Will the Obama Administration continue to seek amendments to the Innovation Act?

USPTO Director Michelle Lee

As patent reform keeps chugging along in Washington, an important briefing was held on Thursday, July 23rd, between members and staff of the U.S. House of Representatives Judiciary Committee and U.S. Patent and Trademark Office Director Michelle Lee. The meeting focused on H.R. 9, the Innovation Act, which recently moved out of committee and is heading to the floor of the House for a vote once it’s scheduled, although a vote is not expected until September at the earliest. The briefing was closed to the press.

We’ve been covering a great deal of growing dissent caused by the Innovation Act and the general movement for patent reform from those who are concerned about the eventual impacts of most proposed legislation on the U.S. patent system. The recent House Judiciary Committee vote which passed H.R. 9 to floor debate was remarkably divided and a number of representatives remarked that they believed the bill still needed a lot of work to better target patent trolling behavior. Over in the Senate, another minority has sprung up to oppose the PATENT Act, which was passed by the Senate Judiciary Committee in early June, on similar grounds. Most recently, a press conference featuring members from both houses of Congress came together on Capitol Hill to voice a wide spectrum of concerns related to passage of the Innovation Act.

One thing which will be interesting to follow in the days following Lee’s briefing with the House Judiciary Committee will be to see if she holds firm to her stance in a few key areas. In written statements and spoken testimony previously offered to the House Judiciary Committee, Lee has said that the PTO generally supports the Innovation Act but that certain provisions, such as the customer stay and fee-shifting rules, needed some more fine-tuning. Will the Obama Administration continue to push for fine-tuning or will the White House get behind the bill regardless?

The pleading requirements that would be put into place by the Innovation Act was another area of concern for Lee. This aspect of the Innovation Act gives us a chance to view how tightly Lee stuck to her guns during the committee briefing thanks to some very pointed prior remarks on this subject. In written testimony submitted by Lee to the House Judiciary Committee prior to an April 14th committee hearing on the Innovation Act, that a complaint of patent infringement must include an explanation of how a technology allegedly infringes upon at least one claim for every patent in question; the Innovation Act would require an explanation of the infringement of every claim for each patent allegedly infringed upon. “Any requirement to plead additional claims in a patent at this early stage of litigation should be considered in light of the burdens that it would place on the patent owner, the potential that it creates for procedural motions that do not materially advance the case, and the incentive that it creates to ‘overplead’ marginally relevant patent claims,” Lee’s testimony reads. Lee further noted that the dynamic nature of patent infringement litigation is such that new claims may become relevant during proceedings, some of which end up being more valuable than the claims for which infringement was originally alleged. Restricting plaintiffs to the claims attached to the original complaint reduces a patent owner’s ability to enforce patent rights.

Lee spoke more about the burden posed by the heightened pleading requirements of H.R. 9 during the hearing itself. Responding to a question from Congressman Jerry Nadler (R-NY) as to why a patent owner couldn’t simply identify all of the claims in question at the outset of litigation, Lee warned that the Innovation Act’s pleading requirements goes well beyond what is needed to move a case forward. “We’ve seen cases where there are multiple patents, and within each patent there are multiple claims asserted,” Lee said. “Sometimes you can have upwards of tens, close to one hundred claims, and that’s a very voluminous complaint you’ve got there if you’re going element by element.” Lee was pretty succinct in her dialogue with Congressman Randy Forbes (R-VA): “On the issue of claims, and which claims are required to be plead with specificity: at least one, and beyond one, we should definitely weigh factors.”

Lee’s written testimony does note some benefit to the heightened pleading requirements. Stricter requirements, when applied properly, would help to focus discovery and would help to cut some of the high costs of discovery, which is often leveraged by patent owners who are trolling their patents to extort a settlement. Still, it will be interesting to see whether or not future versions of H.R. 9 reflect the USPTO’s views on reducing the pleading requirements to one claim per patent.

Other aspects of the Innovation Act could use some reworking in the PTO’s eyes. Provisions regarding stays of customer suits, a motion by which a manufacturer would step in for a consumer or a retailer to handle patent litigation proceedings, are again generally supported by the patent office but Lee’s testimony argued in favor of requiring the consumer or retailer to be bound to the rulings of the suit facing the manufacturer. Without that safeguard, a patent owner bringing legitimate claims forward might have to litigate two whole cases, burdening those that the patent system is supposed to encourage.

The USPTO would also see amendments to the transparency of patent ownership provisions of the bill, which are intended to identify all parties which may have an interest in the unfolding litigation. The agency recommended limitations on the amount and type of information collected, especially if it provides little benefit to the legal proceedings. A public database of patent ownership information maintained by the USPTO was also discussed in Lee’s testimony as a mechanism by which members of the public could stay informed when faced with a strongly worded demand letter.

Even with the slight tweaks to the language of the Innovation Act being sought by the USPTO, it’s the broad nature of the bill that still has many of the U.S. patent system’s stakeholders very concerned. Some industry groups, such as the National Venture Capital Association, are concerned that changes to fee shifting and joinder rules, among other things, could upset the economic balance that would allow business startups to thrive on investment. Many have noted the problems arising from the inter partes review and other proceedings set into motion by the 2011 America Invents Act. If the PTO continues to support the Innovation Act despite Congress’s inability to press forward on more targeted reforms, it would seem that Lee might be willing to surrender the rights of individual innovators to heed the call for sweeping, and perhaps unnecessary, patent reform.