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Senate panel to hold markup of PATENT Act; some groups continue push for additional IPR reform in bill

By Jessica M. Karmasek | Jun 4, 2015

WASHINGTON (Legal Newsline) - A Senate-introduced patent reform bill is set for markup by the U.S. Senate Judiciary Committee Thursday.


The hearing will focus on S. 1137, otherwise known as the Protecting American Talent and Entrepreneurship Act.


The PATENT Act was introduced in April by Sens. Chuck Grassley, R-Iowa and chairman of the judiciary committee; Patrick Leahy, D-Vt. and ranking member; John Cornyn, R-Texas and committee member; and Chuck Schumer, D-N.Y. and also a committee member.

The senators argue their legislation -- the fourth patent reform bill to be introduced this Congress -- makes “necessary and commonsense” reforms to stop abusive patent litigation practices and prevent “bad actors” from further undermining the nation’s patent system.


The bill would clarify pleading standards; protect end users; reasonably limit early discovery; create more risk for bad actors; curb abusive demand letters; and increase transparency.


On Wednesday -- a day before the bill’s expected markup -- Cornyn and Schumer wrote an op-ed explaining why Congress must back their patent reform legislation.


“The dilemma faced by anyone caught in the crosshairs is unbearable: spend precious time and resources defending against what are often overly broad or bogus infringement claims, or pay a handsome sum to make the lawsuit go away,” they wrote in the piece, published by ARS Technica. “The constant threat has discouraged entrepreneurs who are understandably hesitant to invest in innovation. In fact, the more companies invest in research and development, the more likely they are to be sued for patent infringement.”


PATENT, they argue, provides “consensus solutions” that would ease the burden on American companies and inventors.


“Our bipartisan bill shifts the legal burden back onto those who seek to game the patent system at the expense of businesses that are playing by the rules,” the two senators wrote.


“The PATENT Act would put the responsibility on the plaintiff to explain the substance of the claim when filing an initial suit. It would also curb the practice of sending abusive demand letters that con people into paying settlement fees for unsubstantiated infringements. And it would limit costly discovery while preliminary matters in a case are resolved. Finally, our legislation would bring flexibility and transparency to patent litigation proceedings, discouraging frivolous lawsuits by shifting the responsibility for the cost of litigation to the losing party if the case was not objectively reasonable.


“We firmly believe the PATENT Act’s sensible reforms are the best way to deter those who abuse the system while also protecting access to justice for patent holders with legitimate claims of infringement.”


At a hearing held last month, Grassley said he was “comfortable” with the bill’s language, but said he was made aware of some concerns -- raised by patent holders -- about processes at the U.S. Patent and Trademark Office.


“They worry that administrative proceedings created by the America Invents Act -- the inter partes review (IPR) and post-grant review (PGR) proceedings -- are being abused and are stacked against patent holders,” he explained. “Other stakeholders, however, are of the view that these new proceedings have been very effective at weeding out weak patents.


“I’ve committed to looking at these concerns, determining whether they are valid or not, and working with my colleagues to see what can be done to improve this process.”


In a letter sent to Grassley, Leahy and the other members of the panel late last month, the Electronic Frontier Foundation, Engine, Public Knowledge and R Street urged the committee to strengthen IPR as part of PATENT.


IPR is a procedure for challenging the validity of a patent before the PTO. The procedure, which allows third parties to challenge bad patents, is conducted by the Patent Trial and Appeal Board, or PTAB.


The review was enacted in September 2012 as part of the AIA. The procedure replaced a previous review procedure called inter partes reexamination.


The public interest groups argue that the procedure needs to be made more accessible to and a more powerful tool for those, such as themselves, acting in the public interest.


The Coalition for 21st Century Patent Reform, or 21C, has expressed its support for PATENT but it, too, is hopeful additional IPR and PGR reforms will be included in the bill.


“The proposed language in the Managers’ Amendment takes important steps toward restoring basic fairness to AIA review proceedings, while retaining their viability as alternatives to litigation to determine the validity of patents,” Chairman Kevin Rhodes wrote in a letter to members of the judiciary panel Wednesday. “These are welcome improvements, which we strongly support, and we thank you and your staffs for the serious consideration that has been given to these important issues.


“We still believe more comprehensive reforms to IPR/PGR proceedings are needed, and reserve the right to advocate for such additional reforms, in order to instill more fairness in them.”


The Innovation Alliance, a group made up of research and development-focused companies, said while it appreciates the committee’s work thus far, several of the provisions in PATENT, even as amended, would jeopardize the value and enforceability of all U.S. patents and risk serious damage to the economy, job creation and the future of American innovation.


“The Managers’ Amendment remains overbroad in many areas, but does not go far enough in others,” Executive Director Brian Pomper wrote in a letter to Grassley and Leahy Wednesday. “The PATENT Act fails to correct the well-documented unfairness and imbalance in the inter partes review procedure at the PTO that is allowing abuse of the IPR system, an unintended consequence of the America Invents Act.


“Since the IPR program was implemented in September 2012, more than 2,700 requests for IPRs have been made at the PTO, and 78 percent have been decided against the patent holder.”


Pomper continued, “Although the Managers’ Amendment makes some changes to the IPR process, they do not go far enough in reining in the potential for abuse of the IPR system. Changes to the IPR system that aim to end abuse should impose a standing requirement for filing IPR petitions, ensure that patent owners have the right to amend their patent claims to preserve patentability, and grant patent owners a true presumption of validity in IPR proceedings by requiring petitioners to prove their case by clear and convincing evidence.”


However, members of United for Patent Reform argue that the current process has “already proven to be successful in its goal of improving patent quality.”

The coalition, in a letter to Grassley, Leahy and leaders of the House Judiciary Committee Monday, said it supports maintaining the IPR program as it exists in current law.


“We, the undersigned businesses and associations, urge you to support the continuing vitality of the IPR process and let the PTO continue its excellent work reviewing the vague and overly broad patents that have allowed abusers of the U.S. patent industry to thrive,” its three-page letter states.


Among those members that signed the letter were Amazon, Best Buy, eBay, Facebook, Ford, General Motors, Google, Overstock.com, QVC and Walmart.


Thursday’s hearing is set to begin at 9:30 a.m. EST.


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

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