Jessica M. Karmasek Jan. 8, 2015, 9:26am


WASHINGTON (Legal Newsline) - Patent law experts agree that the next go at federal patent reform legislation most likely will end up resembling a bill introduced and approved in 2013 - or possibly be more aggressive - when the “new” Republican-controlled Congress convenes this month.
 

Adam Mossoff, a law professor at George Mason University and senior scholar at the university’s Center for Protection of Intellectual Property, said he expects Congress to act “very” quickly.

 

“The Republican leadership has expressed that patent reform is one of its top priorities in 2015,” he said.

 

Republicans now hold the majority in both the U.S. House of Representatives and the Senate following the November midterm election.

 

It is the first time the GOP has regained the majority of the Senate since losing it in January 2007.

 

Now, the question is, what will the newest version of a patent reform bill look like? How much will the new makeup of Congress help, or hurt, in shaping a bill?

 

“It’s a very interesting question, as to what form the next round of patent legislation will take,” Mossoff admitted.

 

“There are certain issues in patent revision legislation that were part of (House of Representatives Bill) 3309 that was voted by the House that will certainly remain part of the package of proposed revisions to the patent system in 2015.”

 

H.R. 3309, or the Innovation Act, was approved in an overwhelming bipartisan vote of 325-91 in December 2013. But efforts to pass the patent reform came to a halt in the U.S. Senate in the following spring.

 

The legislation, sponsored by U.S. Rep. Bob Goodlatte, R-Va., required:

 

-Plaintiffs to disclose who the owner of a patent is before litigation, so that it is clear who the real parties behind the litigation are. Goodlatte says this will ensure that patent trolls cannot hide behind a web of shell companies to avoid accountability for bringing frivolous litigation;

 

-Plaintiffs to actually explain why they are suing a company in their court pleadings;

 

-Courts to make decisions about whether a patent is valid or invalid early in the litigation process so that patent trolls cannot drag patent cases on for years based on invalid claims.  This prevents invalid patents from being used to extort money from retailers and end users;

 

-The U.S. Judicial Conference to make rules to reduce the costs of discovery in patent litigation so that patent trolls cannot use the high costs of discovery to extort money from small businesses and entrepreneurs; and

 

-The U.S. Patent and Trademark Office to provide educational resources for those facing abusive patent litigation claims.

 

Also, when parties bring lawsuits or claims that have no reasonable basis in law and fact, the Innovation Act would have required judges to award attorneys fees to the victims of the frivolous lawsuit.

 

The bill would have allowed judges to waive the award of attorneys fees in special circumstances. This provision applied to both plaintiffs and defendants who file frivolous claims.

 

The measure also would have created a voluntary process for small businesses to postpone expensive patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiffs, to protect customers who simply bought the product off-the-shelf.

 

“Exactly what form those issues - fee-shifting, disclosure of party of interest, joinder rules, heightened pleading standards - will take is anyone’s guess,” Mossoff said of new legislation.

 

It also could end up resembling U.S. Sen. Patrick Leahy’s measure, the Patent Transparency and Improvements Act.

 

Leahy’s bill, also referred to as Senate Bill 1720, failed to move past a Senate panel last spring.

 

The Democratic senator blamed Sen. Harry Reid, D-Nev., for its failure. The former Senate Majority Leader reportedly has strong ties to trial lawyers, and they were concerned about the fee-shifting provision of the bill that would require the loser to pay the winner’s legal fees.

 

Similar to Goodlatte’s Innovation Act, Leahy’s bill would have increased transparency in patent ownership.

 

In particular, the person or organization that holds the patent and files an action in federal court would have had 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 would have targeted the widespread sending of frivolous demand letters.

 

More specifically, the Senate bill would have empowered the Federal Trade Commission to consider such letters an “unfair and deceptive act or practice.”

 

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

 

Leahy’s bill also would have provided additional resources for small business that are targeted in patent infringement lawsuits, and it called 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 did 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.

 

“Many Republicans are pushing for some type of legislation to revise the patent system because Republicans have become enamored with the idea - that is, they have somehow come to believe-- that this is some form of tort reform,” Mossoff said.

 

That is simply not the case, he argues.

 

“All they’re doing is weakening property rights,” he said.

 

Mossoff said lawmakers, if they’re smart, would take more of a wait-and-see approach.

 

He pointed to various U.S. Supreme Court decisions in 2014 that have made it easier for district courts to award attorneys fees and costs to patent litigants and to invalidate patents on various statutory grounds.

 

In addition, Mossoff pointed out, the Judicial Conference - which is charged with framing policy guidelines for administration of judicial courts in the United States - has changed some of the rules on filing patent complaints.

 

“One of the complaints is that it’s too easy to file a (patent) complaint,” he said.

 

The council, he said, voted to accept and implement in 2015 a rule that will eliminate very low pleading standards.

 

“So now you have Congress, which is going to try to step in and enact all these changes, some of which are completely moot because they’ve been addressed by the Supreme Court or by the federal judiciary,” Mossoff said.

 

“I see it as an issue of separation of powers. Let judges control their court rooms.”

 

Paul Michel, retired chief judge of the U.S. Court of Appeals for the Federal Circuit, agreed.

 

“In terms of pleadings, the Judicial Conference and the Supreme Court have already changed things without legislation,” he said.

 

Michel, who served more than 20 years on the Federal Circuit, which handles all U.S. patent appeals, retired in 2010. He is considered an expert on intellectual property law.

 

As to other proposed provisions, Michel called them “overkill.”

 

“They’re not harmless,” he said, adding that new legislation has the potential to be even more aggressive.

 

“Of course, it’s hard to make firm predictions because there are many factors in play. But I think we’re going to see a surge pushing hard for early passage of the original Goodlatte Bill or something even more radical.”

 

And the change in Senate leadership is only going to make it that much easier to push through, Michel said.

 

“Republicans in both the House and the Senate are very eager to do two things: One is to tap into the campaign contributions of these very big, wealthy companies, which, historically, have given to Democratic politicians,” he explained.

 

“The second big motivation (for them) is they think if they can get fee-shifting and fact-pleading jammed into the law of patents that that will be a foot in the door to get those provisions made applicable to all civil litigation.”

 

And then there’s the politics of it all, Mossoff added.

 

“This is an easy go-to issue for both parties,” he said. “Here, both Republicans and the White House want the same thing, which doesn’t happen very often. So, they want to take advantage of that.

 

“But the byproduct of all of this could end up undermining the patent system, patent innovation, the ability to create new jobs and new life-saving medicines.”

 

Michel agreed, calling the stakes “huge.”

 

“Everyone agrees that patent cases today are way too slow and way too expensive and way too unpredictable. Everyone. Plaintiffs, defendants, academics, etc.,” he said. “So what would the effect of more legislation be? We’ll be adding a lot more costs, a lot more delay, a lot more disruption and a lot more unpredictability.

 

“So why are we doing this? Because lawmakers have been convinced by companies -- a handful of big companies, really -- that have had lawsuits brought against them that all of the cases are baloney and that the system is broken, and that these measures will help the problem.”

 

Instead of rushing to pass another bill -- the America Invents Act was signed into law in 2011, switching the nation’s patent system from a “first to invent” to a “first inventor to file” system -- Michel urged lawmakers to “slow down” and assess the facts.

 

“I’m for patent reform,” the former judge said. “But carefully tailored, targeted reforms that focus on specific abusive actions and counteract those particular people and those actions without burdening the majority.”

 

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

 

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