On February 5, 2015, Rep. Goodlatte reintroduced the Innovation Act, which was previously passed in 2013 by the House of Representatives by an overwhelming vote of 325-91. While it initially appeared that the 2013 bill would easily pass through the Senate, the first Innovation Act had no such luck. Instead, Senator Patrick Leahy (D-VT), Chairman of the Committee, announced on May 21, 2014 that the bill was being taken off the Committee’s agenda due to stakeholder disagreement.
Despite the failure of the 2013 Innovation Act, bipartisan support for patent reform remains strong, and with the recent turnover in Congressional seats during the 2014 mid-term election, odds are in favor of the introduction of new legislation aimed at curbing abusive patent litigation. The Innovation Act has 19 co-sponsors, made up of 10 Democrats and 9 Republicans, making it a truly bipartisan bill. The new Innovation Act is identical to the 2013 Innovation Act and builds on the reforms that were made in the America Invents Act by addressing certain abusive practices taking place in our courts.
While the Innovation Act has garnered significant support from many interest groups, including startups and technology lobbyists, it still is likely to encounter the same opponents and criticisms that the old Innovation Act faced. Should the House vote to approve the act, it will then be up to the Senate to consider the act and resolve any potential issues or disagreements by way of committee. Overall, the Innovation Act would make patent litigation more burdensome for plaintiffs. Discussed below are some of the main provisions and reforms introduced by the act.
Disclosure of Ownership and Financial Interest:
If the Innovation Act passes plaintiffs would be required to disclose at the outset of the litigation all ownership information to the other parties, the court, and the USPTO. Included in this disclosure is the patent assignee, any person or entity with a financial interest in the patent, and any person or entity with a right to sublicense or enforce the patent.
Heightened Pleading Requirements:
The proposed Innovation Act also requires plaintiffs to disclose significantly more information in its initial pleadings than previously required. Patent-plaintiffs would be required to explain why they are suing a particular defendant in their court pleadings. The bill also requires courts to decide early on whether a patent is invalid to discourage plaintiffs from dragging out lawsuits in an attempt to obtain settlements.
The proposed bill also introduces a fee-shifting structure that departs from the traditional rule that each party bears the cost of its own attorney’s fees. Under the new provision, judges would be required to make parties who bring lawsuits that are not “reasonably justified in law and fact” to pay their opponents’ legal fees. This section is arguably the most controversial provision of the bill and the one responsible for Sen. Harry Reid refusing to bring the original Innovation Act to the Senate floor. The bill would create a presumption of awarding attorney fees to the prevailing party. Under this structure, a court would be required to award attorney fees and “other expenses” to the prevailing party “unless the court finds that the position and conduct of the non-prevailing 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.” This provision serves as a drastic change from the current standard in patent cases where attorney fees are only awarded in “exceptional cases.” The bill also discourages a patentee from offering a covenant not to sue as a means to settle infringement litigation, making such an offer an admission that the patentee is the “non-prevailing party” and thus a risk for an award of fees and costs to the accused infringer (Sec. 3(b)(1)(c)).
The proposed act also introduces changes to the discovery requirements, including mandatory disclosure of standard setting organizations (SSOs) obligations. Under this provision, the Judicial Conference would consider “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” to be part of the “core documentary evidence” and must be provided by the plaintiff to the defendants in every litigation.