Jessica M. Karmasek Jan. 29, 2014, 4:00pm

WASHINGTON (Legal Newsline) -- In his State of the Union address Tuesday night, President Barack Obama called on federal lawmakers to pass patent reform legislation.

Obama said doing so would help bolster the nation's economy.

"We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender," he said in his address.

"Federally-funded research helped lead to the ideas and inventions behind Google and smartphones. That's why Congress should undo the damage done by last year's cuts to basic research so we can unleash the next great American discovery -- whether it's vaccines that stay ahead of drug-resistant bacteria, or paper-thin material that's stronger than steel.

"And let's pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation."

This isn't the first time the President -- who signed into law another patent reform measure, the America Invents Act, in 2011 -- has called for patent reform.

And last month, he came out in support of Rep. Bob Goodlatte's Innovation Act, or House of Representatives Bill 3309.

"The Administration supports House passage of H.R. 3309, as reported with a strong, bipartisan vote by the House Judiciary Committee," Obama said in a statement just ahead of the House's Dec. 5 vote.

"The bill builds on the important patent reforms contained in the America Invents Act and successfully implemented by the U.S. Patent and Trademark Office.

"The bill would improve incentives for future innovation while protecting the overall integrity of the patent system."

The legislation was approved in an overwhelming bipartisan vote of 325-91 and has since been sent to the Senate, where lawmakers are carefully considering it.

Sen. Patrick Leahy has introduced his own bill, the Patent Transparency and Improvements Act of 2013.

Leahy's measure, also referred to as Senate Bill 1720, is considered by some to be a "less ambitious" version of the House's Innovation Act.

Similar to the Innovation Act, Leahy's bill would increase transparency in patent ownership.

In particular, the person or organization that holds the patent and files an action in federal court would have to disclose any and all persons that have a financial interest in the proceedings, or that could be affected by the outcome.

And like the Innovation Act, the Leahy measure targets the widespread sending of frivolous demand letters.

More specifically, the Senate bill would empower the Federal Trade Commission to consider such letters an "unfair and deceptive act or practice."

S. 1720 also allows cases against customers who are sued for patent infringement to be stayed while the manufacturer litigates the lawsuit.

Leahy's bill also would provide additional resources for small business that are targeted in patent infringement lawsuits, and it calls for various studies to be done by the PTO, among others.

The biggest difference between Leahy's proposed legislation and the House version is that S. 1720 does not include the provisions that would force patent infringement case management rules on the district courts or procedures as to pleading, discovery timing and limits, cost-shifting related to discovery or loser-pays fee shifting.

S. 1720 was assigned to a congressional committee in November. It must be considered before it is possibly sent on to the House or Senate as a whole.

The Main Street Patent Coalition said in a statement late Tuesday it was "encouraged" to hear the President push for a patent reform bill.

The recently-formed, non-partisan coalition, made up of more than a dozen trade associations, companies and small businesses, is dedicated to stopping so-called patent trolls.

Patent trolls -- also referred to as "patent assertion entities" -- are companies that purchase groups of patents without an intent to market or develop a product. The companies then target other businesses with lawsuits alleging infringement of the patents they bought.

"Main street businesses are the engine of American jobs, American innovation and American ingenuity," said Michael Meehan, MSPC's manager and the president and CEO of VennSquared Communications, a leading boutique communications firm. "We owe it to them to help protect the businesses they have built from predatory patent trolls.

"The opportunity to pass legislation that fixes those flaws and creates a patent system that supports our future is here, we agree that its time to enact meaningful reform."

Christopher Banys, a California attorney who represents inventors, small businesses and sometimes patent assertion entities, said Wednesday the President's focus on innovation is "commendable."

"A strong patent system is key to a strong and innovative economy," said Banys, who testified on Capitol Hill last week against the proposed patent reform bills. "But the Goodlatte bill and many of the proposals in the Senate do the opposite: they create an unfair patent system where our taxpayer-funded courts protect major corporations and even wealthy patent assertion entities, but leave individual inventors, universities and start-ups out in the cold."

He continued, "Fee-shifting, litigation stays, requiring every inventor whose patent has been infringed to post a multi-million-dollar bond before she even gets into court, delaying cases, regardless of merit, none of these proposals will reduce frivolous litigation. Instead, by driving up litigation costs for the average American, they let infringing corporations use their vast wealth to escape justice.

"Ultimately, many inventors will not bother wasting time inventing, once they learn that they cannot stop the rich and powerful from free-riding on their work," Banys said, adding that the consequences to the economy could be "devastating."

From Legal Newsline: Reach Jessica Karmasek by email at

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