), the Eagle Forum, the
Institute of Electrical and Electronics Engineers, the National
Association of Patent Practitioners (NAPP), the National
Venture Capital Association, and the National Bankruptcy
Conference.\3\
---------------------------------------------------------------------------
\3\These and numerous other well-regarded groups and individuals
have cited similar concerns with the bill. The following materials are
on file with the House of Representatives Committee on the Judiciary,
Democratic Staff, and many are accessible on the minority website:
Letter from Jeffrey S. Sutton, Chair of the Committee on Rules of
Practice and Procedure of the Judicial Conference of the United States,
and Jonathan C. Rose, Secretary of the Committee on Rules of Practice
and Procedure of the Judicial Conference of the United States, to
Representative John Conyers, Jr., Ranking Member of the House Committee
on the Judiciary (Nov. 6, 2013) (noting that ``[b]y dictating the
outcome of the Rules Enabling Act process with respect to potential
rules, Section 6 of H.R. 3309 runs counter to that process.''); Letter
from Thomas M. Susman, Director of the Governmental Affairs Office of
the American Bar Association, to Representative Robert Goodlatte,
Chairman of the House Committee on the Judiciary, and Representative
John Conyers, Jr., Ranking Member of the House Committee on the
Judiciary (Nov. 14, 2013) (noting that ``[o]ur primary concerns regard
provisions of the bill that call for Congress, rather than the courts,
to establish certain rules of procedure for the Federal courts, thereby
circumventing a rulemaking process that has served our justice system
well for almost 80 years.''); Letter from Wayne P. Sobon, President of
the American Intellectual Property Law Association, to Representative
Robert Goodlatte, Chairman of the House Committee on the Judiciary
(Nov. 19, 2013) (noting that ``AIPLA is concerned that the bill will
mandate inflexible rules, many of which may have unintended
consequences including impeding access to the courts, and we further
believe that the Judicial Conference in its own discretion is in a
better position to work with the district courts to institute
appropriate case management rules.''); Letter from Robert D. Budens,
President of the Patent Office Professional Association, to
Representative Robert Goodlatte, Chairman of the House Committee on the
Judiciary, and Representative John Conyers, Jr., Ranking Member of the
House Committee on the Judiciary (Nov. 18, 2013) (arguing that ``the
Innovation Act appears skewed against small inventors.''); Letter from
the Association of American Universities, American Council of
Education, Association of American Medical Colleges, Association of
Public and Land-grant Universities, Association of University
Technology Managers, and Council on Governmental Relations to
Representative Robert Goodlatte, Chairman of the House Committee on the
Judiciary, and Representative John Conyers, Jr., Ranking Member of the
House Committee on the Judiciary (Nov. 19, 2013) (arguing that ``a
number of provisions in the Manager's Amendment are problematic,
including the extremely broad scope of civil actions to which fee
shifting would apply and the high, indefinite threshold for a court's
waiver of that fee shifting, the extent of the heightened pleading
requirements, the breadth of the information required in Sec. 4's
transparency provisions, and the narrowing of the scope of the estoppel
provisions in the AIA's new post-grant review procedure.''); Letter
from James C. Greenwood, President and CEO of the Biotechnology
Industry Organization, to Representative Robert Goodlatte, Chairman of
the House Committee on the Judiciary (Nov. 14, 2013) (arguing that ``in
an attempt to target abusive litigation practices by the few, the
proposals impose unjustified burdens on too many legitimate patent
owners seeking to enforce and defend their inventions in good
faith.''); Letter from Carl B. Horton of the Coalition for 21st Century
Patent Reform to Representative Robert Goodlatte, Chairman of the House
Committee on the Judiciary, and Representative John Conyers, Jr.,
Ranking Member of the House Committee on the Judiciary (Nov. 18, 2013)
(noting that ``we continue to have a serious concern that the provision
related to stays of discovery pending claim construction would prolong
all patent litigation by a year or more, substantially increase its
cost, and deny parties with meritorious positions of the timely relief
they deserve.''); Letter from Brian Pomper, Executive Director of the
Innovation Alliance, to Representative Robert Goodlatte, Chairman of
the House Committee on the Judiciary, and Representative John Conyers,
Jr., Ranking Member of the House Committee on the Judiciary (Nov. 19,
2013) (arguing that ``[o]verly detailed pleading requirements,
inflexible discovery limits, and broad provisions permitting stays
against certain parties have the potential to undermine the
enforceability of all patent rights, no matter how valuable the patent,
and thus potentially incentivize infringement.''); Letter from Linda
Lipsen, CEO of The American Association for Justice, to Representative
Robert Goodlatte, Chairman of the House Committee on the Judiciary, and
Representative John Conyers, Jr., Ranking Member of the House Committee
on the Judiciary (Nov. 19, 2013) (arguing that the ``Innovation Act
makes radical and unnecessary changes to United States patent law that
would close the courthouse door to individual inventors and small
start-ups.''); Letter from Chester Davis, Jr., Executive Vice President
of Advocacy and Member Relations for the Pharmaceutical Research and
Manufacturers of America, to Representative Robert Goodlatte, Chairman
of the House Committee on the Judiciary, and Representative John
Conyers, Jr., Ranking Member of the House Committee on the Judiciary
(Nov. 13, 2013) (noting that ``many of the provisions contained in the
recently introduced Innovation Act (H.R. 3309) perhaps unintentionally
undermine the ability of patent owners more broadly to enforce their
rights by filing a patent suit and litigating it to completion.'');
Letter from Marc T. Apter, President of The Institute of Electrical and
Electronics Engineers, to Representative Robert Goodlatte, Chairman of
the House Committee on the Judiciary, and Representative John Conyers,
Jr., Ranking Member of the House Committee on the Judiciary (Nov. 19,
2013) (arguing that ``provisions in the Bill are still not sufficiently
narrowly crafted to target litigation abuse and therefore would reduce
the value and enforceability of patents more broadly.''); Letter from
Priya Sinha Cloutier, Chair of The National Association of Patent
Practitioners Government Affairs Committee, to Representative Robert
Goodlatte, Chairman of the House Committee on the Judiciary (Nov. 19,
2013) (arguing that ``the provisions contained in the recently
introduced Innovation Act (H.R.3309) are not narrowly crafted to
address abusive practices, butinstead broadly undermine the ability of
patent owners to enforce their constitutionally protected,government
(USPTO) granted patent rights.''); Letter from Bobby Franklin,
President and CEO of the National Venture Capital Association, to
Representative Robert Goodlatte, Chairman of the House Committee on the
Judiciary, and Representative John Conyers, Jr., Ranking Member of the
House Committee on the Judiciary (Nov. 20, 2013) (noting that it is
``critical that Congress balance the need for patent litigation reform
with the needs of those start-ups that depend on strong patent
protection and that believe the system is working. Congress must also
take care to avoid any unintended consequences that could weaken strong
patent protection.''); Letter from Phyllis Schlafly, President of the
Eagle Forum, to Chairman Robert Goodlatte (Oct. 29, 2013); and
Memoranda of the National Bankruptcy Conference (Nov. 11-12, 2013)
(noting the National Bankruptcy Conference's opposition to the
enactment of section 6(d) of H.R. 3309 as a matter of international
bankruptcy policy.).
---------------------------------------------------------------------------
For these reasons, and those described below, we
respectfully dissent and urge our colleagues to reject this
legislation when it comes to the House floor.
DESCRIPTION AND BACKGROUND
I. BRIEF SUMMARY OF H.R. 3309
H.R. 3309 includes several common sense proposals that as a
general matter we believe would improve the patent system and
respond to abuses and asymmetries in the patent system. These
include:
(i)
Transparency of Patent Ownership (Sec. 4)--
requiring patent litigants to disclose the real
parties in interest in the asserted patent.\4\
---------------------------------------------------------------------------
\4\We find the additional fee-shifting provision in this section
unnecessary and duplicative. We supported the Conyers/Watt substitute
that did not create an additional fee-shifting requirement associated
with the transparency obligations.
(ii)
Customer Stay (Sec. 5)--limiting the practice
of suing downstream users of a patented product
or technology, such as retailers, restaurants
or supermarkets, for infringement by allowing
the manufacturer to step in to defend against
an infringement claim.\5\
---------------------------------------------------------------------------
\5\We would hope that the final language concerning the customer
stay could be reviewed and fine tuned if necessary to insure that the
language does not have any unintended consequences in terms of
protecting culpable parties. See, e.g., testimony of David J. Kappos
before the Committee on the Judiciary, H.R. 3309 Innovation Act, Oct.
29, 2013.
(iii)
Small Business Assistance (Sec. 7)--
facilitating coordination between the USPTO
patent ombudsman, the Small Business
Administration, and the Minority Business
Development Agency to provide educational
resources and outreach programs for small
business concerns arising from patent
infringement and abusive patent litigation
practices.
At the same time, we strongly oppose a number of provisions
that go well beyond the problem of patent trolls and would harm
legitimate patent holders and independent inventors. These
include:
(i)
Limits on Access to the Courts (Sec. 3)--
imposing a series of limitations on the civil
justice system involving patents, including
heightened pleading requirements; mandatory fee
shifting in most cases; and limitations on
discovery.
(ii)
Encroachment on Judicial Authority (Sec. 6)--
imposing a series of mandates and directives on
the Federal judiciary involving patent
litigation in contravention of the time-tested
Rules Enabling Act process.
II. DETAILED SECTION-BY-SECTION ANALYSIS OF H.R. 3309
Sec. 1. Short Title. Section 1 sets forth the short title
of the bill as the ``Innovation Act.''
Sec. 2. Definitions. Section 2 provides for the definitions
of ``Director'' and ``Office''.
Sec. 3. Patent Infringement Actions. Subsection (a) imposes
heightened pleading requirements on parties asserting patent
infringement whether in an initial complaint, counterclaim or
cross-claim. Current law governing pleading in all civil
actions, including patent infringement claims, is somewhat
fluid following the decisions of the U.S. Supreme Court in Bell
Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal,
556 U.S. 662 (2009). Those cases moved away from the
traditional ``notice'' pleading regime and moved towards more
fact-based pleading requirements. Section 3(a) imposes
statutory heightened pleading requirements by requiring patent
holders to identify the patents and claims infringed and to
provide more specificity as to how they are infringed.
Subsection (b) alters the fee-shifting scheme under
existing law. Currently, a court ``in exceptional cases may
award reasonable attorney fees to the prevailing party'' in a
patent infringement lawsuit. There is pending litigation
concerning the meaning of the term ``exceptional cases.'' The
Federal Circuit is expected to address this issue within the
next month in Sidense Corp. v. Kilopass Tech., Inc.\6\ And the
Supreme Court has granted certiorari in two cases involving
fee-shifting in patent litigation this term, including Octane
Fitness v. Icon Health & Fitness Inc. in which the two-step
test to meet the ``exceptional case'' standard has been
challenged.\7\ Section 3(b) would replace the current
discretionary statutory provision with a mandatory fee-shifting
provision. As amended by Representative Hakeem Jeffries'
amendment at markup, it requires that fees shift to the non-
prevailing party unless they can meet the burden of
establishing that their position was ``reasonably justified''
or that ``special circumstances''\8\ make an award unjust. The
provision also defines a non-prevailing party to include a
plaintiff patentee who ``subsequently unilaterally extends . .
. a covenant not to sue for infringement with respect to the
patent or patents at issue.''
---------------------------------------------------------------------------
\6\See Sidense Corp. v. Kilopass Tech., Inc., (Fed. Cir. pending
2013).
\7\Octane Fitness v. Icon Health & Fitness, Inc., 496 Fed. Appx. 57
(Fed. Cir. 2012), cert. granted, 81 USLW 3567 (U.S. Oct. 1, 2013) (No.
12-1184). Octane Fitness will consider the Federal Circuit's two-part
test for satisfying the ``exceptional case'' standard. According to the
Federal Circuit ``[a]bsent misconduct in conduct of the litigation or
in securing the patent, sanctions may be imposed . . . only if both (1)
the litigation is brought in subjective bad faith, and (2) the
litigation is objectively baseless.'' Brooks Furniture Mfg. Inc. v.
Futailer Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). The Court
also granted certiorari in Highmark, Inc. v. Allcare Health Management
Systems, Inc., 687 F.3d 1300 (Fed. Cir. 2012), cert. granted, 81 USLW
3562 (U.S. Oct 1, 2013) (No. 12-1163, 12A763), in which it will
consider to what extent a district court's determination whether the
criteria for ``exceptional case'' status has been met is entitled to
deference.
\8\The Jeffries Amendment parenthetically explains that ``special
circumstances'' includes ``severe economic hardship to a named
inventor).''
---------------------------------------------------------------------------
Subsection (c) establishes an additional mechanism for
joinder of additional plaintiffs notwithstanding Federal Rules
of Civil Procedure 19 and 20, which already provide for the
permissive and mandatory joinder of parties, respectively.
Under section 3(c) defendants may join additional parties
having a financial interest in the patents at issue for the
purpose of satisfying any award of attorneys' fees and other
expenses against a judgment-proof patentee.
Subsection (d) requires a judge to limit discovery in any
case where the court will hold a Markman hearing\9\ to construe
the terms in the patent claim and determine the scope of the
patent. Markman proceedings can occur early in the litigation
or at the end of full-scale discovery but before the trial.
Section 3(d) strips the court of discretion to manage
proceedings before it by requiring that they limit discovery in
all cases to only that information needed to construe the
claims of the patent and render a Markman ruling. This section
further restricts the discretion of the court to expand the
scope of discovery prior to claim construction only in cases
with a statutory deadline (specifically including cases where a
pharmaceutical company submits an abbreviated application for
approval of a new drug) ``when necessary to resolve a motion
properly raised'' or ``as necessary to prevent the manifest
injustice.''
---------------------------------------------------------------------------
\9\Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).
---------------------------------------------------------------------------
Sec. 4. Transparency of Patent Ownership. Section 4(a)
requires a patent owner who asserts an infringement claim in
court to provide detailed information about all persons or
entities having an interest in the patent. Specifically, the
patent owner has an ongoing duty to inform the parties, the
court, and the USPTO of the identity of any: (1) assignee of
the patent, (2) entity with the right to sublicense or enforce
the patent, (3) entity with any financial interest in the
patent or in the patentee, and (4) the ultimate parent entity
of the assignee. The patent owner is encouraged to comply with
this requirement by causing it to forfeit attorneys fees under
section 285 or enhanced damages. In addition, the patent owner
may also be required to pay the opposing party's costs and
attorneys fees incurred to determine the identity of the real
parties at interest in the patent if the patent owner fails to
comply with this section. Fees may be shifted even if the
identity of additional parties was immaterial to the
proceedings and may only be avoided if the court determines
they are ``unjust.''
Sec. 5. Customer-suit Exception. Currently, manufacturers
or suppliers may seek leave to intervene in patent infringement
actions against their customers or end users. They may also
seek a declaratory judgment where a case or controversy exists,
or pursue administrative legal action against a patent owner.
Section 5(a) goes further to require an action against a
customer be stayed if: 1) both the manufacturer and customer
agree, 2) the customer agrees to be bound by any judgment
against the manufacturer, and 3) the motion for a stay is
brought within 120 days of service of the first infringement
pleading.
Sec. 6. Procedures and Practices to Implement and
Recommendations to the Judicial Conference. Section 6 includes
a number of mandates that the Federal judiciary change its
rules of procedure in several specified areas. Subsection (a)
requires the Judicial Conference to promulgate rules and
procedures on core document discovery, electronic communication
production, fee-shifting for additional document discovery, and
the sequence and scope of discovery. Subsection (b) requires
the Judicial Conference to develop case management procedures
for all patent cases, including procedures that will focus on
early disposition of the case. Subsection (c) requires the
Supreme Court to eliminate Form 18 (concerning patent
pleadings) and authorizes the Court to replace Form 18 with
specific minimum contents.
Section 6(d) makes two substantive amendments to the
Bankruptcy Code. The first concerns chapter 15 of the
Bankruptcy Code, which codifies the Model Law on Cross-Border
Insolvency promulgate by the United Nations Commission on
International Trade Law (UNCITRAL). It reflects a very
carefully crafted international agreement that guides
bankruptcy courts throughout the world about how to manage
transnational insolvencies implicating the laws of other
nations.\10\ To achieve its goal of reciprocal international
cooperation, chapter 15 requires ``each country to recognize a
foreign main proceeding in the debtor's home country as the
leader in the worldwide effort and that it cooperate with that
jurisdiction to achieve the best results for all
concerned.''\11\ Section 6(d) would alter a fundamental
principal of chapter 15, namely, that it not favor a particular
country's law. It does this by requiring a U.S. court to apply
Bankruptcy Code section 365(n) (which gives certain rights to
intellectual property licensees where the debtor has rejected
the license agreement) to ``foreign main proceedings,'' a type
of chapter 15 case ``pending in the country where the debtor
has the center of its main interests.''\12\ This change
effectively imposes U.S. law whether or not it should apply to
a particular license. For example, a U.S. bankruptcy court
would be required to apply U.S. law to a license owned by a
foreign company and issued under another country's law even if
the intellectual property that is the subject of the license
agreement is not located in the U.S.
---------------------------------------------------------------------------
\10\Enacted in 2005, chapter 15 is intended to ``provide effective
mechanisms for dealing with cases of cross-border insolvency'' through
various statutorily mandated objectives. Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23
(2005). The text of the Model Law and the Report of UNCITRAL on its
adoption are found at U.N. G.A., 52d Sess., Supp. No. 17 (A/52/17).
These include promoting cooperation between U.S. courts and the courts
of foreign nations and ensuring ``fair and efficient administration of
cross-border insolvencies that protects the interests of all creditors,
and other interested entities, including the debtor.'' 11 U.S.C.
Sec. 1501(a)(1) & (3) (2013). As explained in this Committee's report
that accompanied identical legislation that led to the enactment of
chapter 15, ``[c]ases brought under chapter 15 are intended to be
ancillary to cases brought in a debtor's home country, unless a full
United States bankruptcy case is brought under another chapter.'' H.
Rep. No. 109-31, at 105-06 (2005).
\11\Id.
\12\11 U.S.C. Sec. 1506 (2013).
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In addition, section 6(d) amends the Bankruptcy Code's
definition of intellectual property to include trademarks,
service marks, and trade names\13\ and imposes an affirmative
duty on the debtor-licensor that has rejected the license
contract to monitor and control the quality of the licensed
product or service. This provision would apply to all types of
bankruptcy cases, namely, liquidating chapter 7 cases,
reorganizing chapter 11 cases, and transnational chapter 15
bankruptcy cases.
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\13\11 U.S.C. Sec. 101(35A) (2013).
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Sec. 7. Small Business Education, Outreach, and Information
Access. Subsection (a) requires the USPTO to develop
educational resources and outreach programs for small business
concerns arising from patent infringement and abusive patent
litigation practices. It requires the Patent Ombudsman Program,
established under AIA, to coordinate with small and minority
business initiatives. The Director of the PTO is required under
section 7(b) to develop a website for small businesses that
should include patent transparency information required under
the bill whenever a patentee sues on a patent.
Sec. 8. Studies on Patent Transactions, Quality, and
Examination. Section 8 mandates a number of concurrent studies.
Subsection (a) requires a study on the secondary market
oversight for patent transactions to promote transparency and
ethical business practices and is due within 1 year of
enactment of the bill. Subsection (b) requires a study on
patents owned by the U.S. government and is due within 6 months
of enactment of the bill. Subsection (c) requires a study on
patent quality and access to the best information during
examination. The GAO is also directed to evaluate the patent
examination process at the USPTO and to assess the available
technologies. The GAO study is due within 6 months of enactment
of the bill. The manager's amendment includes a new subsection
(d) which requires an additional study by the Administrative
Office of the U.S. Courts to examine the feasibility of
developing a pilot program for patent small claims proceedings.
Two additional studies were added during the markup. One
imposes yet another obligation on the USPTO to study a very
broadly defined ``demand letter'' and issue a report to
Congress within 1 year of enactment of the bill. The other
requires the GAO to produce a study within 6 months of the
enactment of the bill on the quality of business method patents
asserted in patent infringement lawsuits.
Sec. 9. Improvements and Technical Corrections to the
Leahy-Smith America Invents Act. Section 9 makes several
changes to patent law, many of which are not technical and
would have a significant impact on patent system. A summary of
these provisions follows:
Section 9(a) repeals section 145, which allows a de novo
appeal of denial of a patent application by the USPTO to a
district court. Currently, a patent applicant has the option of
either appealing a decision by the USPTO denying a patent
application directly to the Federal Circuit under 35 U.S.C.
Sec. 141 or initiating an action against the USPTO in district
court under 35 U.S.C. Sec. 145. The Federal Circuit reviews an
appeal of a USPTO decision solely based on the record that was
before the agency. In a district court proceeding, however, the
applicant can introduce new evidence and subpoena witnesses.
The Supreme Court recently affirmed the expansive breadth of
evidence that a patent applicant may introduce in a Sec. 145
proceeding.\14\
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\14\See Kappos v. Hyatt. 566 U.S. __, 132 S.Ct. 1690 (2012).
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Section 9(b) deletes ``or reasonably could have raised''
from section 325(e)(2) in the AIA's Post Grant Review (PGR)
procedure. The AIA established this new first window procedure
to enable early challenge of patents. PGR is intended to weed
out weak issued patents before they have an adverse effect on
the market. Section 325(e)(2) of the AIA currently contains an
estoppel provision that prohibits a participant in PGR from
asserting claims ``on any ground that the petitioner raised or
reasonably could have raised during that post-grant review'' in
a subsequent civil action. The revision now estops a PGR
participant from raising in a subsequent lawsuit only those
claims the petitioner actually raised in the PGR.
Section 9 (c) eliminates the ``Broadest Reasonable
Interpretation'' (BRI) standard and requires that claims of
issued patents be construed in PGR and inter partes review
(IPR) proceedings under the same standard used in district
court. Patents before the district courts are presumed valid
and subject to a ``clear and convincing'' standard of proof to
establish validity. BRI is an administrative rule that the
USPTO has used and the courts have sanctioned since the 1930's.
After enactment of the AIA, however, the USPTO issued a
rulemaking proceeding to determine the rules of practice to
implement the newly created IPR proceeding, the PGR proceeding,
and the transitional post-grant review proceeding for covered
business method patents (Section 18/CBM program). The final
rule requires the USPTO to apply BRI to construe certain patent
claims before the agency, including those in the new IPR and
PGR proceedings.\15\ This subsection, in effect, repeals the
agency rulemaking and replaces the BRI standard with the same
standard used in the district courts.
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\15\See Federal Register/Vol. 77, No. 157, Aug. 14, 2012.
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Section 9(d) codifies the judicial doctrine against double-
patenting and applies it to patents issued after AIA under the
first to file system. Current law prohibits two types of double
patenting. One type is based on 35 U.S.C. Sec. 101, which has
been construed to disallow multiple patents for the ``same
invention.'' The other type is judicially created. The judicial
doctrine against double patenting prevents a patentee from
prolonging the life of a patent by rejecting claims in a second
patent that are obvious variations from claims in a first
patent. The provision codifies the concept that ``unless two
patents from the same inventor could have validly issued had
they been sought by two different inventors, the two patents
must be owned by the same entity, and must both terminate upon
the earliest termination of either patent.''\16\
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\16\Summary of 21C Position, at 11.
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Section 9(e) of the manager's amendment dispensed with the
controversial expansion of the reach and duration of the
transitional Section 18/CPM program included in the introduced
version of H.R. 3309. The manager's amendment, however,
redefines and expands the scope of prior art under the
transitional covered business method program, and retains the
seemingly unencumbered authority of the Director to waive fees
under this section.
Section 9(f) extends the life of certain patents if there
are delays in the issuance of those patents. There are often
delays during the patent examination process and Congress
enacted 35 U.S.C. Sec. 154(b)(1) to provide for an extension of
a patent term for USPTO delays. Part B delay occurs when the
USPTO fails to issue a patent within 3 years from the filing
date of the patent application. For a ``B'' type delay there is
an addition of one day for each day after the end of the 3-year
period beginning on the date the patent application was filed.
Judges on the U.S. District Court for the Eastern District of
Virginia have disagreed about the meaning of section
154(b)(1)(B) and how the filing of a Request for Continued
Examination (RCE) impacts the ability to accrue ``B'' type
Patent Term Adjustment. Section 9(f) would amend
Sec. 154(b)(1)(B) to eliminate any patent term adjustment for
``B delay'' occurring after an applicant files a RCE. The
section would make the change effective with regards to any
``patent application or patent'' pending on the Act's date of
enactment. This section would codify the USPTO's current
practice of excluding any time consumed by an RCE from the
calculation of patent term adjustment under section
154(b)(1)(B). This change would overturn the November 1, 2012
decision in Exelixis, Inc. v. Kappos I\17\ and codify the
January 28, 2013 decision in Exelixis, Inc. v. Kappos II.\18\
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\17\No. 1: 12cv96 (E.D. Va. Nov. 1, 2012).
\18\No. 1: 12cv574 (LMB/TRJ) (E.D. Va. Jan. 28, 2013).
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Section 9(g) clarifies Federal jurisdiction over cases in
which a patent issue is not the primary issue in the case. This
provision is presumed to be an attempt to override the Supreme
Court decision in Gunn v. Minton\19\ in which the Court held
that a legal malpractice claim did not ``arise under'' Federal
patent law for purposes of section 1338(a). The Court applied a
four-prong test: ``federal jurisdiction over a state law claim
will lie if a federal issue is: (1) necessarily raised, (2)
actually disputed, (3) substantial, and (4) capable of
resolution in federal court without disrupting the federal-
state balance approved by Congress.'' Although the Court found
that the first two prongs were satisfied, jurisdiction was
absent because the patent question ``was not substantial in the
relevant sense'' and therefore the third prong was not
satisfied. This subsection focuses on the third of the four
prongs without relating it to the first two.
---------------------------------------------------------------------------
\19\568 U.S. __ (2013).
---------------------------------------------------------------------------
Section 9(h) extends the life of the patent pilot program
from 10 to 20 years.
Section 9(i) makes a series of seven additional changes it
classifies as ``technical,'' including one that extends the
time limit for bringing disciplinary proceedings before the
USPTO. Like several other technical changes, the rationale has
never been explained and it does not appear to be supported by
the USPTO.
Sec. 10. Effective date. Section 10 provides that unless
otherwise specified in the bill, the provisions shall become
effective on the date of enactment and apply to any patent
issued or any case filed on or after the date of enactment.
CONCERNS WITH H.R. 3309
As noted above, we oppose the legislation for a number of
reasons, including the rushed process; the failure to end USPTO
fee diversion; the legislation's limitations imposed on the
patent civil justice system in a manner that will harm all
patent holders, not just ``trolls;'' and its general disregard
for our system of mutual respect for the prerogatives of a
coequal branch of government by imposing unnecessary and overly
prescriptive mandates on the Federal courts. The following is a
more detailed description of these concerns.
I. RUSHED AND UNFAIR LEGISLATIVE PROCESS
Legislation involving a subject matter as critical and
sensitive as patent law should be reviewed and considered only
under the most careful and deliberative process. The America
Invents Act (AIA),\20\ was signed into law by President Barrack
Obama in 2011 which was the most comprehensive overhaul of the
U.S. patent system since 1952.\21\ That legislation was the
subject of numerous hearings over more than three
Congresses.\22\
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\20\Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat.
285, (2011).
\21\The White House, ``President Obama Signs America Invents Act,
Overhauling the Patent System to Stimulate Economic Growth, and
Announces New Steps to Help Entrepreneurs Create Jobs'' (Sept. 16,
2011).
\22\The AIA was intended, in part, to provide American inventors
and entrepreneurs with new or improved administrative alternatives to
costly litigation regarding patent validity, freeing them to focus on
innovation and job creation. Implementation of the various provisions
of the AIA was staggered to allow the agency adequate time to comply
with the new statutory mandates. ``America Invents Act: Effective
Dates, United States Patent and Trademark Office (USPTO)'' (Oct. 5,
2011) http://www.uspto.gov/aia_implementation/aia-effective-dates.pdf.
In addition to modifying USPTO practice and procedures to provide
alternatives to litigation, the AIA also sought to address allegations
of patent litigation abuse head-on. For example, a provision was
hastily added to the bill just prior to the markup to discourage the
improper joinder of multiple, unrelated defendants in a single suit.
David O. Taylor, ``Patent Misjoinder,'' 88 N.Y.U. L. Rev. 652, 655-656
(2013). Companies argued that entities that do not manufacture any
products would sue a large number of defendants in an inconvenient
forum on distinct grounds of infringement. Section 299 of the AIA
severely restricts this practice by imposing specific requirements that
must be met before a court may allow numerous accused infringers to be
sued together.
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Yet now, a little more than 2 years after the AIA was
signed into law, and at a time when many important aspects of
the new law are largely untested, we are again considering a
significant patent overhaul. In this context, and given the
stakes involved, it is all the more important that we proceed
with caution and deliberation. This was the message strongly
delivered to the Committee just a few weeks ago by David J.
Kappos, the most recent Director of the USPTO:
At the outset of considering further changes to our
patent system, we must recognize that the time constant
of the patent system--the period between new patent
application and court decision on patent infringement
claim--is very long. Many years. As such, the impact of
Congress' very recent major changes to our patent
system has barely begun to be felt. In such long time
constant situations, every engineering instinct and
every leadership instinct tells me to proceed with
caution.
Moreover, in long time constant systems such as our
patent system, over-correction is a major danger. By
the time an over-correction is apparent, it will be
years after the system is badly damaged. And we are not
tinkering with just any system here; we are reworking
the greatest innovation engine the world has ever
known, almost instantly after it has been significantly
overhauled. If there were ever a case where caution is
called for, this is it.
Caution in turn calls for a deliberative process that
takes the time to reach out and listen to all
stakeholders, including those who will be the fastest
ones off the mark. Many small innovators--today's
Edisons--have not had time to make their views heard.
Others having various levels of dependence on strong IP
rights are just now beginning to consider the prospect
of further changes to our patent system. We need to
allow these important stakeholders their time to
participate.
Caution also calls for us to ask: is the building on
fire? Do we have an emergency that requires immediate
action? No. The building is not on fire.\23\
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\23\Statement of David J. Kappos before the Committee on the
Judiciary, H.R. 3309 Innovation Act, Oct. 29, 2013 (emphasis added). In
this regard, it is useful to note the AIA required the Government
Accountability Office (GAO) to conduct a study of the litigation and
litigation practices of these ``non-practicing entities'' or NPEs. The
GAO study made some key observations about NPEs, more pejoratively
referred to as ``patent trolls,'' who engage in abusive litigation
tactics to enforce patents of dubious validity or patent portfolios
purchased for the sole purpose of monetizing through licensing or
litigation. U.S. Government Accountability Office, 2013, ``Intellectual
Property: Assessing Factors That Affect Patent Infringement Litigation
Could Help Improve Patent Quality'', GAO-13-465, at 2-3, http://
www.gao.gov/assets/660/657103.pdf. Chief among its observations was
that who or what qualifies as a ``patent troll'' cannot be determined
solely based on the entity's characterization as a NPE. NPEs themselves
defy precise definition and may include individual inventors who do not
produce or have not yet produced a product associated with their
patented invention; universities that partner with technology transfer
companies; or research and development companies that license their
patents to others in order to fund further research. NPEs may even
consist of manufacturing or ``operating companies'' that claim
infringement based upon patented products they no longer produce, or on
patents for which they have never produced a product that uses the
asserted invention. Due in part to this definition dilemma, the GAO's
analysis suggested that focusing on the identity of the patent holder
to assess the nature and scope of litigation abuses is likely
misplaced. Id., at 45. Instead, the GAO thought it noteworthy that the
vast majority of patent lawsuits regardless of the litigant, were based
on software patents. Significantly, the GAO also found that, despite
the arguments that abusive patent litigation by NPEs was pervasive, in
fact, ``companies that make products brought most of the lawsuits and
that nonpracticing entities (NPE) brought about a fifth of all
lawsuits.'' Id., inside cover of report, ``What GAO Found''. Moreover,
to the extent that there was an uptick in lawsuits by NPEs, the
increase was likely a consequence of the AIA's strict joinder provision
which led to plaintiffs suing more defendants separately, or due to a
rush to the courthouse by plaintiffs seeking to avoid the restrictive
joinder provision before the AIA was signed into law. Id, at 15.
Finally, the GAO concluded that there was little difference in the rate
of settlements of lawsuits whether brought by operating companies or
NPEs. Id., at 25.
Unfortunately, in this case the Committee on the Judiciary
has proceeded with undue haste and with a bill that goes well
beyond the issue of patent ``trolls'' and well beyond even the
patent law. We have only had a single legislative hearing, with
a single panel of four witnesses a mere 1 month ago.\24\ The
Chair ignored a bipartisan request signed by six Members of the
Committee seeking an additional hearing ``to further study the
text and impact''\25\ of the legislation. Subcommittee markup
was skipped and the bill proceeded to full committee where it
was marked up for a single day. A deadline for floor amendments
has been set by the Rules Committee on the very first day back
after the Thanksgiving District Work period, making it
difficult for Members of the full House to review the bill and
the report and develop meaningful amendments. H.R. 3309 is
scheduled for floor consideration the very first legislative
week after markup. In essence, we are acting as if there is an
emergency at a time when caution and deliberation are clearly
required.
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\24\Although the Intellectual Property Subcommittee held a number
of hearings to explore various aspects of the ``patent troll'' problem
(Hearing on: ``The International Trade Commission and Patent
Disputes,'' Wednesday 7/18/2012; Hearing on: ``Abusive Patent
Litigation: The Issues Impacting American Competitiveness and Job
Creation at the International Trade Commission and Beyond,'' Tuesday 4/
16/2013; Hearing on: ``Abusive Patent Litigation: The Impact on
American Innovation & Jobs, and Potential Solutions,'' Thursday 3/14/
2013), the Committee held only a single legislative hearing on the
proposed solutions consisting of a number of complex and overlapping
measures that would affect procedures before both the courts and the
USPTO.
\25\Letter from Representatives Doug Collins & John Conyers, Jr.,
et al., to Chairman Bob Goodlatte (Nov. 7, 2013).
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II. FAILURE TO END PTO FEE DIVERSION
A critical threshold failing of H.R. 3309 is its failure to
respond to the single most important problem facing our patent
system today--the continuing diversion of patent fees When the
AIA was passed 2 years ago, there was consensus on both sides
of the aisle that continuing fee diversion constituted a tax on
innovation and undermined efforts of the USPTO to reduce its
backlog. Unfortunately, loopholes in the final agreement and
the onset of sequester have again resulted in user fees being
diverted away from the USPTO.
The result is that nearly $150 million in badly needed user
fees have been diverted in Fiscal Year 2013. This loss is on
top of the estimated $1 billion in fees diverted over the last
two decades.\26\ By failing to provide patent examiners the
resources they need to review and analyze effectively the
hundreds of thousands of complex and interrelated patent
applications they receive every year, ongoing efforts at the
USPTO to keep pace with innovation and to continue to enhance
patent quality will be stymied. This diversion prevented
improvements to IT projects and resulted in the hiring of about
1000 less patent examiners.\27\
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\26\See Letter from Herbert C. Wamsley, Executive Director of the
Intellectual Property Owners Association to Ranking Members John
Conyers, Jr. and Mel Watt and Representatives Darrell Issa and Doug
Collins, (Oct. 29, 2013) (on file with House Committee on the Judiciary
Democratic staff).
\27\IPO Daily News for Friday, November 22, 2013, available at
http://www.ipo.org.
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There is widespread agreement by observers of the system
and stakeholders that this is an unacceptable and harmful
situation. Former PTO Director Kappos has testified:
Less than 2 years after the passage of the AIA and all
the accompanying focus on USPTO fee diversion, we found
ourselves again looking at an Agency having its
lifeblood, the user fees that come with the work asked
of USPTO by American innovators drained away. I simply
cannot overstate the destruction that is causing, as
the work remains without funding to handle it, creating
an innovation deficit that will require future
generations of innovators to pay into the Agency again
in hopes their fees are paid. Nor will it be possible
for the USPTO to accomplish the mandates of the AIA,
much less the added responsibilities contemplated by
parts of H.R. 3309, without access to the user fees
calculated to meet those challenges.\28\
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\28\Statement of David J. Kappos, before the House Judiciary
Committee, Hearing on H.R. 3309, Innovation Act., October 29, 2013
(emphasis addded).
Similarly, the Coalition for Twenty First Century Patent
Reform has written that ``The single most critical issue facing
the U.S. Patent and Trademark Office (USPTO) is its inability
to retain all of the fees paid by patent and trademark
applicants and to use those fees to provide the services for
which they were paid. Legislation to prevent USPTO user fees
from being diverted or sequestered to support other government
programs must be enacted.''\29\ This view is shared by the
Patent Office Professional Association,\30\ the American
Intellectual Property Law Association, \31\ and the Innovation
Alliance.\32\ Failure to include language ending PTO fee
diversion once and for all belies any serious effort to reform
and update the patent system.\33\
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\29\Letter from 21C.
\30\``The single most urgent problem facing the U.S. Patent System
is not `patent trolls,' it is stable and adequate funding for the
USPTO.'' Letter from POPA.
\31\``Finally, and perhaps most importantly, AIPLA strongly
believes that the single most important reform for improving the
quality of patents is requiring a fully funded USPTO.'' Letter from
AIPLA.
\32\``We have long supported ensuring that USPTO has full access to
the fee revenue that it collects. No other change would more
effectively enhance patent quality in the United States.'' Letter from
Innovation Alliance.
\33\Representatives Conyers and Watt, along with a bipartisan group
of 10 additional Members have introduced legislation, H.R. 3349, the
``Innovation Protection Act,'' which would end the problem of fee
diversion by creating a permanent funding mechanism to support the PTO.
Unfortunately, when this language was offered at the Committee, it was
rejected by the Majority in a party line vote.
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III. THE LEGISLATION LIMITS THE RIGHTS OF ALL PATENT HOLDERS, NOT JUST
PATENT ``TROLLS''
A. LThe Bill's Heightened Pleading Requirements Will Deny Legitimate
Inventors Access to the Courts
We oppose the heightened pleading requirements set forth in
Section 3(a) because they will work an unfairness against
patent holders across the board; are drafted in a one-sided
manner; will prolong litigation; and the provision is
unnecessary as the issue is already being dealt with by the
courts.
First, the information required by the heightened pleading
standard will in many cases create an unfairness since the
information may not be available to the patent holder at the
time of the filing.\34\ It is for these reasons that so many
key patent stakeholders oppose this provision of H.R. 3309. For
example, PhRMA has written that the section ``increases
pleading requirements in a way that raises questions about the
balance between having information available in pleadings and
providing for the prompt and effective access to the courts by
patent owners more broadly.'' \35\
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\34\Often the specific information required under this section may
only be obtained through discovery which typically cannot be obtained
prior to filing a complaint or other pleading Even though the bill
relieves a claimant of the obligation to provide the level of detail
required if the information ``is not reasonably accessible'', there is
no guidance for making that determination.
\35\PhRMA letter.
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The American Association for Justice has noted that ``[t]he
practical effect of this change is that many meritorious cases
will face early dismissal because corporate defendants will
simply refuse to provide the information necessary to plead the
case.''\36\ And in a similar vein, the Coalition for Twenty-
First Century Patent Reform, representing many of the largest
operating companies in America, has complained that ``[t]he
pleading requirements in proposed Sec. 281A go well beyond this
concept of fair notice of the basis for the allegation of
infringement and well beyond the requirements of Rule 11 of the
Federal Rules of Civil Procedure.''\37\ Likewise, several other
key participants in the patent community have expressed serious
concerns about the fairness and practicality of this provision,
including the National Association of Patent Practitioners\38\
and the higher education community.\39\
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\36\AAJ letter.
\37\21C letter.
\38\Letter from Priya Sinha Cloutier, Chair of The National
Association of Patent Practitioners Government Affairs Committee to
Representative Robert Goodlatte, Chairman of the House Committee on the
Judiciary (Nov. 19, 2013).
\39\Letter from the Association of American Universities, American
Council of Education, Association of American Medical Colleges,
Association of Public and Land-grant Universities, Association of
University Technology Managers, and Council on Governmental Relations
to Representative Robert Goodlatte, Chairman of the House Committee on
the Judiciary, and Representative John Conyers, Jr., Ranking Member of
the House Committee on the Judiciary (Nov. 19, 2013).
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Second, section 3(c), is drafted in a one sided manner in
that, as the ABA notes, it applies ``only to parties asserting
patent infringement, either as a plaintiff or as a defendant
counterclaimant [but] does not provide any corresponding
heightened pleading standards for asserting non-infringement or
invalidity in a complaint or counterclaim for Declaratory
Judgment.''\40\ Under this provision, a small inventor will be
required to provide detailed information in their complaint,
however, an alleged infringer does not bear the same burden to
explain with specificity to that inventor why they believe they
have not infringed the patent or why they believe the patent is
invalid. As the Institute of Electronics Engineers has written,
``[s]ince most patent infringement complaints draw a counter-
claim of patent invalidity, any such counter-claim should also
be pleaded with comparable particularity (e.g., citing applied
prior art references to all claim terms) that would support the
invalidity contention.''\41\
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\40\American Bar Association Section of Intellectual Property Law,
2013 Fall Council Meeting, Innovation Act Task Force Resolutions and
Reports, at 5, Nov. 8, 2013.
\41\Letter from Marc T. Apter, President of The Institute of
Electrical and Electronics Engineers to Representative Robert
Goodlatte, Chairman of the House Committee on the Judiciary, and
Representative John Conyers, Jr., Ranking Member of the House Committee
on the Judiciary (Nov. 19, 2013) (hereinafter IEEE-USA letter).
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Third, although the stated goal of the legislation is to
reduce and shorten litigation, the heightened pleading
requirement may well have the opposite effect by fostering
litigation over whether the patent owner has met the heightened
pleading standard or had reasonable access to the required
information if they admittedly did not comply.
Finally, as with many other provisions in section 3, it is
not necessary for Congress to enact a statutory change, as this
very matter is being addressed by the Federal judiciary
already. Indeed, in the patent context, courts have addressed
whether emerging pleading standards in the aftermath of the
Supreme Court's decisions in Bell Atlantic v. Twombly\42\ and
Ashcroft v. Iqbal\43\ override Form 18\44\ of the Federal Rules
of Civil Procedure.\45\ Courts have also considered the
interrelationship of Form 18, pleading requirements for claims
other than direct infringement,\46\ counterclaims,\47\ and
affirmative defenses\48\ after Twombly and Iqbal. The Judicial
Conference of the United States has issued its request under
the Rules Enabling Act \49\ for comments to its proposed
amendments to Federal Rules of Civil Procedure, including
revision of forms and discovery rules.\50\
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\42\550 U.S. 544 (2007).
\43\556 U.S. 662 (2009).
\44\Fed. R. Civ. Pro. 84 provides: ``The forms in the Appendix
suffice under these rules and illustrate the simplicity and brevity
that these rules contemplate.'' Form 18 in the Appendix is the template
for a complaint for patent infringement.
\45\In McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir.
2007), the Federal Circuit considered whether the bare allegations of
the predecessor to Form 18, Form 16, were sufficient post-Twombly. The
Court approved of the Form as sufficient for pleading direct
infringement by a pro se litigant. See, 501 F. 3d at 1357. Courts have
split about whether McZeal, decided before Iqbal and in the context of
a direct infringement claim asserted by a pro se litigant, is valid
post-Iqbal in other patent contexts. See, e.g., Ingeniador, LLC v.
Interwoven, 874 F. Supp. 2d 56 (2012).
\46\See, e.g., Selex Commc'ns, Inc. v. Google Inc., No. 1:09-CV-
2927-TWT, 2012 WL 1681824, at 4, 6 n.3 (N.D. Ga. May 11, 2012)
(requiring specific facts to support a theory of joint infringement on
ground that Form 18 provides sufficient complaint only for direct
patent infringement, and observing that complaint may also support a
claim for indirect infringement); DR Sys., Inc. v. Avreo, Inc., No 11-
CV-0932 BEN (WVG), 2012 WL 1068995, at 1 (S.D. Cal. Mar. 29, 2012)
(noting that ``because Form 18 does not address induced infringement or
contributory infringement, the heightened pleading standard of Twombly
and Iqbal apply to allegations of induced
infringement and contributory infringement.'' (citations omitted)).
\47\See, e.g., Memory Control Enter., LLC v. Edmunds.com, Inc., No.
CV 11-7658 PA (Jcx), 2012 WL 681765, at 2-3 (C.D. Cal. Feb. 8, 2012)
(finding Twombly/Iqbal applicable to counterclaims for patent
invalidity, even though infringement claims need only comply with Form
18 under Rule 84, in part because ``[j]ust as
Twombly and Iqbal did not rewrite the Federal Rules of Civil
Procedure--thus, Rule 84 still applies, and Form 18 still suffices--a
court cannot write into the Federal Rules a form for a claim for
declaratory judgment of patent invalidity.'').
\48\See, e.g.,Tyco Fire Prods. LP v. Victaulic Co., 777 F. Supp. 2d
893 (E.D. Pa. 2011) (concluding that while patent counterclaim subject
to Twombly's plausibility standard, the affirmative defense must only
provide fair notice of the issue).
\49\28 U.S.C. Sec. 2071-2077.
\50\Preliminary Draft of Proposed Amendments to the Federal Rules
of Bankruptcy and Civil Procedure: Request for Comment (Aug. 15, 2013),
available at http://www.uscourts.gov/uscourts/rules/preliminary-draft-
proposed-amendments.pdf.
---------------------------------------------------------------------------
An amendment offered by Rep. Jeffries during markup would have
mandated pleading parity to ensure that the exchange of information in
litigation was balanced and that specificity requirements applied to
all parties in a dispute. The Chairman opposed the amendment which was
defeated by a vote of 12-23.
B. LThe Bill's Fee Shifting Standard Will Favor Wealthy Parties and
will Chill Potential Meritorious Claims
We oppose section 3(b)'s fee shifting requirement because
it will favor wealthy corporate parties over individual
inventors; is drafted in an over-broad manner to apply in
beyond patent infringement actions; deprives courts of
discretion; and is unnecessary as the issue is under
consideration by the Federal courts. The related enforcement
provision allowing for expanded joinder in fee shifting cases--
section 3(c)--also raises a host of problematic issues of law
and equity.
Our first concern is that fee-shifting always favors the
party with greater financial resources, and thus could chill
potential meritorious claims. Enacting a mandatory regime into
our patent law would not only work an unfairness to independent
inventors, it would constitute a very unfortunate precedent in
our civil justice system generally. This concern was
articulated by the American Association for Justice: ``A `loser
pays' provision will deter patent holders from pursuing
meritorious patent infringement claims and protects
institutional defendants with enormous resources who can use
the risk of fee shifting to force inventors into accepting
unfair settlements or dismissing their legitimate claims.''\51\
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\51\AAJ Letter.
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Make no mistake, this provision is not a modest or
temperate step, instead of requiring that fees be shifted in
exceptional cases as set forth in current law, this provision
would create a presumption of fee shifting in every single
case, not just cases involving so-called ``trolls,'' with the
burden of establishing that fees should not be imposed borne by
the non-prevailing party. The dangerous nature of this
provision was highlighted by a recent article by the American
Enterprise Institute which noted:
By shifting the burden of proof onto the losing party,
it will require courts to examine the justification of
each and every case . . . it won't just be patent
trolls who pay at times, but at times the legitimate
companies who occasionally are found to infringe PAE
patents . . . [O]ur unique justice system, dedicated as
it is to allowing every American person and company its
`day in court' would be immutably changed in the area
of patent litigation. We'd be one step closer to
adopting the loser-pays model.\52\
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\52\Patent troll legislation: a closer look (pt. 2)--fee shifting,
Tech Policy Daily, November 26, 2013 (emphasis added).
In this regard, we would dispute the Majority's assertion
that section 3(b) is fairly based on the Equal Access to
Justice Act.\53\ EAJA was developed as a means to allow private
citizens to obtain legal fees when they prevail in litigation
against the U.S. government, not to serve as a model for fee
shifting in private lawsuits. Further, although the bill
purports to align itself with EAJA, the fees and expenses
scheme established by that Act is far more complex and balanced
than section 3(b). For example, EAJA permits the court ``in its
discretion [to] reduce . . . or deny an award, to the extent
that the prevailing party . . . engaged in conduct which unduly
and unreasonably protracted the final resolution of the matter
in controversy.''\54\ No such balance or flexibility for the
court is provided in this bill.\55\
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\53\See Section By Section, Innovation Act, available at http://
judiciary.house.gov/news/2013/
10232013%20%20Section%20by%20Section%20Patent%20Bill.pdf.
\54\28 U.S.C. Sec. 2412(d)(1)(c).
\55\During the markup, Ranking Member Melvin Watt offered an
amendment that would have restored judicial discretion to the
determination whether to shift fees by modifying the underlying statute
to permit shifting in ``appropriate'' as opposed to ``exceptional''
cases. The amendment failed by a vote of 12-23. Mr. Jeffries offered an
amendment that retains the mandatory character of the provision, but
lowers the standard of justification from ``substantially justified''
to ``reasonably justified'' for the nonprevailing party's position in
the case. The amendment passed by a vote of 36-2. Ranking Member Watt
then offered an amendment that would more accurately align itself with
EAJA and permit judges to consider the behavior of both the prevailing
and nonprevailing parties in determining whether to depart from the
American rule. Ranking Member Watt's amendment would have allowed the
court ``in its discretion [to] reduce . . . or deny an award, to the
extent that the prevailing party . . . engaged in conduct which unduly
and unreasonably protracted the final resolution of the matter in
controversy.'' The amendment failed by a vote of 17-21.
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Third, section 3(b) is drafted in an overly broad manner.
The higher education community has noted that the language is
so broad that it could potentially apply ``to any civil action
in which any party asserts a claim for relief arising under any
Act of Congress relating to patents. That scope sweeps in over
25 statutes containing patent law clauses, including the Space
Act, the Atomic Energy Act, the Non-Nuclear R&D Act as well as
all titles of the omnibus bills in which the Bayh-Dole Act and
amendments became law. The breadth of the proposed amendment
will impair parties' ordinary enforcement procedures and
litigation activities outside the scope of abusive patent
litigation.''\56\ BIO opposes the fee-shifting provision for
similar reasons, writing that it permits ``parties to seek
reimbursement of their litigation costs from other parties
under a vaguely-defined and potentially broad set of patent-
related cases.''\57\ The inclusion of language in the managers
amendment defining a non-prevailing party as one who offers a
``covenant not to sue'' may have the effect of increasing
litigation, with the Coalition for Twenty First Century Patent
Reform noting the provision may also have the unintended effect
of discouraging early settlement and prolonging costly
discovery.\58\
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\56\Statement from the Higher Education Community on H.R. 3309, The
Innovation Act, at 1, Nov. 8, 2013 (hereinafter Universities' letter)
(on file with Committee on the Judiciary Democratic staff).
\57\Letter from James C. Greenwood, President and CEO of the
Biotechnology Industry Organization to Representative Robert Goodlatte,
Chairman of the House Committee on the Judiciary (Nov. 14, 2013)
(hereinafter BIO letter).
\58\Summary of 21C Position, at 3-4.
---------------------------------------------------------------------------
Fourth, the fee shifting provision is again wholly
unnecessary because both the Supreme Court and the Federal
Circuit are preparing to rule on litigation concerning the
phrase ``exceptional cases.'' The Supreme Court has granted
certiorari in two cases that focus on fee shifting in patent
cases.\59\ The Court of Appeals for the Federal Circuit, which
is the appellate court for patent cases, is also preparing to
issue an opinion in a case on fee shifting in patent cases.\60\
---------------------------------------------------------------------------
\59\See Highmark v. Allcare Health Management, No. 12-1163 (cert.
granted); Octane Fitness v. Icon Health & Fitness Inc., No. 12-1184
(cert. granted); Sidense Corp. v. Kilopass Tech., Inc., No. 13-1193
(Fed. Cir. argued Oct. 9, 2013).
\60\See Sidense Corp. v. Kilopass Tech., Inc., No. 13-1193 (Fed.
Cir. argued Oct. 9, 2013).
---------------------------------------------------------------------------
Finally, we would also note that the joinder provision
included in section 3(c) in order to help enforce the fee
shifting provision raises a host of potential additional
concerns. Among other things, it is drafted in a one-way manner
that benefits alleged infringers. Deep pocketed defendants
would be guaranteed satisfaction of fee awards but small
companies, startups, and independent inventors would not be
similarly protected when they prevail as plaintiffs against
defendant infringers that hide their assets, file for
bankruptcy, or otherwise evade payment of fee awards. This
provision also raises constitutional concerns because it
creates standing for parties that would otherwise not have it.
In other words, a defendant may join a third-party at the end
of the case for purposes of fee shifting, but the third-party
had no standing to assert or defend themselves during the
course of the legal proceedings. The joinder provision may
allow defendants to ``bring higher education institutions and
their inventors, non-profit technology transfer organizations
associated with those institutions, federal laboratories, and
federal agencies within the fee-shifting purview.''\61\
Defendants already have other avenues to join plaintiffs,
including Federal Rules of Civil Procedure 19 and 20. As a
result, a broad range of patent stakeholders, including
21C,\62\ AIPLA,\63\ and BIO,\64\ have raised concerns with this
new joinder provision.
---------------------------------------------------------------------------
\61\Universities' letter, at 2.
\62\Summary of 21C Position, at 5.
\63\AIPLA letter.
\64\BIO letter.
---------------------------------------------------------------------------
C. LThe Bill's Discovery Limitations Will Prolong Litigation and
Increase Costs
The legislation's limitations on discovery prior to holding
hearings to construe patent claims and determine their scope
set forth in section 3(d) are objectionable because they will
delay litigation and lead to greater expenses for the parties
and can be more properly dealt with by the courts.
First, the discovery provision is likely to extend
litigation and increase costs.\65\ Numerous participants in the
patent system, including many large patent holders have stated
that the provision will be harmful and counterproductive. For
example, PhRMA has written section 3(d) will ``impose
restrictions on discovery that could serve to delay ultimate
resolution of patent litigation and increase costs.''\66\
Similarly, BIO asserts the legislation creates ``opportunities
for systematic delays in patent litigation by inviting
piecemeal discovery and adjudication that would push back a
determination of patent infringement liability until much later
in the case.''\67\ The Coalition for Twenty-First Century
Patent Reform agrees that ``under proposed sec. 299A, discovery
that might otherwise be undertaken concurrently . . . will be
postponed, thus delaying trial while the postponed discovery is
completed, delaying the resolution of all patent cases. Such an
. . . approach would be less efficient and likely more costly .
. . The Innovation Act's approach to patent case discovery
reflects a narrow and one-sided view of patent litigation, in
essence legislating that each case be managed in the manner
that a defendant in an action brought by a non-practicing
entity would seek to have the case managed. This unbalanced and
inflexible approach to all cases is reflected in the automatic
stay of discovery pending claim construction.''\68\ The IP Law
section of the ABA concurs, writing, the subsection will
``further delay the resolution of patent litigation.''\69\
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\65\Further, the provision's rigidity in restricting judicial
discretion only in cases with a statutory deadline (specifically
including cases where a pharmaceutical company submits an abbreviated
application for approval of a new drug), ``when necessary to resolve a
motion properly raised,'' or ``as necessary to prevent the manifest
injustice'' could also lead to the loss of evidence as witness
recollection can fade over time, documents may be lost or destroyed,
and witnesses may become unavailable.
\66\PhRMA letter.
\67\BIO letter.
\68\21C letter.
\69\American Bar Association Section of Intellectual Property Law,
at 24.
---------------------------------------------------------------------------
Second, these new limitations on discovery ignore the role
of the courts in setting proper discovery time lines. It was
recently opposed by Judicial Conference's Court Administration
and Case Management Committee. In particular, they oppose this
provision because it unnecessarily removes judicial discretion
in setting discovery.
The mandatory nature of the discovery limitation ignores
the fact that Federal courts with the most experience and skill
in managing patent infringement cases have adopted local rules
that specify the timing and scope of discovery, but none have
adopted rules automatically staying discovery pending claim
construction.\70\ The Judicial Conference shares this concern
and also observed that the proposed change will create
confusion in relation to the local rules the patent pilot
courts have developed to manage discovery. The Federal Circuit
is also dealing with the precise issue of potentially excessive
discovery cost, as their Advisory Council released a Model
Order Regarding E-Discovery in Patent Cases to strike a
``balance between the value of discovery and its costs.''\71\
Of note is that the Model Order Regarding E-Discovery specifies
that both abusive or ``disproportionate'' requests and
``nonresponsive or dilatory discovery tactics'' are relevant
factors for ``cost-shifting considerations.''\72\
---------------------------------------------------------------------------
\70\Summary of 21C Position, at 6.
\71\See Federal Circuit Advisory Council's Model Order Limiting E-
Discovery, available at http://www.cafc.uscourts.gov/images/stories/
announcements/Ediscovery_Model_Order.pdf.
\72\See id., at 6 para.3.
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IV. THE MANDATE ON THE COURTS WILL UNDERMINE THE
FEDERAL JUDICIARY
We oppose section 6 of H.R. 3309, dictating that the
Federal judiciary adopt a series of new rules and judicial
changes, because the provision undermines the judiciary by
intruding on the cherished principle of comity between coequal
branches of government and ignores the very real expertise the
courts are able to bring to the issue of developing rules and
procedures for patent cases.
First, the very idea of Congress dictating procedures to
the Federal courts is an anathema to our system of government.
As a matter of fact, the Obama Administration took a strong
stand against such a mandate on November 12 when they opposed
the H.R. 2655, Lawsuit Abuse Reduction Act, which would have
also overridden the Rules Enabling Act.\73\ We believe the
Administration's objections to LARA are applicable here, namely
that the Innovation Act ``would circumvent the usual procedure
for amending the Federal Rules of Civil Procedure . . . raise
the amount and cost of civil litigation and provide more
opportunity for unnecessary delay and harassment . . . could
chill meritorious claims by deterring worthy plaintiffs from
challenging existing laws or seeking novel interpretations of
them . . . [and] is an attempt to amend the rules directly,
over the objections of the Judicial Conference.''
---------------------------------------------------------------------------
\73\See Statement of Administration Policy, H.R. 2655, the Lawsuit
Abuse Reduction Act, available at
---------------------------------------------------------------------------
This is also why Section 6 is so strongly opposed by the
Federal judiciary and the American Bar Association. The
Committee on Rules of Practice and Procedure of the Judicial
Conference wrote to the Committee that ``legislation that
mandates the contents of the Federal rules contravenes the
longstanding Judicial Conference policy opposing direct
amendment of the Federal rules by legislation instead of
through the deliberative process Congress established in the
Rules Enabling Act. . . . We worry that this kind of approach
will undermine rather than further, the development of sound
rules and practices.''\74\
---------------------------------------------------------------------------
\74\Judicial Conference Letter.
---------------------------------------------------------------------------
The ABA also objects, writing ``Our primary concerns regard
provisions of the bill that call for Congress, rather than the
courts, to establish certain rules of procedure for the Federal
courts, thereby circumventing a rule making process that has
served our justice system for almost 80 years . . . This
unhealthy precedent could prompt calls to Congress to provide
special rules of procedure in still other areas of the law,
leading to the balakanization in the administration of
justice--precisely the opposite result that the Rules Enabling
Act process was designed by Congress to avoid.''\75\
---------------------------------------------------------------------------
\75\ABA letter.
---------------------------------------------------------------------------
Second, Congress' historic deference to the courts on
matters involving judicial rules and procedures is not some
arcane notion. It is based on the reality that the courts are
far better equipped and less partial in making these intricate
determinations. As the AIPLA wrote: ``We fear that . . . these
[changes] would intrude on the established role of the Judicial
Conference and would overly restrict the traditional discretion
of district court judges to manage their cases. In this regard,
AIPLA is concerned that the bill will mandate inflexible rules,
many of which have unintended consequences including impeding
access to the courts, and we further believe that the Judicial
Conference in its own discretion is in a better position to
work with the district courts to institute appropriate case
management rules.''\76\
---------------------------------------------------------------------------
\76\AIPLA letter.
---------------------------------------------------------------------------
In this regard, the Rules Enabling Act provides for a
deliberative process for the Judicial Conference to amend court
rules and allows input from interested parties, including the
public and Congress. Recently, the Judicial Conference issued a
request for comments to its proposed amendments to the Federal
rules, including revision of forms and discovery rules.\77\
Before the proposed amendments become final, Congress has the
authority to reject, modify, or defer any final rule. Yet, this
legislation ignores that reasonable process. A far more
appropriate and traditional means of indicating Congress'
interest in a rule making matter include describing specific
concerns in a committee report.
---------------------------------------------------------------------------
\77\See Preliminary Draft of Proposed Amendments to the Federal
Rules of Bankruptcy and Civil Procedure: Request for Comment (Aug. 15,
2013), available at http://www.uscourts.gov/uscourts/rules/preliminary-
draft-proposed-amendments.pdf.
---------------------------------------------------------------------------
Though our fundamental concern with section 6 is that it
undermines the independence of the Judiciary, it is important
to note that section 6 includes two unrelated substantive
amendments to the Bankruptcy Code. Section 6(d) of the
Innovation Act makes two significant amendments to the
Bankruptcy Code, first by requiring that U.S. law be applied to
patent licenses in international bankruptcy cases, whether or
not it should apply to that license, and second by requiring
bankruptcy trustees to perform certain duties under trademark
licenses even where it has no assets or ability to do so. Both
of these changes are strongly opposed by the National
Bankruptcy Conference, a leading group of non-partisan
bankruptcy legal experts.
The first change is an attempt to pre-empt an appeal
currently pending in the 4th Circuit Court of Appeals.\78\ The
issue before the court is whether the U.S. bankruptcy court
erred in ruling that Bankruptcy Code section 365(n) may be
applied to a German insolvency proceeding to constrain the
application of German law. Given the gravity of this issue and
its international ramifications, the United States filed an
amicus brief in that case.
---------------------------------------------------------------------------
\78\In re Qimonda AG, 462 B.R. 165 (Bankr. E.D. Va. 2011) [give
subsequent history].
---------------------------------------------------------------------------
The second change regarding the treatment of trademarks is
also significant because it could result in an impossibility,
i.e., requiring a debtor that essentially has gone out of
business to perform certain affirmative duties, even where
there are no assets available to fund the execution of such
duties. In effect, section 6(d) imposes an affirmative duty on
a debtor-licensor that has rejected a license contract to
monitor and control the quality of the licensed product or
service.\79\ This provision wold apply to all types of
bankruptcy, including a chapter 7 case where the debtor has
gone out of business, but would nonetheless be required to
perform certain duties with respect to this form of trademark.
As with the other aspect of section 6(d), this provision has
nothing to do with the issue of abusive patent litigation.
Obviously, careful consideration of the implications of a
change is necessary if we are to avoid unintended consequences.
Although we believe the issues presented by section 6(d) are
worthy of further consideration, in the absence of any
substantive analysis or deliberative process of these issues,
we cannot support them.
---------------------------------------------------------------------------
\79\This provision would apply to all types of bankruptcy cases,
that is, liquidating chapter 7 cases, reorganizing chapter 11 cases,
and transnational chapter 15 bankruptcy cases. For example, in a
chapter 7 case where the debtor has ceased to exist because it has gone
out of business, this provision would require the bankruptcy trustee to
perform certain duties even where there are no assets available to fund
the execution of such duties.
---------------------------------------------------------------------------
There are numerous other provision in the bill which like
the bankruptcy amendments are also unrelated to the issues of
patent ``trolls'', yet they somehow made there way into the
legislation. For example, section 9(a) repeals section 145 of
the patent law, granting patent owners the right to a de novo
review of the denial of a patent application.\80\ Section 9 (i)
for some reason extends the time period for bringing judicial
discipline proceedings, even though we understand the PTO does
not need this authority, as they can use tolling agreements if
time is running out in a disciplinary matter. These are just
two examples, but the legislation includes numerous so-called
``technical changes'' which clearly warrant further vetting.
---------------------------------------------------------------------------
\80\Currently, the patent applicant has an option to appeal an
adverse decision by the USPTO on their patent application directly to
the Federal Circuit under 35 U.S.C. Sec. 141 or to initiate an action
against the USPTO in district court under 35 U.S.C. Sec. 145. While the
scope of review on appeal to Federal Circuit is narrowly based upon the
record that was before the USPTO, the district court considers the
denial de novo. Therefore, proceedings before the district court may
consider new evidence and subpoena witnesses that were unavailable or
unwilling to appear before the USPTO. The Supreme Court in Kappos v.
Hyatt recently affirmed the expansive breadth of evidence that a patent
applicant may introduce in a Sec. 145. There the USPTO argued that a
district court should only admit new evidence if the patent applicant
had no reasonable opportunity to present it to the USPTO during its
consideration of the application. The USPTO also argued that even when
new evidence was permitted to be introduced, the district court should
consider that evidence along with the findings of the agency under a
deferential standard of review. The Supreme Court rejected both
arguments finding instead that an applicant in a Sec. 145 proceeding
was limited only by the Federal Rules of Evidence and the Federal Rules
of Civil Procedure with respect to new evidence that could be
introduced and that the district court's determinations of disputed
questions of fact based on new evidence would be de novo.
---------------------------------------------------------------------------
CONCLUSION
We have stated repeatedly that we are willing to work with
the Majority and any and all stakeholders and interested
parties to develop a fair process to consider common sense
solutions that would improve the patent system and respond to
the problems posed by asymmetries in the patent litigation
system. That is why we all voted for a Democratic Substitute
that would have pursued such a reasonable legislative
route.\81\ We also strongly believe that any serious reform of
the patent laws must include once and for all an end to fee
diversion from the USPTO to ensure adequate hiring, proper
training of examiners, and sustained patent quality. However,
we are unwilling to support changes that go well beyond the
problems of patent ``trolls,'' would create an imbalance in the
patent system skewed in favor of big corporate interests,
negatively impact all patent owners thereby undermining
innovation, and would encroach on our longstanding deference to
the prerogatives of the Judiciary. For these reasons, we
dissent from H.R. 3309.
---------------------------------------------------------------------------
\81\At the markup, Democratic Members of the Committee
overwhelmingly supported a substitute that responded to the real
problems of patent abuse without upsetting the entire patent law
system. In addition to including provisions concerning real parties in
interest, customer stays, and small business assistance, the
substitute, offered by Ranking Members Conyers and Watt, included a
revolving fund to end fee diversion, required a study on the practice
of deceptive demand letters and a report with tailored recommendations
on changes to laws and regulations that would deter the use of those
letters. Unfortunately, the substitute failed 13-17 on a nearly party
line vote. We believe that the substitute provides a better baseline
legislative approach from which to begin to address abusive tactics by
the ``patent trolls.''
John Conyers, Jr.
Robert C. ``Bobby'' Scott.
Melvin L. Watt.
Sheila Jackson Lee.
Henry C. ``Hank'' Johnson, Jr.
Additional Views
We support a reasonable and fair approach to address the
issue of abusive patent litigation. Nevertheless, we continue
to have concerns about how H.R. 3309, the ``Innovation Act,''
would impact the independence of the federal judiciary, impose
limits on pleadings and discovery, and place intrusive mandates
on the court system. We are also very concerned that the
legislation, as currently drafted, is overly broad. We write
separately to highlight some of the concerns that we continue
to have with the bill.
It is essential that we strike the appropriate balance
between addressing the issue of abusive patent litigation and
avoiding unintended consequences. Inventors, start-ups, and
tech entrepreneurs must be protected. Although the process
leading up to the markup was not perfect, we are encouraged
that some of the bill's provisions have been improved. For
example, we appreciate that the fee shifting provision was
slightly improved. Accordingly, we look forward to working with
our colleagues to further improve this bill so that the final
version is one that we can continue to support.
While many of the provisions currently in the bill are
designed to limit patent litigation abuse, it is critical that
these provisions do not harm inventors and small entrepreneurs.
As the Government Accountability Office study on patent
litigation found, the patent troll problem accounted for only
19 percent of the cases between 2007 and 2011, demonstrating
that the extent of the problem does not merit this rushed
effort.\1\ This underscores why we should proceed with caution
to ensure against unintended consequences and legislative
overreach.
---------------------------------------------------------------------------
\1\Government Accountability Office, Assessing Factors That Affect
Patent Infringement Litigation Could Help Improve Patent Quality, GAO-
13-465, at 17 (Aug. 22, 2013).
---------------------------------------------------------------------------
Several Democratic amendments that would have addressed
many of these concerns were offered and defeated during the
markup of the bill. We hope as the bill moves to the floor many
of these recommended revisions will be made. In addition, we
supported the substitute amendment that was offered by Ranking
Member Conyers and Congressman Watt because it would respond to
the real and identifiable problems without upsetting the entire
patent law system. And, we agreed that the substitute addressed
one of the most important issues, making sure that there is an
end to fee diversion, so that the Patent and Trademark Office
has access to all of its fees.
We have traditionally been opponents of fee shifting for
many years. Although there was a fee shifting amendment
accepted at markup, which we view as an incremental
improvement, we continue to have concerns that the language
remains broad. While we agree that we should work to address
abusive patent litigation, we do not believe that it should be
addressed in a way that hurts honest inventors trying to
enforce their patents. This legislation must be viewed from
both the perspective of the small company that is sued and the
small inventor who may have a valid case.
We also have concerns that the provisions in section 3
would unduly limit a patent holder's rights. In particular,
section 3 could harm legitimate inventors who are seeking to
defend their patents. Specifically, Section 3(d) would limit
discovery in every patent infringement case until the court has
construed the patent claims at issue. The language in the bill
restricts the discretion of judges to manage cases in their
courts, and presents the prospect of prolonging patent
litigation and substantially increasing its already-high cost.
This unbalanced approach limits a judge's discretion and could
harm patent owners seeking to protect their patented
technologies and products against infringement quickly and
expeditiously.
Section 6 of the bill also remains problematic. The
Judicial Conference warns that it will ``undermine, rather than
further, the development of sound rules and practices.''\2\
This provision is an unnecessary imposition on the independence
of the judicial branch of government. The Conference explains:
---------------------------------------------------------------------------
\2\Letter from Jeffrey S. Sutton, Chair of the Committee on Rules
of Practice and Procedure of the Judicial Conference of the United
States, and Jonathan C. Rose, Secretary of the Committee on Rules of
Practice and Procedure of the Judicial Conference of the United States
to Representative John Conyers, Jr., Ranking Member of the House
Committee on the Judiciary (Nov. 6, 2013).
[L]egislation that mandates the contents of federal
rules contravenes the longstanding Judicial Conference
policy opposing direct amendments of the federal rules
by legislation instead of through the deliberative
---------------------------------------------------------------------------
process in the Rules Enabling Act. . . .
By dictating the outcome of the Rules Enabling Act
process with respect to potential rules, Section 6 of
H.R. 3309 runs counter to that process. . . . Instead
of mandating the outcome of the Rules Enabling Act
process, Congress may wish to urge the Judicial
Conference's Rules Committee to study whether certain
rules should be amended to address abusive patent
litigation tactics and/or to implement the provisions
of the Innovation Act. That approach would allow
Congress to express its interest in addressing these
problems and would respect the long-established virtues
of the deliberative process created by the Rules
Enabling Act.\3\
---------------------------------------------------------------------------
\3\Id. (original emphasis).
We concur with the Conference's concerns. Section 6 will
not further the development of sound rules and practices.
For these reasons, we believe the bill should continue to
be improved and we hope these changes are made as the bill
progresses to the floor.
Luis V. Gutierrez.
Cedric Richmond.
Joe Garcia.
Steve Cohen.