INVENTIVE STEP

Sen. Charles Schumer (D-NY) has introduced a bill in the Senate that would expand the AIA’s temporary review of business method patents in the financial services industry.  The bill would simply delete the sunset provision in the AIA and replace the “financial product or service” language in the AIA with “an enterprise, product, or service.”  The intent, presumably, is to expand the current PTO review to include business method patents in any industry, not just the financial services industry.

The bill is designated as S. 866 and has been referred to the Senate Judiciary Committee.

While the bill does not use the term “patent trolls” at all, Sen. Schumer recently issued a press release where he indicated that he intended to introduce legislation to crack down on patent trolls.  These entities are costing “legitimate companies” billions of dollars per year.  He asserts that the expanded potential to have patents reviewed by administrative experts at the PTO will save legitimate companies on litigation costs.

Some might suggest that this legislation can have a very different effect from that intended by Sen. Schumer.  If the patent makes it through the PTO review a second time (and they usually do for reexamination), the patent may actually be viewed more strongly by juries.  The patent has not only survived initial review by the PTO, but it has also withstood the additional scrutiny of the new review procedure.

Last year, several members of Congress sought to limit patent infringement suits concerning computer hardware and software.  If the suit did not have a “reasonable likelihood of succeeding,” the losing party would be required to pay all of the legal costs of the lawsuit, including attorneys’ fees.  This was sought to be a deterrent to frivolous litigation.

Now, Reps. Jason Chaffetz (R-UT) and Peter DeFazio (D-OR) are at it again.  They have introduced H.R. 845, Saving High Tech Innovators from Egregious Legal Disputes (SHIELD).  Now, instead of targeting the computer hardware and software industries, they have set their sights on non-practicing entities (NPE) or patent trolls.

The new bill discards the “reasonable likelihood of succeeding” standard (presumably because it was too vague) in favor of simply requiring any losing NPE to pay the costs and fees associated with the litigation.  Put simply, if you don’t practice the patent and bring an infringement suit, if you lose, you pay.

The bill defines an NPE in the negative.  A party is not an NPE if (1) it is the original inventor or co-inventor of the patent, (2) it is the original assignee of the patent, (3) it is a university or technology transfer organization associated with a university, or (4) “[s]uch party can provide documentation to the court of substantial investment made by such party in the exploitation of the patent through production or sale of an item covered by the patent.”

The defendant in such litigation would simply file a motion with the court that the patent owner is an NPE.  The patent owner would then have 90 days to prove that it meets one of the four criteria to not be deemed an NPE.  If the court determines that the patent owner is an NPE, the patent owner would be required to post a bond to cover the entire costs of the litigation.  This amount would be awarded to the defendant in the event it prevails.

Analysis

The bill is an improvement over the previous one in that it doesn’t target a specific technology area.  It is still, however, completely unnecessary.  The power to award attorneys’ fees to the prevailing party already exists under § 285.  Perhaps this section should be applied with more frequency than it currently is.  This would be a simpler fix than that proposed by the SHIELD bill.

There are definitely entities that seek to exploit the fact that patent litigation is very expensive by filing lawsuits that lack substantial factual or legal basis.  These lawsuits are a drain on the target’s resources.  A patent, however, is a property right.  As such, it may be bought, sold, transferred, or otherwise alienated as its owner sees fit.  If an inventor cannot transfer or sell its patent to an NPE, that patent now has less value as the market for its exploitation is smaller.  In this regard, the SHIELD bill seems misguided.

Weeding out frivolous lawsuits, not just in patent law but in all areas of the law, is an admirable idea.  The SHIELD bill, however, does not appear to be the answer.

President Obama has nominated Raymond Chen and Todd Hughes to fill Federal Circuit seats vacated by Judges Linn and Bryson when they took senior status.

Raymond Chen

Since 2008, Raymond T. Chen has served as the Deputy General Counsel for Intellectual Property Law and Solicitor for the USPTO.  He began his career as an intellectual property litigator with Knobbe Martens in California.  From 1996-98, he served as a Technical Assistant at the Federal Circuit where he acted as a staff attorney.  In 1998, he joined the PTO as Associate Solicitor before rising to his current position in 1998.

Chen has extensive experience before the Federal Circuit while working in the Solicitor’s Office.  He has argued over 20 cases, including Bilski, Nuijten, and Comiskey, and advises the PTO’s examining corps on developing legal issues.

Todd Hughes

Since 2007, Hughes has served as Deputy Director of the Commercial Litigation Branch of the Civil Division at the United States Department of Justice.  He has worked in the Justice Department since 1994 in the Commercial Litigation Branch.  He has extensive experience before the Court of Federal Claims, as well as the Federal Circuit and Court of International Trade.

If confirmed, Hughes would be the first openly gay Federal appeals court judge.  Obama previously nominated openly gay attorney Edward DuMont to the court, but he withdrew his nomination which was stalled before the Senate Judiciary Committee.

Federal Circuit

The Federal Circuit is statutorily entitled to 12 judges, but is currently operating with only 9.  Richard Taranto was nominated in November 2011 and approved by the Judiciary Committee last March.  Yet, his nomination has failed to reach the floor of the Senate.

Both nominees seem to be highly qualified for positions on the court.  Raymond Chen is especially well known in the IP community and at the Federal Circuit.  Given the Senate’s inability to confirm judicial nominees, even those that shouldn’t be contentious, it is unclear when any of these nominees may join the court.

Both houses of Congress have now passed the AIA Technical Corrections bill.  Notably, the bill does not contain the language regarding patent applications filed prior to June 1995:  there is no longer any requirements regarding the length of patent term for any granted patent, nor any requirement for a PTO study of the issue.

Indeed, the bill does very little other than permit granted patents to be immediately subject to inter partes review and a few other minor provisions.

The bill now requires President Obama’s signature before becoming law.

Yesterday evening, the House of Representatives passed the AIA Technical Corrections bill by a vote of 308-89.  Prior to passage of the bill, it was amended to remove the rather draconian provisions that would eliminate the transition patent term for applications filed prior to June 7, 1995.  Instead, the bill requires a study or report on those applications.

The bill will now require passage by the Senate and signature from Pres. Obama prior to becoming law.

As reported on Patently-O, the House passed S. 3486, which was originally passed by the Senate in September.

The bill provides for implementation of the Hague Agreement Concerning International Registration of Industrial Designs and the Patent Law Treaty ratified by the Senate in 2007.  Substantively, the bills extend the term of design patents to 15 years from issuance and change other aspects of international applications by permitting up to 100 designs to be included in a single international application and permitting provisional rights in the design from the publication date of the international application.

The bill now proceeds to President Obama for signature and enactment.

As expected, a bill to provide technical corrections to the America Invents Act was introduced on Friday in the House of Representatives:  H.R. 6621.

Manus Cooney of American Continental Group provides a good summary at IPWatchdog.

Most of the proposed changes are indeed technical and do not greatly affect on inventors.  Of interest are proposed changes to eliminate a “dead zone” for patents subject to post-grant review and technical corrections for the time period for instituting derivation proceedings.

In 1995 when the US passed the Uruguay Round Agreements Act, it changed the term of patents from 17 years the issue date to 20 years from the earliest filing date.  For applications pending on the Act’s effective date, June 8, 1995, the patent term is the longer of the two.  For example, for a patent application filed June 7, 1995 and issued June 7, 1997, the patent would expire June 7, 2015.  If the patent issued June 7, 1999, the patent would expire June 7, 2016.

There are still a few applications pending from prior to the enactment date, meaning that if a patent application was filed June 7, 1995 and did not issue until December 3, 2012, it would not expire until December 3, 2029, more than 34 years after the application was filed.

The new bill seeks to eliminate the transition patent term, meaning that for all applications not issued within a year of passage of the bill, the 20 year term would apply.  If the patent application was filed June 7, 1995 and issued January 1, 2014, it would expire on June 7, 2015, giving it an 18 month patent term.

The bill provides no fix to the post-grant estoppel provisions, nor does it provide clarification of the “disclosure” for the newly limited grace period for inventor activity.

Congress will probably spend most of the Lame Duck session on the fiscal cliff which means that a bill like this one will probably pass without debate, possibly tacked onto another, completely unrelated, bill.

Before Congress left Washington to spend full time in campaign mode, the Senate unanimously passed S.3486:  Patent Law Treaties Implementation Act of 2012.

The two treaties, the Hague Agreement Concerning International Registration of Industrial Designs and the Patent Law Treaty, were originally signed by President Bill Clinton and ratified by the Senate in 2007.  This bill and its sister bill in the House, H.R. 6432, are simply implementing legislation necessary for the treaties to take effect in the US.

The treaties generally concern design patents and would change the term and conditions for such patents.  The goal is to make it easier to file a single application for filing in multiple countries.

It is likely that the House will take up, and probably pass, the companion bill during a lame duck session after the election.  There is also speculation that Congress may attempt some technical amendments to last year’s America Invents Act during such as session as well.

IPWatchdog has provided a good summary of the bill.

Last week, the Senate Judiciary Committee approved the appointment of Richard Taranto to the Federal Circuit.  The vote was unanimous but for Sen. Mike Lee (R-UT) who has committed to vote against all of President Obama’s nominees as a protest to several recess appointments made during a two-day congressional break in January.

It seems that Taranto should sail through a confirmation vote from the entire Senate.  The question is simply a matter of when that body will get around to it.  The Federal Circuit has not had its full complement of 12 judges since October 2009 when Judge Schall took Senior Status.