After passing the landmark Leahy-Smith America Invents Act (AIA) in 2011, has Congress developed a taste for tinkering with patent law? On December 5, 2013, the U.S. House of Representatives passed Rep. Goodlatte’s bill targeting troll litigation tactics (Innovation Act -- H.R. 3309). The Senate has similarly been assessing legislation directed at abusive patent litigation behavior. On December 17, 2013, the Senate Judiciary Committee held a hearing to discuss Sen. Leahy’s troll-targeting bill (Patent Transparency and Improvements Act -- S. 1720). What are the major changes that the bills propose? Will we see patent litigation reform legislation in 2014?
Commonalities between the House and Senate Proposals
The House and Senate bills address several issues in similar fashions. For example, both would require greater transparency at the outset of a patent infringement suit, requiring plaintiffs to disclose all beneficial owners of the patent in suit. Though some non-practicing entities have been accused of playing a shell game with such information, this would likely be a non-controversial measure. In fact, a number of federal district courts already have local rules requiring such disclosures. Likewise, the Leahy and Goodlatte bills both would allow customers targeted in patent infringement suits to stay their cases while a related suit against the manufacturer of the product accused of infringement is pending. Patent-assertion entities have been accused of asserting frivolous downstream lawsuits against companies who may not have the resources or information necessary to effectively defend against the allegations, and of using such lawsuits as leverage against the manufacturer whose may face indemnity claims and strained business relationships. Additionally, the House and Senate proposals both would clarify that a license pertaining to a U.S. Patent cannot be unilaterally terminated in bankruptcy. Finally, both the Leahy and Goodlatte bills would undertake minor tweaks to language in the AIA and would require the Patent and Trademark Office to create educational materials for small business owners regarding patent litigation.
Differences between the House bill and the Senate Proposal
The Goodlatte bill and Leahy bill do not correspond precisely. One major aspect of the Leahy proposal is to codify that sending fraudulent or materially misleading demand letters asserting patent infringement is a deceptive trade practice that may be targeted by the Federal Trade Commission. The FTC is currently examining a number of the largest patent assertion entities, and this past fall began seeking public comments to help inform its internal policy debate concerning whether troll practices should be policed by the Commission. The Senate bill would apparently attempt to cut at least part of the FTC’s process short by directing the Commission to regulate false cease and desist letters. Similarly, several major aspects of the House bill are not addressed in the Leahy proposal, including codification of a heightened pleading standard for patent infringement allegations, changing the standard for fee-shifting in patent infringement cases, and permitting a court’s discretion to limit discovery before claim construction in patent infringement cases.
Changes in the New Year?
The Goodlatte bill was passed remarkably quickly (a mere 43 days after committee introduction), and by an overwhelming majority (325-91) of the House or Representatives. The Senate Judiciary Committee is discussing multiple bills intended to address patent infringement litigation abuse, though the Leahy bill seems to be the one being most seriously considered. Despite the legislature’s current reputation for getting little accomplished, legislation targeting patent troll behavior seems to have bi-partisan backing, legislative attention, and corporate interest. The stars may be aligned for new reforms in 2014.
