After unsuccessful efforts to enact significant patent reform legislation in the last session of Congress, legislators renewed their patent reform efforts on March 3, 2009 by introducing the Patent Reform Act of 2009 in both the House and Senate. The identical bills are co-sponsored in the Senate by Patrick Leahy (D-Vt.) and Orrin Hatch (R-Utah), and in the House of Representatives (H. R. 1260) by John Conyers, Jr. (D-Mich.) and Lamar Smith (R-Texas). The 2009 bills are to similar to the bipartisan legislation introduced in 2008 that was passed in the House (H.R. 1908), but which did not proceed past the Senate Judiciary Committee (S. 1145).
The 2009 bill retains major components from the 2008 version and adds new provisions based on legislative compromises made last year. Significant holdover provisions of the 2009 bill include the following:
- Change to a “first-inventor-to-file” system from current “first-to-invent” system and elimination of the one-year grace period. This provision, which harmonizes the United States with rest of the world, encourages early filing of patent applications and tends to favor corporate inventors over solos.
- Allowing third parties to submit prior art in pending application. Third parties would be entitled to submit relevant information together with a statement of relevance within six months of publication of the application or before a first office action on the merits.
- Codifying and clarifying the “reasonable royalty” standard in calculating damages. The proposed provision would provide for calculation of a reasonable royalty based on the price of licensing a similar non-infringing substitute in the relevant market.
- Apportionment of damages based on an invention’s “specific contribution over the prior art.” (This is perhaps the most controversial provision in the bill and one that was opposed by Senator Arlen Specter (R-Pa.) in the prior bill and the one Senator Specter still characterizes as “controversial.”)
- Codifying the Seagate standard for willful infringement and limiting treble damage awards to situations where an adjudicated infringer recklessly continued to infringe after receiving specific written notice of the alleged infringement and proceeding without advice of counsel.
- Imposing stricter venue requirements for patent actions, limiting plaintiff’s choice of venue to the location of the defendant’s principal place of business, place of incorporation, or place where defendant has committed substantial acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the operations of the defendant.
- Permitting evidence of prior public use or on sale as additional grounds for re-examination, i.e., in addition to printed publication prior art.
- Providing an additional post-grant review in the form of a cancellation proceeding. According to the provision in the bill, a petition for cancellation, based on any ground of invalidity, may be filed within 12 months of patent issuance. Cancellation proceedings would be conducted by an administrative patent judge (APJ).
- Providing the Federal Circuit jurisdiction over interlocutory claim construction appeals if certified by the district court judge.
- Relaxing the current requirement of submitting a signed inventor declaration by allowing a company to file an application on the inventor’s behalf when an obligation to assign exists.
While many controversial provisions from the 2008 legislation remain, such as those concerning apportionment of damages, significant deletions from the prior bill include the following:
- Deletion of requirement that all applications are published automatically at 18 months. (This was a concession to small inventors who are less likely to see protection overseas and who did not want to see their applications published, only to be practiced overseas.)
- Deletion of all inequitable conduct provisions (an issue that Sen. Leahy indicates remains under consideration).
- Deletion of “second window” post-grant review procedure and adoption of approach to improve current inter partes re-examination process.
- Deletion of “Applicant Quality Submission” provision that would have required mandatory submissions by patent applicants of prior art and other materials relevant to patentability.
- Deletion of provision that would have granted the U.S. Patent and Trademark Office (USPTO) substantive rule-making authority.
- Deletion of provision providing immunity for infringement of electronic check processing patents.
While Senator Leahy stated that 2009 is “the year in which bipartisan patent reform should be enacted” and that he hopes the 2009 bill will be the “final round” of patent reform efforts, the controversial provisions of the bill, most significantly the changes to calculation of patent damages, have provoked heated debate as they did in 2008.
In fact, in a hearing conducted on March 10, most of the testimony centered on the damages apportionment issue (a legislative attempt to limit a patent holder’s recovery to the real economic worth of the invention by limiting the so-called entire market rule to specific situations) with high technology companies in favor of apportionment (which tends to reduce damage awards) and the pharmaceutical industry (which relies on the possibility of large damage awards to maintain market share for pioneer drugs) opposed.
The last major overhaul of the U.S. patent laws was in 1956.