Vocal minority cannot keep PATENT Act from passing Senate Judiciary

At the end of a three-hour long hearing held by the U.S. Senate Committee on the Judiciary yesterday, S.1137, the proposed legislation known as the PATENT Act, was approved to move to the floor of the United States Senate by a 16-4 vote of the Senate committee. Proponents of the bill lauded the bipartisan support which brought the bill committee approval. Interestingly, a small but vocal bipartisan minority has developed, a couple of whom have pledged to continue debate aspects of this legislation which they fear will pose a threat to American innovation.

We reported yesterday that the PATENT Act would likely receive the approval it needed to leave committee and wind up on the floor of the Senate for debate. The protracted discussions are somewhat ironic given the opening statements by Sen. Chuck Grassley (R-IA) who urged his colleagues on the committee to cooperate by keeping their comments concise and moving to a vote on the bill in short order.

chuck-schumer-6-4-2015-335The role of patent trolls and abusive demand letter behaviors were foremost on the minds of every judiciary committee member who offered comments. Sen. Dianne Feinstein (D-CA) took particular issue to the fact that demand letters specify an amount of money to settle a dispute, equating it to extortion that borders on criminal blackmail because of the implied threat of legal issues. Sen. Chuck Schumer (D-NY) proffered some very harsh words on the economic impact of patent trolls: “We cannot keep these tapeworms on the body politic.”

A manager’s amendment prepared by the six co-sponsors of the proposed patent reform du jour was unanimously approved at the start of the hearing. The amendment addresses a number issues which have been turned up by the recent debates on Capitol Hill on the topic of patent reform. Fee shifting provisions that would be enacted by the PATENT Act were amended so that economic hardship could be a special circumstance considered by a judge when deciding an award for attorney’s fees. The amendment also seeks to address some of the alleged abuses of the inter partes review (IPR) and post-grant review (PGR) proceedings created by the 2011 America Invents Act. Notably, the amendment requires the IPR and PGR decisions of the Patent Trial and Appeals Board to be made publicly available and searchable online. It also directs PTAB to apply the Phillips district court claim construction standard during review proceedings.

Dick-Durbin-6-4-15-335The first member of the judiciary committee to raise any serious opposition to committee approval of the PATENT Act was Sen. Dick Durbin (D-IL). He pointed out that, prior to the 2011 passage of the AIA, the last major reforms to the patent system were enacted in 1952. “We’ve returned to this issue of patent reform very quickly after first effort,” he said. Durbin pointed out a lot of the hyperbole involved in this debate, including Schumer’s characterization of patent trolls as tapeworms, which became a rhetorical target for a couple of Senators opposing the bill. “If [patent trolls] are really the target group, why does this current bill have the oppositions of the inventors, investors, universities and small businesses,” Durbin said. In no uncertain terms, Durbin stated to the rest of the judiciary committee that the PATENT Act would end up hurting honest innovators all in the name of ending the problem of patent trolls.

Sen. Durbin’s words did not fall on deaf ears. Sen. Ted Cruz (R-TX) indicated that he found Durbin’s comments to be quite persuasive. “We have in our economy a particular obligation to protect innovators, the little guy inventing the next great invention that will change the world,” Cruz said. He also said that he would vote against the legislation at that day’s committee hearing but may be able to support it on the Senate floor depending upon any amendments made to the bill’s language.

Sen. Sheldon Whitehouse (D-RI) added his voice to the few who urged caution at the passage of the PATENT Act and the one who was able to most explicitly stated an issue regarding all of the recent patent reform bills being proposed and debated in Congress. “Over the years, I’ve come to recognize a certain pattern,” Whitehouse said. “We start with a really important issue like getting rid of abusive demand letters… but as soon as we address that problem, really big interests start to come to the door and say, ‘By the way, as long as you’re looking at patents, here’s what we want.’” Whitehouse would go on to offer the Benjamin Franklin proverb about the importance of doubting a little bit in our own infallibility, despite the bipartisan support behind the bill. Sen. Richard Blumenthal (D-CT) also observed that Congress should be very careful before placing hurdles in the way of litigants pursuing a legitimate claim of patent infringement.

Another major dissenting voice calling out for caution in approving the PATENT Act was Sen. David Vitter (R-LA). Despite the fact that major Republican figures like Sen. John Cornyn (R-TX) and Sen. Orrin Hatch (R-UT) are sponsors of the PATENT Act, Vitter felt that the legislation was not appropriate from a conservative’s standpoint. Not only do aspects of the PATENT Act weaken patents in a way that makes it difficult to enforce a property right that has been recognized by our country since the passage of the U.S. Constitution but Vitter also found the comprehensive nature of the bill to be less desirable than smaller, targeted approaches. He proposed that an amendment should be made to the bill that would create a small business exemption so that Congress could see how provisions of the PATENT Act would play out between larger corporate entities first.

Chris-Coons-6-4-15Perhaps the most valiant defense of a patent holder’s right to legitimately enforce their intellectual properties against an infringing party was mounted by Sen. Chris Coons (D-DE). He cited letters from numerous stakeholder groups such as the Medical Device Manufacturers Association, the National Venture Capital Association and the Alliance of U.S. Startups and Inventors for Jobs, all of which opposed passage of the PATENT Act as currently worded. “My core concern is that much of the negotiations have happened between interests that are dominant in many sectors,” Coons said. “Every inventor in the eyes of this bill who needs to defend their legitimate invention is also considered a troll.” Coons also spoke to the difficulties that this bill would pose in helping startups and small inventors obtain funding from venture capitalists who are worried that weakened patent rights would pose a threat to their investment activities.

Two amendments proposed by judiciary committee members were approved at the hearing. Sen. Feinstein introduced a measure that prohibits the inclusion of specific monetary amounts within a demand letter. Any patent holder who has successfully negotiated for licensing rights on a case of legitimate patent infringement would likely be able to tell you how problematic this measure is when negotiating in good faith. An Amendment submitted by Sen. Cornyn alters the definition of micro entities under U.S. patent code.

Sen. Durbin submitted seven amendments to the PATENT Act. Several of his amendments related to attorneys fees. While the relative merits of legislatively enacting a fee-shifting provision can be debated, the Durbin Amendment would have made the fee-shifting provision much more even handed, requiring the district courts to consider the conduct of both the non-prevailing and the prevailing party. The proposed amendment read in total: “In determining the amount of attorney fees that is reasonable to award to the prevailing party, the court shall take into consideration the position and conduct of both the non-prevailing party and the prevailing party.”

A separate Durbin Amendment would have directed the district courts to assess the reasonableness of the positions of the non-prevailing party at the time those positions were taken, rather than allowing for a hindsight inquiry. The Amendment read: ‘‘It is further the sense of Congress that the reasonableness of the position or conduct of the non-prevailing party should be assessed based on information that was known or should have been known by the non-prevailing party at the time the position was taken or the conduct occurred.’’

Another Durbin Amendment would have explained that Congress does not want district courts to award attorneys fees based on conduct that “not material to the consideration or outcome of the litigation.” The proposed Amendment read: ‘‘In keeping with the intent to strike a balance and to avoid vexatious or frivolous motions for attorney fees by prevailing parties, it is further the sense of Congress that attorney fees should not be awarded based on allegedly unreasonable litigation positions or actions of non-prevailing parties that are de minimis or are not material to the consideration or outcome of the litigation.”

Sen. Vitter also submitted three amendments. His first proposed Amendment would hold those who file fraudulent or harassing IPRs liable to patent owners. This IPR amendment, as well as several others, were not voted on by the Committee. Vitter’s second proposed Amendment was submitted on his behalf and with the support of Senators Coons and Durbin. Vitter’s second proposed Amendment would exempt Universities, independent inventors and non-profit organizations from needing to meet the heightened pleading requirements of the PATENT Act in order to bring a patent infringement action.

Sen. Tillis submitted an amendment that would extend the sunset date on Covered Business Method (CBM) review. Currently, as a result of the AIA, CBM will sunset 8 years after it became effective, which would be September 16, 2020. Under the Tillis Amendment CBM would not sunset for an additional 8 years, or until September 16, 2028.

While the Tillis Amendment relating to CBM will likely be viewed very skeptically by many within the industry, the biotechnology and pharmaceutical industries were undoubtedly extremely pleased with his second proposed Amendment, which would make it impossible for an IPR to be filed against pharmaceutical patents or patents that cover biological products that have been approved by the FDA. The proposed Amendment read: “An inter partes review shall not be instituted or maintained for a patent that claims a drug or biological product, method of use, or method of manufacturing a drug or biological product approved under section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) or section 351 of the Public Health Service Act (42 U.S.C. 262), including any patent listed in the Food and Drug Administration publication Approved Drug Products with Therapeutic Equivalence Evaluations or identified by the patent owner in a certification in its response to the petition.’’

Sen. Coons submitted 12 amendments to the PATENT Act, which largely seem to be attempts to amend the PATENT Act to incorporate the language of the STRONG Patents Act, which he submitted along with Senators Durbin and Hirono.

One of Coons’ 12 amendments was particularly important because would raise the burden to clear and convincing evidence to invalidate a patent claim in inter partes review (IPR). This would change the standard to match the burden required to invalidate patent claims in federal district court. Another of Coon’s proposed amendments would have allowed the United States Patent and Trademark Office to keep the fees it collects and use those funds for ongoing business operations. While the America Invents Act (AIA) did create a revolving fund for the USPTO to tap into, the USPTO remains under the control of Congressional Appropriations. This and another similar attempt in the House of Representatives would take the USPTO out from under Congressional Appropriations and allow the agency to use 100% of the fees collected. This would have put an end to the controversial practice of fee diversion.

The most vocal and consistent opposition to the string of amendments proposed by Sen. Coons came from Sen. Cornyn, who urged the entire committee to vote against each Coons measure. The crux of the debate between those two statesmen was Coons efforts to create targeted reforms while Cornyn insisted that any amendments protecting certain groups undermined the delicate balance wrought by the negotiations involving this legislation. Both of these gentlemen presumed to be speaking on behalf of the rights of small inventors.

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If you are interested in patent reform please consider joining me for a live program in Washington, DC, on Friday, June 12, 2015, that will take a look at the major patent reform bills pending in Congress. The program will take place at the Washington, DC, offices of DrinkerBiddleBob Stoll, former Commissioner for Patents and current DrinkerBiddle partner will co-host the event with me. Former Federal Circuit Chief Judge Paul Michel will deliver a keynote speech, and will also participate on the first panel, which I will moderate. Other participants will include Brad Olson (Barnes Thornburg), Michael Remington (Drinker Biddle), Dean John Whealan (George Washington University Law School),  Vince Garlock (AIPLA),  Hans Sauer (Biotechnology Industry Organization) and Adam Mossoff (George Mason University School of Law). Stoll will moderate the second panel and provide opening remarks. The event is free and Virginia CLE is being requested. To Register CLICK HERE.

The Author

Gene Quinn & Steve Brachmann

Gene Quinn & Steve Brachmann   

Gene Quinn is a patent attorney and the founder of IPWatchdog.com. He is also a principal lecturer in the PLI Patent Bar Review Course, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. is admitted to practice law in New Hampshire, is a Registered Patent Attorney licensed to practice before the United States Patent Office and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. You can contact Gene via e-mail.

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than seven years. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 11 Comments comments.

  1. Pro Se June 5, 2015 1:22 pm

    If the patents I own today were enforceable like the patent era before 2007, I would have been able to start a corporation and continue to work on many more of the ideas I’ve come up since winning my strongest patent rights.

    Today, I have to be insulted by companies who own attempts to get patents in the same art, get rejected by examiners who cite my art against them, and get told in mediation it means nothing because the way “litigation” works is everyone will just keep trying IPRs until one finally works.

    What little value I have left, to feed my family, the government looks as if they are trying to finish the job.

    I would be more vocal about my experience in this current IP system of things, but at this point, I want to avoid the embarrassment of being a poster child for how bad real independent inventors have been destroyed since eBay.

  2. Edward Heller June 5, 2015 2:18 pm

    Pro Se, indeed. IPRs have to go. And, if congress really wanted to restore the balance to the system, they would legislatively overturn eBay. Congress should also provide some kind of safe harbor for negotiations before an accused infringer could file a case in court. As it stands, patent owners have no way to negotiate without risking a DJ action.

  3. Edward Heller June 5, 2015 2:39 pm

    We all know that Coons has spoken to an understands the problems of small business and startups.

    Cornyn, on the other hand, may think he is helping small businesses, but certainly not as the source of new technology.

    Startups need the patent system far more than big business in order to obtain financing and to protect their inventions from piracy. Treating inventors and startups as trolls is the underlying problem with this legislation.

    It is also the underlying problem with IPRs, where the deep pocket infringer can bankrupt any small fry simply by filing as many IPRs as it takes.

  4. American Cowboy June 5, 2015 4:54 pm

    The real problem is the high cost of litigation. It is not only potential patent infringement defendants who are hurt by threats to sue. I was reading Thomas Sowell today; he was discussing the recent allegations of bad/racist/too-rough policing. He made the point that the DOJ threatens to sue local police departments and they can’t afford to litigate, so they roll over to what the Feds demand. Similar examples crop up in all parts of the law. It is only the deep pocketed software developers who have the money to fight the trend, and they do it by putting that money into Senate PACs to give us this monstrosity.

  5. Edward Heller June 5, 2015 5:12 pm

    American Cowboy, let us think this through. From a cost-benefit point of view, will any patent owner spend a lot of his hard-earned money on a lawsuit whose outcome is uncertain when the potential payoff in terms of a reasonable royalty is not large? To suggest people who cannot afford a defense are actually being sued is probably not the case, in point of fact.

    I do agree, however, there are some unethical people who do send out these demand letters to small fry. But realistically, should they be afraid? I think not.

    So, the high cost of litigation is not really a problem, in my view, at least not from the infringer point of view. It is, however, a problem from the patent owner enforcement point of view when they sue a well-healed infringer who can burn dollars and who almost always conduct the most expensive defense possible just to wear down the patent owner.

  6. Pro Se June 5, 2015 8:30 pm

    When working with good counsel, eating IPRs and invalidity contentions 1000+ pages long (this really happened!)..

    It starts to take a toll when there’s uncertainty to the overall patent climate and then if you can get to trial, expect a jury go in your favor after having billed up millions in contengencies…

    This is now an even more extremely tough business, and unless a pantentee has a long-tail bulk case position..

    In my opinion, today’s business of new ideas is like U2 releasing their best work in today’s music business.

    Why reveal the next potential great idea when the big tech guys can just adopt them into already successful machines?

    Apple, Google, and YouTube were founded in garages.. Today startups stay there due to the current IP climate 🙂

  7. Wes Few June 6, 2015 9:33 am

    It is good to see that there is an issue out there that can be debated and not fall strictly to partisan politics. Agree this starts off as a “well intentioned” effort to stop patent trolls, the type who send hundreds if not thousands of demand letters to people they suspect might be infringing. Disputes need to have a means of resolution and not multiple channels for calculated gamesmanship, and certainly not differing standards in IPR versus District Court. De Novo review is also a problem as the appellate courts hold too much power and litigants who lose big will always continue the fight hoping to get a Judge that did not see the trial to agree with their legal argument, hoping for even a remand and a retrial, etc. Cases / disputes should have a two year resolution deadline. The public is better served by having disputes decided because perfect resolutions are not feasible, and delay should never have become a commonly accepted dispute resolution strategy. As for the patent troll, all of these lobbying resources / money could have spent identifying the proper DJ target and holding their feet to the fire of their extortion tactics. The word will get out and the law firms that spend 90% of their practice sending those letters will start to think twice. These are complex issues for which we must hope our elected representatives will take the time to investigate and vote for what is best and not merely pander to sound bites.

  8. Randy Landreneau June 6, 2015 12:41 pm

    I’m not an attorney, but it seems to me that the best thing to do when having received a frivolous demand letter is to just ignore it. I heard recently that in one case of thousands of demand letters being sent out there were less than five licensing agreements obtained. I get spam, but I don’t try to shut down the internet. The corporations who want to make it very hard to get sued when they are infringing patents have successfully made a huge mountain out of a small mole hill.

  9. Dan Wood June 7, 2015 12:10 pm

    We must distinguish between non-practicing entities, per se, and disreputable conduct. A man builds a multifamily house and rents out the units. Good for him. He later sells it to another who… rents out the units. Bad for him? The purchaser had no involvement in the making of the property. Yet, he fairly acquired the right to demand rents for its use. Is he a real estate “troll?” Bad conduct in patent owners demand letters should be addressed on the basis of bad conduct and practices (and there are many). But the constant use of the pejorative advances nothing and serves only to allow large infringers to taint an otherwise totally American practice relative to property rights, intellectual or otherwise.

  10. Dan Wood June 7, 2015 12:34 pm

    The burdens on small companies who have a valuable and useful invention and who must resort to litigation to protect their rights against giant corporations are legion. I have been involved in such a fight for nearly 10 years. The problems range from district courts that have a paucity of patent literate judges to standard delay and obfuscation tactics by defendants to stonewalling settlement discussions to countering with sanctions motions targeting the principals and attorneys with millions in personal liability. The strategy is clear and unapologetic: break the little guy with excessive and unnecessary (except as a strategy) costs. To couch the current patent landscape as giant corporations being under vicious assault by mislabeled patent trolls (for merely stealing and exploiting the other’s invention) is but another example of telling the “Big Lie” and repeating it until it gains traction.

  11. Anon June 7, 2015 12:44 pm

    Well said Dan Wood.

    The Big Lie needs to be refuted – and refuted harshly. Let there be no patent peace for our time.

    And the worst offenders are the very lawyers (and academicians) who should know better, but who would twist and pervert the law to align with their philosophical beliefs beyond which the words of Congress plainly are directed to. This area of law is complicated enough without the misdirections, misstatements and down right obfuscations of law. Not bad enough to engage this behavior directly, I am thankful to Ned Heller for pointing out Judge Kathleen O’Malley’s writings pointing out the hazards of breaching the divides of law and wanting the judiciary to handle that which belongs to the legislative. It is difficult enough to muster enough courage to hold the legislative branch to accountability, but if you promote [pun intended] machinations by those unaccountable, then the system surely cannot survive, let alone prosper.