Innovation Act

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The H.R.9:Innovation Act was reintroduced on February 5, 2015, by Representative Bob Goodlatte (R-VA). The bill was referred to the House Committee on the Judiciary and Subcommittee on the Courts, Intellectual Property, and the Internet, and was placed on the Union Calendar on July 29, 2015. Currently the bill has 27 cosponsors, 15 Republicans and 12 Democrats.

The full title of the act is "To amend title 35, United States Code, and the Leahy-Smith America Invents Act to make improvements and technical corrections, and for other purposes." [1]GovTrack predicts that the Innovation Act has a 36% chance of being enacted. Representative Bob Goodlatte intends for the bill to cut down on abusive patent litigation and strengthen a patent holder's rights.[2] The Innovation Act also proposes certain reforms to the enacted Leahy Smith America Invents Act.

The bill will target the following areas [2]:

  • Abusive Patent Litigation.
  • Increasing Transparency and reducing Weak Patent Infringement Claims.
  • Clarifying patent litigation procedures and practices.
  • Bolstering small businesses built upon IP.
  • Reducing referrals to random courts for the review of patent cases.
  • Weakening power of Patent Trolls.

Provisions

The provisions of the Innovation Act encompass all of the areas of reform currently in consideration by Congress.

Pleading Requirements

In efforts to diminish the Patent Troll threat by the bill sponsors, the Innovation Act has heightened pleading requirements for parties filing for patent infringement. Form 18, the form previously used to submit generalized patent infringement claims, has been eliminated by the Judicial Conference in wide-sweeping amendments. This amendment was expected to be implemented December of 2015 and was made in an effort to heighten patent claim requirements by the Judicial Conference. [3] The Innovation Act also proposes Form 18's elimination by the Supreme Court to reduce patent litigation, especially litigation involving Patent Trolls or Non-Practicing Entities.[4] The Supreme Court would be allowed to codify a new model for filing infringement complaints that would include notifying the accused parties of the claim and its content. [5]

Supporters hope that the act would go further in reducing generalized complaints and eliminating loopholes by requiring (with exceptions) the plaintiff to submit infringement charts with the initial complaint.[6] The purpose of the charts would be to force the plaintiff to explain the specifics of a claim, how a product or the specific use of the patented idea or process (referred to as accused instrumentalities) violates each infringed component of a patent and the scope of each component's infringement. [6]

Additionally, a claim of previous commercial use may not result in a court invalidating a patent because it lacks novelty, seems to cover obvious subject matter, or due to prior art. [5] Prior Art refers to evidence indicating that the technology or invention in question has already been used, discovered, or generally known. Typically, simply having previously described or created a similar process or technology at any point in time by any one constitutes prior art in patent law. [7]

Fees and Other Expenses

Writers of the bill propose that a modified "English Rule" become the new standard in patent litigation in America to avoid frivolous lawsuits and adequately sanction patent trolls for pointless or unfounded claims. [8] [6] The "English Rule" requires the losing party in a trial compensate the prevailing party for its attorney fees. [9]

The act requires courts to have losing parties provide for "reasonable fees and other expenses" incurred by the other party throughout litigation. The award may be waived only if the losing party is found to have just legal and factual cause to be part of the litigation. If the losing party is unable to pay due to extraordinary circumstances, the court may ask a joined or interested party to cover the award. [10]

Once a plaintiff has claimed a patent in civil action, dismissing the civil action by proposing an agreement to not sue for infringement, referred to as a covenant, makes the plaintiff liable for payment of attorney fees. Payment may not be required if the plaintiff had the right to settle with a covenant without a court order or if payment would not serve the "interests of justice." [5] The "interests of justice" have been called upon previously in patent proceeding and generally determine whether a motion will best serve the outcome of a trial. [11]

Joinder of Interested Parties

As part of the Fees and Other Expenses provisions, an interested party or parties may be required to cover attorney's fees and other expenses in the case that the nonprevailing party cannot. The purpose of this provision is to prevent Patent Trolls from claiming the inability to pay fees by shuffling accounts between all of their companies. [8] A joinder of interested parties may be called upon only if the prevailing party proves that the nonprevailing party has simply claimed patent infringement and has no other substantial interest in the issue. Parties that have invented or invested in the disputed patents may be considered to have substantial interest. Parties that commercially practice or perform R&D in the same field as the patented technology or subject matter may also be considered to have substantial interest by the act. [5]

Discovery Stay

The act establishes that a claim construction ruling must occur prior to discovery. [6] Discovery is a process that occurs pre-trial in a civil action, a conflict between two private parties, and is defined by the federal government as any party's right to obtain relevant information for the trial. A claim construction ruling is a critical step in ruling on the validity of a patent and whether infringement has occurred. Claim construction defines exactly what a patent includes and the extent to which a patent holder can protect the subject matter. [12] The provisions also specify that claim construction previously agreed upon in another court must hold when a patent claim is reviewed by the USPTO. [6]

Courts do not have to stay, or suspend, discovery pending preliminary motion if both parties consent, the patent holder is awarded a preliminary injunction, or the case is transferred, dismissed, severed, or a party drops out of the case. [5] A preliminary injunction forces a party to stop the actions supposedly infringing the patent prior to the court's finally ruling. Severing a lawsuit means separating the lawsuit into several parts or deciding a case on an individual basis if there are multiple defendants. Drugs and biological products may also be subject to exemption.[5]

Additional documents may not be disclosed unless the party requesting them covers the costs of discovery and all parties consent to discovery. [6] By enabling courts to limit discovery, the act intends to reduce litigation costs and targets patent trolls intending to settle a case quickly and early on by making use of information revealed in discovery. [2]

Demand Letters

To protect small businesses and other entities, the act requires that the patent owner explain the reason for the lawsuit and how the infringement has occurred to the accused party or parties. [8] A demand letter sent prior to the lawsuit cannot be used as evidence of willful infringement unless the demand letter specifies which patent is being infringed, what is infringing the patent, the parent company that owns the patent, and the grounds for lawsuit. The grounds for lawsuit consist of how the one or more claims in the patent are being violated. [6] The purpose of this provision is to ensure that evasive demand letters are no longer considered in the review process. Plaintiffs who disregard the requirements would be forced to pay additional damages. [13]

Venue

The act reverts to Congress' original intention of patent lawsuit venues by allowing patent infringement suits to only be heard in judicial districts with reasonable connection to the conflict. [13]

A judicial district in which the following have occurred is considered to have reasonable connection ot the dispute: [5]

  • the defendant is headquartered or incorporated.
  • the defendant infringed the patent.
  • the defendant's facility where the patent continues to be infringed.
  • the defendant was informed and agreed to the suit.
  • an inventor of the patent led R&D.
  • either party runs R&D for the patented invention.
  • either party manufactures a physical product that violates the patent's claims.
  • either party runs a process using the patented invention.

Disclosure of Ownership

An initial complaint must disclose specifics about the patent including the parent company of the patent and any party with a financial interest in the patent. [13] Any change in patent ownership must be provided to the UPSTO. If the information is not provided or updated when changes occur, then the court will make the patentee cover the defendant's attorney fees. [6]

Double Patenting

Within the Innovation Act, several reforms are suggested to the Leahy-Smith America Invents Act. One of these reforms concerns codifying double patenting. [5] Double patenting is when two patents are awarded for the same invention to one patent holder. The first-to-file (FTF) system was introduced in the American Invents Act and put into effect in March of 2013. In the FTF system, the first inventor to file for a patent has priority in protecting the idea. [14] The Innovation Act applies the FTF system to double patenting restrictions. If a patent claim is filed on the same day or before a similar second patent, then the first patent will be deemed prior art to the second patent, preventing double patenting unless nonobvious subject matter can be proven. [5]

Manufacturers

To protect manufacturing investments and patent owners, the act would prohibit foreign courts from eliminating a company's US IP licenses in bankruptcy, in accordance with US law. [13] On the other hand, the act pushes for plaintiffs to deal with manufacturers rather than retailers or end users selling products or using processes that infringe on a patent's claims. [6]Courts may stay customer suits and hear suits brought before manufacturers accused of infringing the same patent. [5]

Small Businesses

In addition to reducing costs and curbing patent troll abuses, the act requires the USPTO to create and distribute educational materials for small businesses involved in aggressive patent litigation. Working outreach programs would be modified to include information on patent litigation practices that are threatening to the success of small businesses. This information would also be disseminated through the Small Business Administration and the Minority Business Development Agency. The act directs the USPTO to have public records online about when a patent claim is brought to court along with other specifics regarding the patent's ownership to increase transparency. [5]

References

[1] [2] [3] [4] [6] [8] [9] [10] [7] [5] [11] [12] [13]

[14]

  1. ↑ 1.0 1.1 [1] 'H.R.9:Innovation Act', govtrack.us.
  2. ↑ 2.0 2.1 2.2 2.3 [2] 'The Innovation Act', Judiciary Committee: Chairman Bob Goodlatte, (Washington, D.C.).
  3. ↑ 3.0 3.1 [3] L. Morad and A.J. Bramhall, 'An Early Review of the Impact of Form 18's Elimination on Pleading Direct Infringement',PatentlyO.
  4. ↑ 4.0 4.1 [4] Jura Zibas and Gregory Brescia, 'Supreme Court Adopts Amendments to Federal Rules', The National Law Review, (Western Springs, IL).
  5. ↑ 5.00 5.01 5.02 5.03 5.04 5.05 5.06 5.07 5.08 5.09 5.10 5.11 [5] 'Summaries for the Innovation Act', "govtrack.us".
  6. ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 [6] Dennis Crouch, 'Patent Reform: Innovation Act of 2015', PatentlyO.
  7. ↑ 7.0 7.1 [7] 'What is prior art?', "European Patent Office: Inventors' Handbook", (Munich, Germany).
  8. ↑ 8.0 8.1 8.2 8.3 [8] 'The Innovation Act: Key Provisions', Judiciary Committee: Chairman Bob Goodlatte, (Washington, D.C.).
  9. ↑ 9.0 9.1 [9] Theodore Eisenberg and Geoffrey P. Miller, 'The English vs. the American Rule on Attorneys Fees', New York University Law and Economics Working Papers.
  10. ↑ 10.0 10.1 [10] 'Summary: H.R.9-114th Congress', congress.gov.
  11. ↑ 11.0 11.1 [11] 'How PTAB Applies 'Interests of Justice' Discovery Standard', "Law360", Portfolio Media, Inc. (New York, New York).
  12. ↑ 12.0 12.1 [12] Peter S. Menell, Matthew Powers, and Steven Carlson, 'Claim Construction: A Structured Framework', "PatentlyO".
  13. ↑ 13.0 13.1 13.2 13.3 13.4 [13] 'H.R.9, The "Innovation Act": Section-by-Section Summary", 'Judiciary Committee', (July 2015).
  14. ↑ 14.0 14.1 [14] Kirby Drake,'How to Take Advantage of the First-to-File Patent System', Entrepreneur Media, Inc.
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