Archive for the ‘Congress’ Category

Bill Introduced to End Fee Diversion

March 17, 2014

Sen. Diane Feinstein (D-CA) has introduced the Patent Fee Integrity Act to purportedly end Congress’ theft of PTO user fees.  The bill would place user fees into a fund that can only be used by the PTO for its operations.

Fee diversion was a big part of the debate over the America Invents Act, but ultimately the provisions to end that practice were removed prior to final passage.  Indeed, Congress stole $120 million in PTO funds due to sequestration cuts and has taken $1.1 billion in user fees from the PTO since 1990.  This amounts to an extra tax on innovation in the US.

Congress periodically introduces these types of bills and they never go anywhere.  During the AIA debate over the issue, Rep. Lamar Alexander (R-TX) basically told PTO users to “trust me” there will be no more fee diversion.  If that were so, the PTO would not have been subject to sequestration cuts and would not have been in danger of closing during the government shut down, as users continued to file patent applications to fund the Office.

Meanwhile, Rep. John Conyers’s (D-MI) bill to end fee diversion has not advanced beyond the House Subcommittee on Courts, Intellectual Property and the Internet.

Another New Demand Letter Bill Introduced in Senate

March 5, 2014

220px-Claire_McCaskill,_Official_portrait,_112th_CongressCongress is continuing its quest to defeat the evil patent troll monster.

On the heels of the House passage of the Innovation Act in December that would bar patent owners from sending “purposely evasive” demand letters to secure willful infringement verdicts and require identification of the real party in interest, and the Patent Transparency and Improvements Act being considered by the Senate Judiciary Committee that includes a number of requirements for infringement demand  letters and would permit the FTC to act against parties sending out fraudulent letters, Senator Claire McCaskill (D-MO) has introduced the Transparency in Patent Assertion Act.

The bill, S. 2049, would similarly set minimum requirements for demand letters sent by patent assertion entities and empower the FTC to act against companies asserting patents as scams.  The bill would require the demand letter to include a detailed description of the patent at issue and the accused product or service, including how it infringes the patent.  The letter must also include the name and address of the person who has the right to enforce the patent.

Sen. McCaskill held a hearing on patent trolls in November where she made her feelings about such “bottom feeders” and “scam artists” quite well known.

If Congress, President Obama, and the Patent Office are of one mind on the evils of patent trolls, why the need for so many different bills and initiatives?

Innovation Act Passes House

December 6, 2013

Yesterday, the House of Representatives passed the Innovation Act, H.R. 3309, by a vote of 325-91.  The bill now heads to the Senate where a similar bill, the Patent Transparency and Improvements Act, S. 1720, is currently pending.

Prior to passage by the House, several amendments were made to H.R. 3309.

The use of demand letters or notice to potential infringers has often been used to later establish claims of willful infringement.  Once the potential infringer is put on notice of the patent, continued infringement is alleged to be willful.  One amendment seeks to provide significantly greater requirements for such letters. 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, identifies the ultimate parent entity of the claimant, 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.

The requirement to identify the “ultimate parent entity of the claimant” was added.

The provision to repeal 35 U.S.C. § 145 was deleted.  Section 145 permits applicants who are dissatisfied with a final PTO decision on the merits of a patent application to sue the PTO in district court to obtain the patent.  This section has nothing to do with patent trolls and should be taken up and debated in a separate bill.

A requirement for an economic study of the impact of the legislation on individuals and small businesses owned by women, veterans and minorities was also added.

Not surprisingly, this legislation is controversial.  Industry groups are lining up for and against the legislation.  One specific problem is that the PTO has not weighed in.  This is also not surprising given that the agency has been leaderless since David Kappos stepped down in January.  Acting Director Teresa Stanek Rea has also left the PTO last month.  Kappos testified against passage of the bill, but seems to carry much less weight since leaving the Office.

The PTO no longer has a Director or a Deputy Director.  What is the Administration waiting for to nominate new leaders for these positions?  Margaret (Peggy) Focarino has been delegated to undertake the leadership positions that have been vacated.

Innovation Act Approved by Committee; New Troll Bill Introduced in Senate

November 21, 2013

Congress continues its work to pass legislation aimed at reducing abuse from patent trolls.

Earlier this week, House Judiciary Committee Chairman Bob Goodlatte (R-VA) had introduced a Manager’s Amendment to the Innovation Act, H.R. 3309.  The Amendment eliminated provisions in the original bill that had nothing to do with patent trolls, such as the provision expanding and making permanent the PTO Business Method review proceedings.

Yesterday, the Committee held a markup session where the majority turned back numerous proposed Democratic amendments aimed at softening many of the bill’s provisions related to discovery, fee shifting, and other provisions.  There were objections that the bill is ostensibly aimed at patent trolls, but its provisions apply to all patent infringement plaintiffs.

The only amendment of any substance that was approved by the Committee was intended to somewhat soften the fee shifting provisions.  While the original bill called for automatic fee shifting unless the losing party’s conduct was “substantially justified,” the language was amended to “reasonably justified.”  Fee shifting could also be waived if it would cause economic hardship to the losing party.  The new provision is meant to apply only to egregious cases.

The Committee also lumped in provisions related to licensing demand letters, requiring them to contain more detailed information.

The amended bill was approved by the Committee in a 33-5 vote.  The bill will now move to the House floor for full debate and vote.

Patent Transparency and Improvements Act

Meanwhile, on the other side of the Capitol, Sens. Patrick Leahy (D-VT), Mike Lee (R-UT), and Sheldon Whitehouse (D-RI) introduced a bill in the Senate that is aimed a patent trolls, S. 1720.  This bill is aimed primarily at the most egregious actors and not at patent owners generally.  House Judiciary Committee members Reps. John Conyers (D-MI) and Mel Watt (D-NC) have expressed support for this bill instead of the House’s more extensive reform bill.

S. 1720 would authorize the Federal Trade Commission (FTC) to act against parties sending out patent demand letters that include include materially deceptive or fraudulent assertions.  Such letters would need to include sufficient details to permit a party to investigate and respond to the allegations, including the patent owner’s identity, patent being asserted, and reasons for the assertion.

The Senate bill also includes provisions to change claim interpretation of issued patents by the PTO.  Currently, the PTO uses the “broadest reasonable interpretation,” while courts review the patent specification and file history to determine the correct claim interpretation.  This provision would make the two standards the same and add to predictability in post-grant proceedings.

HT:  Patently-O.

The good news for patent owners is that a number of bills are now being proposed in Congress to address perceived problems with patent litigation and demand letters.  Perhaps this will spur analysis and debate of the competing bills rather than quick passage of a bill without sufficient review and consideration.

The actions of some patent assertion entities have certainly caused anguish among their targets and needs to be addressed.  Revamping the entire system, however, is not the answer as it will deter legitimate infringement allegations and further reduce the value of patents.

Legislative Update

November 18, 2013

IPWatchdog is reporting that Rep. Goodlatte (R-VA) is working to fast track the Innovation Act through the House of Representatives.  He reports that Rep. Goodlatte has scheduled a markup session on the bill for this week in spite of the fact that the bill was only introduced on October 23.

Several other members of the House Judiciary Committee, of which Rep. Goodlatte is the chair, have expressed concern about rushing the legislation through Congress.  Ranking Member John Conyers (D-MI) and former chairman James Sensenbrenner (R-WI) have asked for more time to study the bill.

Again, this bill seems to be on high speed through the Committee, which has not heard from any independent inventors or small businesses on how they will be affected by the bill.  The Biotechnology Industry Organization (BIO) and the University community have expressed concerns over the bill, particularly the fee shifting provisions.

Is the only way to get bills through Congress now to rush them through rather than to have sufficient debate of the issues?

House Passes Amendments to Rule 11

Rule 11 of the Federal Rules of Civil Procedure permits judges to sanction parties and lawyers for filing frivolous lawsuits and other pleadings during a lawsuit.  The Lawsuit Reduction Act of 2013 was passed by the House last week to undo 1993 amendments to the Rule that made sanctions within the discretion of the district court judge.

The new bill would require judges to sanction parties for violations of the rule and would remove the 21 day “safe harbor” provision that permitted parties to withdraw pleadings that did not contain sufficient basis in law or fact within 21 days of their initial filing.

Several consumers groups and the American Bar Association have opposed the changes to the rule arguing that it will increase legal maneuvering and make it more difficult for legitimate claims to proceed.  The ABA argues that there is no evidence of the need to remove judicial discretion.

The bill passed the House by a vote of 228-195 largely along party lines, with most Republicans supporting the bill and most Democrats opposed.  It is unclear whether or when the Senate will take up the bill.

Senate Hearing on Patent Trolls

November 12, 2013

Last week, the Senate Committee on Commerce, Science & Transportation conducted a hearing on patent troll demand letters.

The hearing was led by Sen. Claire McCaskill (D-MO) who called patent assertion entities “bottom feeders.”  These entities are “scam artists” who prey on the vulnerable, getting them to pay damages instead of facing the high costs and uncertainty of litigation.

Several of the witnesses, including Cisco Systems general Counsel Mark Chandler, Nebraska attorney general Jon Bruning (R), and BrandsMart USA executive vice president Lary Sinewitz gave testimony about particular instances where demand letters had been received that were clearly outrageous.  Yet, companies and individuals often pay to get rid of these allegations.

Jon Potter of the industry trade group Application Developers Alliance called these letters fraudulent.  He and several others called on Congress to require these letters include sufficient specificity to permit companies and individuals to respond to them in an appropriate manner.  They should include specific patent claims that are infringed and specific products that are alleged to be infringed.  The letters should include information on the real patent owners and real parties in interest.  Another proposal was for any company that sends out ten or more of such demand letters to companies that neither manufacture nor sell the accused product be required to deposit a copy of such demand letters in a government registry that can be reviewed by others to help determine an appropriate response.

Meanwhile, Professor Adam Mossoff of George Mason School of Law urged lawmakers to be cautious with new legislation.  There may be unintended consequences of harming legitimate patent owners whose patents are being infringed.  There are existing rules and procedures for handling bad patents and bad actors.

New Patent Bills

October 31, 2013

As I noted last week, Rep. Bob Goodlatte (R-VA), chairman of the House Judiciary Committee, introduced the “Innovation Act” that contains a number of draconian provisions that would severely change the way patent litigation is conducted.  The Committee held a hearing on the bill earlier this week.

Several Republicans on the Committee, including Chairman Goodlatte and Rep. Howard Coble (R-NC) raised serious concerns about patents to “basic ideas” and how patent litigation is causing people to lose jobs.  Abusive litigation tactics in the patent realm require a bill such as H.R. 3309.

On the other side of the issue, Rep. John Conyers (D-MI), the Committee’s ranking member, cautioned against taking so much discretion out of the hands of district court judges.  He specifically objected to the limited discovery provisions and the automatic fee shifting required by the bill.  He also suggested waiting to see how the PTO and the courts handle some of the business method and post-grant reviews before expanding these proceedings.

Rep. Mel Watt (D-NC) suggested that the problem of patent trolls has been overblown.  He has apparently been reading the GAO report on patent litigation.  Some of the requirements would be overly prescriptive to the courts.

Several witnesses spoke favorably of the bill.  Former USPTO Director David Kappos suggested that the bill not be rushed through Congress.  Several provisions are good, while others require further study and revision.  Smaller inventors have not had their views heard regarding these matters.  Kappos is now a partner at Cravath, Swaine & Moore.

Meanwhile, Reps. Conyers, Watt, and Doug Collins (R-GA) have introduced the Innovation Protection Act, H.R. 3499.  This bill seeks to attack a separate problem that the PTO has been facing for many years:  fee diversion.  It would permit the PTO full access to its fees regardless of government shutdown, sequestration, or failure of appropriations.  This would be until Congress decides otherwise of course.

HT:  Patently-O.

Rep. Goodlatte Introduces “Innovation Act”

October 25, 2013

195px-Bob_Goodlatte_OfficialAfter introducing several “discussion drafts” of his bill to curb abusive patent litigation tactics, Rep. Bob Goodlatte (R-VA) has now introduced the innocuously titled “Innovation Act,” H.R. 3309.  This is his revision to the bill that he introduced in September.

Rep. Goodlatte specifically states the purpose of his bill to be ending “[a]busive patent litigation [that] is a drag on our economy.”  The bill seeks to move patent litigation away from the standard notice pleading required in virtually all other areas of litigation in federal courts (with several exceptions generally related to fraud) to a much more detailed requirement that points out specific claims of the patents that are alleged to be infringed, the theory of infringement (direct, indirect, literal, doctrine of equivalents), and a detailed explanation of how each accused product or service meets the limitations of the claims.  This type of information is currently not required until much later in the litigation process, once the parties have had an opportunity to engage in discovery.

The proposed bill seeks to make it so that many of these suits do not make it to the discovery stage.  Discovery will be limited until after a court provides a ruling on claim construction.  This will make it more difficult for patent owners to acquire information necessary to proceed with patent infringement suits.

Fee shifting under current § 285 of the Patent Act is provided in “exceptional cases.”  District court judges are provided with great discretion as to the awarding of such fees.  It generally occurs when a party has engaged in litigation misconduct, inequitable conduct, or if the case is extremely frivolous.  Whether a case is “exceptional” is in the eye of the beholder and the district court judge.

The proposed bill seeks to change the default in patent cases to a fee shifting system.  Courts will be instructed to award attorneys’ fees to the prevailing party “unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust.”

Many other provisions from earlier bills continue in H.R. 3309.

Patent owners must disclose all parties will financial interests in the outcome of an infringement suit.  If the patent owner sues a manufacturer and its customer, the suit against the customer is automatically stayed until the suit against the manufacturer is resolved.  Civil actions against the PTO would no longer be permitted to obtain a patent; all final rejections from the Patent Trial and Appeal Board must be appealed to the Federal Circuit (what does this have to do with curbing litigation abuse?).

Post-grant review estoppel would be narrowed from grounds a challenger reasonably could have raised to only grounds he actually did raise.  In conducting post-grant reviews and similar proceedings, the Patent Office would be required to construe patent claims as the courts currently do; the office would no longer be able to use the “broadest reasonable” interpretation.  Double patenting rejections would be codified.  The practice of requiring a terminal disclaimer to overcome an obviousness-type double patenting rejection is currently a judicially created law.  The bill would slightly modify the covered business method procedure to limit it to post-AIA applications.  This procedure would also be made permanent.

Several good summaries of the bill are available here, here, and here.

A hearing before the House Judiciary Committee (of which Rep. Goodlatte is the chair) is scheduled for Tuesday to consider the bill.  The consensus seems to be that there is strong support in Congress to pass the bill.  Much of this support has been generated by the mainstream media, which has been condemning the patent system in general and “patent trolls” in particular.  Of course, most of this criticism is largely devoid of factual support or an understanding of how the system currently works.

Patent News Update

September 27, 2013

There have been a number of patent-related news items making their rounds recently.

PTO to Stay Open in Event of Government Shut Down

Hal Wegner shared a memo from Acting PTO Director Teresa Rae to PTO employees that the agency will use its reserve funds to remain open for at least several weeks in the event of a government shut-down on Tuesday.

Dear Colleagues,

As you know, the Obama administration is working diligently with Congress to try to ensure that the federal government remains open and continues to do its work on behalf of the American people. However, I wanted to inform you that even in the event of a government shutdown on October 1, 2013, the United States Patent and Trademark Office will remain open, using prior year reserve fee collections to operate as usual for at least a few weeks. We continue to assess our fee collections compared to our operating requirements to determine how long we would be able to operate during a government shutdown; we will update you as more definitive information becomes available.

Because the USPTO maintains sufficient carryover funding from prior fiscal years, our agency can and will stay open for business for a period of time using these available reserves. During that time we will all continue to conduct our duties and serve our Nation, by processing the patent and trademark applications that drive our country’s innovative economy. Should we exhaust these reserve funds before the government shutdown comes to an end, USPTO would have to shut down at that time, although a very small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.

I realize you likely have many more questions. As new information becomes available, we will inform you promptly and thoroughly. Your respective business unit managers will also be reaching out to you to provide further clarification, as needed.

I thank you for your hard work, and the continuing dedication you demonstrate to the American people.

Sincerely,

Terry Rea

Congress Continues to Seek More Patent Reform

Patently-O has provided analysis and review of a patent reform bill discussion draft introduced by House Judiciary Chair Bob Goodlatte (R-VA).  The purpose of the bill, according to Rep. Goodlatte is to end “[a]busive patent litigation” specifically by “patent trolls.”

The bill would repeal the right of a civil action against the PTO to obtain a patent, substantially narrow the estoppel provisions of post-grant review, require the PTO to construe patent claims as a court would during post-grant and inter partes proceedings, codify obviousness-type double patenting, expand the scope of covered business methods for review, eliminate patent term extension after the filing of an RCE, and overturn the Supreme Court decision that patent malpractice suits belong in state court.

Other provisions in Rep. Goodlatte’s bill are similar to other bills seeking to reduce patent litigation abuse and patent troll tactics.  The bill would raise patent infringement pleading requirements, require the award of attorneys’ fees to prevailing parties (and against all interested parties), limit discovery prior to a court’s claim construction ruling, require companies asserting patents to disclose all interested parties, require courts to stay infringement suits against customers until suits against manufacturers are resolved, and protect creditor-licensees from foreign bankruptcies by IP owners.

Supreme Court Patent Cases

The Supreme Court’s October 2013 Term begins Monday, October 7.  The Court is scheduled to hear oral arguments in Medtronic v. Boston Scientific Corp. on November 5.  The question that Court will consider in that case is whether a declaratory judgment plaintiff has the burden to prove non-infringement against a patent owner.  The Federal Circuit ruled that the DJ plaintiff does bear the burden of proof.

The Court is considering or will consider petitions in a number of other patent cases as well.

Akamai v. Limelight.  The Court issued a CVSG order in this case in June where it asked for the views of the Solicitor General as to whether it should hear this case.  Akamai concerns multi-party infringement where more than one party completes all of the steps required in a patent claim.  The issues relate to both direct infringement and indirect infringement (inducement or contributory infringement).

Alice v. CLS Bank.  An en banc Federal Circuit could not garner a majority to determine whether the computer-related claims in this case were patent eligible subject matter.  A plurality of the court affirmed the district court’s holding that they were not.

WildTangent v. Ultramercial.  The Federal Circuit has twice held that the internet monetization claims in this case do constitute patent eligible subject matter.  The Supreme Court had earlier asked the Federal Circuit to reconsider its opinion in light of the Mayo v. Prometheus decision.

GAO Report Finds Patent Trolls are Not the Problem With Litigation

August 26, 2013

Last week, the General Accounting Office (GAO) provided a report that was requested by Congress on patent litigation in the US.

The report found that the number of patent lawsuits was fairly steady from 2000 to 2010 and increased by about a third in 2011.  Most stakeholders opined that this increase was due to the impending passage of the America Invents Act that significantly changed the patent system, including the fact that multiple defendants could no longer be easily joined into a single lawsuit.

The number of defendants in such lawsuits increased by 129% from 2007 to 2011.  Only about 19% of the lawsuits were brought by non-practicing entities (patent trolls), but about 89% of the increase in defendants were involved in lawsuits encompassing software-related patents.

While Congress had anticipated that reports such as this would confirm its hysteria related to patent trolls, this turned out not to be the case at all.  The increase in litigation by patent trolls (called Patent Monetization Entities) was considered to be not statistically significant.

GAO FIG

The question remains of where these non-practicing entities get their patents.  The report indicates that it is as would be expected.  They acquired the patents from a variety of sellers, including universities, individual inventors, failed companies, or operating companies.  Some acquired their own patents from the PTO with minimal R&D efforts, some previously produced patented products but now simply asserted the patents, and some sued on behalf of individual inventors who lack the resources to bring their own lawsuits.

Instead, the report seemed to focus on patent quality.  The PTO needs to pay more attention to trends in patent litigation, including the increase in software-related litigation where the claims seem to be overly broad and difficult to determine the scope.  Terminology in many patents is unclear and many entities do not understand what a patent claims.

The report also noted several other reasons for increasing patent litigation.  There is a perception that damage awards can also be disproportionately high compared to the actual contribution of the patent to a product as a whole.  Companies are also beginning to understand that patents are more valuable than previously thought.

PTO Initiatives

The report credited several PTO initiatives to address perceived problems with patent quality.  First, the PTO has implemented guidelines and training to assist examiners with understanding claim definiteness.  The PTO is working to implement more consistent terminology in software-related patents.  Updates to the patent classification system, including attempts to harmonize with Europe should improve patent searching and planning.  New PTO initiatives should provide greater transparency in patent ownership.  These are in addition to the PTO’s attempts to improve patent quality by testing and review.  New post-grant review procedures under the AIA should also aid in patent quality.

Conclusion

The report concludes that, while the focus of patent litigation discussion has been on non-practicing entities, this focus is not necessarily appropriate.  The real increase is in lawsuits involving software-related patents. regardless of who is asserting the patents, whether practicing or non-practicing.

Critics of the report are, of course, dismissing it as not addressing the issues that Congress requested.  Hopefully, the report will be used by Congress as it debates (or not) some of the bills regarding patent litigation that are currently pending in that body.  Some of these bills seek to shift fees, limit discovery, or similar items.

The AIA was passed as a bellweather tremendous change and improvement in the patent system.  The AIA, however, does little to address the real issues surrounding the patent system:  patent quality and patent pendency.  These issues require improvements at the PTO.  The agency has done what it can, but it really needs additional resources.  As long as Congress continues to steal or sequester money from the PTO, improvement there will be difficult.


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