The Innovation Act includes a new Section 281A that significantly changes the pleading requirements for patent infringement actions. These changes are intended to discourage frivolous lawsuits by requiring detailed infringement allegations in the complaint that are typically provided by the patentee early in discovery. Unfortunately, the heightened pleading standards, if passed in their current form, will do more harm than good. They will create more motion practice, delay, and expense for all litigants, and do little, if anything, to prevent the filing of baseless lawsuits.
The New Pleading Requirements Will Not Discourage Baseless Cases
As many commentators have noted, the Innovation Act’s pleading requirements include disclosures that are already required at the beginning of discovery in the vast majority of patent cases. The local rules of many high-volume patent jurisdictions, for example, require the early disclosure of infringement contentions. In the absence of local patent rules, accused infringers typically serve discovery that seeks infringement contentions immediately after the parties’ Rule 26(f) conference. In both scenarios, the patentee must explain its infringement theory in detail before actually receiving any meaningful discovery.
The supporters of the Innovation Act apparently believe that incorporating infringement contentions into the complaint will deter baseless lawsuits. But doing so will have very little impact. In nearly every case, including those that many accused infringers would consider frivolous, the patentee will be able to provide the information required by the Innovation Act at some minimal level of detail. Even a patentee with a weak case expects to disclose infringement contentions early in discovery, so moving up the disclosure a few months will not discourage the filing of a complaint. If the case turns out to be baseless, the accused infringer will still need to file a dispositive motion to resolve the infringement claim.
The other pleading requirements in the Innovation Act will fare no better. For example, the party alleging infringement already expects that its principal business (or lack thereof) will become known early in discovery. Moreover, an accused infringer can usually figure out whether the patentee has a business other than asserting patents after a few Internet searches. The same is true for the required list of complaints that assert the same patents. This information is readily available through various sources and can be accessed quickly for very little expense. Finally, the provision relating to standards-essential patents appears flawed because the language focuses on patents that have been declared essential by the standards-setting body (as opposed to the patentee who typically makes such a declaration). In any event, this information will likely be apparent from the patentee’s infringement contentions, and can also be obtained directly during discovery. It is unlikely that any of these provisions will deter the filing of complaints.
The Innovation Act Will Create More Motion Practice under Rule 12 and Rule 15
The heighted pleading requirements will likely lead to delay and increased expense for all patent litigants (not just those involved in allegedly baseless cases). The existing pleading requirements are already a contentious issue in patent cases. In the wake of Iqbal and Twombly, Rule 12 motions have become a common tool used by accused infringers to argue that even the minimal allegations necessary to bring suit have not been met. It is not uncommon for a case to be delayed by several months or even a year to sort out whether the identification of accused instrumentalities and infringement allegations are sufficient.
So why do parties fight so much over the initial wording used to identify accused instrumentalities and the detail of infringement allegations? Many observers may believe that these battles are a complete waste of time. And they are probably right in many cases, except for the fact that these allegations can have a significant impact later in the case. The Rules of Civil Procedure, for example, define the scope of discovery to include any non-privileged matter that is relevant to any party’s claim or defense. If the patentee’s allegations are too specific, accused infringers may try to prevent discovery into topics that could be relevant to the actual infringement dispute. Accused infringers, on the other hand, want to prevent the patentee from embarking on a fishing expedition for potentially infringing products. The resulting disagreement over infringement allegations at the outset of a case is already a problem. By turning the patentee’s infringement contentions into pleadings, the Innovation Act all but guarantees more contentious Rule 12 motion practice over the sufficiency of the patentee’s allegations.
The importance of these initial allegations will be even higher because most patentees supplement their infringement contentions throughout the case, such as by adding more products, changing the number of asserted claims, or adding more detailed allegations. The bill appears to contemplate supplemental contentions from the fact that a patentee can plead infringement based on information not readily accessible (for example, it would make little sense to permit such a claim, but not give the patentee the ability to pursue it). The Innovation Act, however, provides no mechanism for supplementation. It is possible that a patentee may be forced to file multiple Rule 15 motions during the course of the case just to supplement infringement contentions. We can expect that most accused infringers will object, which will then lead to more delay and expense for everyone.
With a Few Changes, the Pleading Requirements of the Innovation Act Could Be Beneficial
If Congress ultimately determines that infringement contentions should be provided by the patentee with the complaint, they should not be part of the pleadings. Instead, to avoid needless Rule 12 motions, the initial infringement contentions should be treated like discovery disclosures. To be sure that the patentee provides detailed allegations, future supplementation can be subject to a “good cause” requirement administered and developed by district courts.
Although it’s not a surprise given the purpose of the Innovation Act, the heightened pleading requirements focus entirely on the patentee. To put the parties on equal footing, contentions similar to those required with the complaint could also be required with the answer. For example, if an accused infringer’s answer alleges invalidity, the accused infringer would then disclose its current invalidity contentions. Those contentions can be subject to a similar “good cause” requirement for supplementation mentioned above, which will need to reflect the difficulty for the accused infringer to develop complete invalidity contentions in the short time between the complaint and the answer.
This modified framework could help promote an early resolution of the litigation because both parties will have each other’s specific allegations early in the case. If the matter cannot be resolved, these early disclosures should speed up the litigation and allow the parties to focus their efforts on the actual disputes. Also, by having an early disclosure of contentions from both parties, it is more likely that they will be able to agree on a schedule for supplementation during discovery because they will both be subject to the same standard. When parties in litigation are not playing by the same rules, they do not have the same incentive to take reasonable positions and avoid motion practice. With a few changes, the pleading requirements in the Innovation Act could reduce the expense of litigation and benefit all cases.