Just when Congress is gearing up to consider a package of patent reform initiatives aimed at dealing with abusive patent litigation, the U.S. General Accountability Office has released a much anticipated study of the “consequences of litigation” by non-practicing entities as mandated by Section 34 of The America Invents Act (AIA). Given that Section 34’s language and directives could best be described as unenthusiastic towards licensing and the enforcement of patents, an objective reader of the GAO study cannot help but conclude that the GAO did not conduct or produce the sort of scornful report on the state of our patent system that large IT companies and patent-skeptics had hoped for. While the report is not a vindication for NPEs (far from it), it did not give patent critics what they hoped to get (i.e. an independent agency’s finding that patent litigation is exploding and that this increase in litigation is having a negative impact on innovation). Quite the contrary.
The GAO interviewed officials from the PTO, FTC, ITC, and 44 stakeholders including judges, academics, venture capitalists, technology companies, and inventors, surveying existing economic and IP academic research; examined data from the AIPLA and RPX; and purchased litigation-related data from third party sources like Lex Machina; and conducted a year-long PTO performance audit. In the end, the GAO produced a measured report which summarizes the views of the various stakeholders and suggests that — to the extent there is a problem in the patent system, it is not a patent litigation problem but rather a legacy patent quality problem.
According to mythological accounts, ancient Mediterranean voyagers confronted a subtle danger embodied in alluring form: the Sirens. The Sirens compelled all who heard their sound to draw near their reef-surrounded isle. “Their song though irresistibly sweet was no less sad than sweet and lapped both body and soul in a fatal lethargy the forerunner of death and corruption.”  Those succumbing to the Sirens’ song perished as their boats were wrecked on the submerged reefs surrounding the island. Others escaped this fate, however, by blocking off the sound itself.
The Sirens are now singing a seductive song about how to stop patent “trolls” and their “abusive litigation.” It appears that several large corporations who cultivated the patent “troll” narrative trill forth their song, promising efficiency and fairness with concomitant benefits for all. Those giving heed to this modern Siren song are lulled into abandoning or subordinating to concerns of “litigation abuse” other fundamental long-held values and principles of equity, separation of powers, judicial independence and prudent judgment.
The America Invents Act (AIA) is one of the most sweeping patent legislation in over a century, the effects of which are yet to be fully understood. Even before the full implementation of the AIA, legislators in both chambers of Congress have heard the Siren muses and called for yet additional changes in our patent law, ostensibly to curb purported “abusive patent litigation.” The majority of the proposed provisions in these bills appear to focus on the patent litigation process, ironically by stripping the Federal Judiciary of their procedural and discretionary case-management tools.
The letter to Congressmen Wolf and Fattah was short and to the point, saying: “We write to request your assistance in addressing the Office of Management and Budget’s (OMB) recent decision to sequester user fees which fund the United States Patent and Trademark Office (USPTO). As a result, almost $150 million in inventors’ fees in Fiscal Year 2013 have been locked in USPTO’s general fund. We request that the Approrpiations Committee allow USPTO to access the sequestered user fee funds.”
Even though the USPTO is funded solely by patent user fees, the sequester requires cuts of nearly $150 million in the agency’s funding. Without a legislative remedy, the shortfall effectively stops the agency from opening new, highly anticipated regional patent offices across the country, including one located in Silicon Valley. See USPTO Announces Satellite Office Locations. Not surprisingly, each of the sponsors of the bill represent districts in Northern California in the greater San Jose area, which explains their keen interest in the opening of the Silicon Valley satellite Patent Office location. Honda represents the 17th District, Lofgren represents the 19th District and Eshoo represents the 18th District.
The PATENT Jobs Act would enable USPTO to access the fee revenue sequestered in Fiscal Year 2013, which would otherwise sit unused and untouchable, and would add the USPTO to the list of agencies exempt from sequestration orders. This is not a new budgetary concept. Congress has recognized the uniqueness of user-fee-funded agencies in the past, exempting them from sequestration in the Statutory Pay-As-You-Go Act of 2010. The legislation follows a bipartisan letter sent earlier this week by members of the California delegation to the Commerce, Justice, and Science Appropriations Subcommittee asking for a remedy.
Justice Stephen Breyer wrote for the majority in FTC v. Actavis.
On Monday, June 17, 2013, the United States Supreme Court issued its much-anticipated decision on so-called “reverse payments” in FTC v. Actavis, Inc. This decision will impact how brand name drug companies and generics enter into patent settlements to resolve pending patent litigation. In a nutshell, speaking for the majority, Justice Breyer wrote that there is no valid reason for the FTC to be denied the opportunity to pursue reverse payments as an antitrust violation. Breyer, who was joined by Justices Kennedy, Ginsberg, Kagan, and Sotomayor, determined that reviewing courts should apply the rule of reason when determining whether reverse payments violate antitrust law.
While the ruling will likely come as no shock to casual observers, or even to those who have long believed that these agreements were anticompetitive, it is a bit of a shock in that the decision seems to present an unrealistic utopian view of how challenges to reverse payments will be litigated. For reasons hardly explained, Breyer thinks that it will be largely unnecessary for reviewing courts to engage in complicated review of the patent or to engage patent issues, but at the heart of these cases is the underlying patent and associated patent laws that give brand name manufacturers significant and uncompromised rights to exclude.
Chief Justice Roberts explained in his dissent, who was joined by Justices Scalia and Thomas, that it was his view the decision of the majority “weakens the protections afforded to innovators by patents, frustrates the public policy in favor of settling, and likely undermines the very policy it seeks to promote by forcing generics who step into the litigation ring to do so without the prospect of cash settlements.”
On March 20, 2013, Maria A. Pallante, who is the Register of Copyrights at the United States Copyright Office, testified before the House Subcommittee on Courts, Intellectual Property and the Internet Committee on the Judiciary. In her testimony she called for a comprehensive review and updating of the Copyright Act. She started her prepared remarks by explaining: “The law is showing the strain of its age and requires your attention. As many have noted, authors do not have effective protections, good faith businesses do not have clear roadmaps, courts do not have sufficient direction, and consumers and other private citizens are increasingly frustrated.”
During her testimony on Capitol Hill, Pallante explained that it is time to begin work on “the next great copyright act,” which is required because individuals “increasingly are accessing content on mobile devices and fewer and fewer of them will need or desire the physical copies that were so central to the 19th and 20th century copyright laws.” Pallante also lamented the fact that the current Copyright Act is cumbersome and difficult to understand, saying: “if one needs an army of lawyers to understand the basic precepts of the law, then it is time for a new law.”
With the prospect of comprehensive copyright reform on the horizon the familiar battle lines are being drawn between those who absolutely need copyright protection to survive and create versus those who are a part of the infringement culture. Will the comprehensive reforms necessary to protect creators or original works be possible? Will any reform be achievable? The goal of comprehensive reform seems laudable, but creators of original works must engage, both individually and by and through their various Guilds and Associations.
The House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet on March 14, 2013, heard from six witnesses that the business of “patent assertion entities” (PAEs) is inflicting severe harm on a broad range of technology users.
That business involves the enforcement of weak or invalid patent claims against initial and downstream users of devices that are remotely related to the patent claims for the sole purpose of extracting settlements in amounts much lower than the cost of litigating the rights. The witnesses at the hearing agreed that, when confronted PAE demand letters on frivolous claims, settlements by and large are economically unavoidable.
Committee Members Are Cautious
The Subcommittee had before it a particular bill (H.R. 845; the Shield Act) to create a limited loser-pays system. It would award full costs to the prevailing party unless the plaintiff is (1) the inventor, (2) the original assignee, (3) one who produced or sold items covered by the patent, or (4) a university or technology transfer organization.
Almost two weeks ago the United States Patent and Trademark Office issued two Federal Register Notices in anticipation of the U.S. converting from first-to-invent to a first-to-file regime. The first were the Changes to Implement First to File and the second was First to File Examination Guidelines. Both are important. The new regulations that make up 37 CFR are found in the former, but much of the meat and potatoes are found in the later. The Guidelines, which the USPTO says they are not obligated to follow, is where the Office spends most of the time comparing and contrasting old pre-AIA 102 with AIA 102. The Guidelines is also where the USPTO explains which cases they believe have been overruled (i.e., Hilmer and Metallizing Engineering) and which cases continue to have relevance. They also selectively cherry pick portions of the legislative history to back up their interpretations.
Frankly, we know that when the Supreme Court ultimately gets involved interpreting the AIA, which is a virtual certainty, the legislative history will play absolutely no role in interpreting the statute. This Supreme Court holds legislative history in near contempt. It is hard to argue with them on that point knowing how easy it is for something to be included into the legislative history. More interesting, however, will be whether the Federal Circuit will consider legislative history, or at least to what extent. But, as for now, the Patent Office is deferring to legislative history with respect to a number of items. On first glance nothing caught me as out of place particularly, and the Office has to rely on something given that Congress re-wrote the law and used different terminology for things that have had long-standing, well-known meanings.
Therefore, the question really has to be this: Did Congress mean what they said? Of course, that has multiple components: (1) Did Congress mean what they said in the actual text of the bill, which leaves a great many things open to interpretation; and (2) Did Congress mean what they said in the legislative history, which at times is some of the most clear writing you will ever read. The trouble, of course, is that they voted on the text, not the legislative history. Moreover, in one particular instance (relating to Metallizing Engineering) the USPTO relied on comments from Senator Leahy that only occurred after the Senate acted, which hardly seems reasonable to do give that the comment was after the fact and the exact type of remark that Justice Scalia and others seem to detest. How do we know that anyone other than one Senator believed that? How do we even know that was what that Senator believed when he voted? What a mess!
Earlier this week House Judiciary Committee Chairman Bob Goodlatte (VA-6) announced the House Judiciary Committee’s Republican subcommittee assignments for the 113th Congress. The subcommittee from the House of Representatives that has jurisdiction over matters relating to intellectual property is the Subcommittee on Intellectual Property, Competition, and the Internet. This subcommittee has jurisdiction over copyright, patent, trademark law, information technology, antitrust matters, as well as other appropriate matters as referred by the Chairman. It is this House Subcommittee on IP that will be one of the primary focal points for any new legislation that deals with intellectual property over the next two years.
Representative Coble was born in Greensboro, NC, March 18, 1931. He served in the United States Coast Guard for over 5 years and later in the Coast Guard Reserves for 22 years. He served in the North Carolina House of Representatives prior to being elected to Congress in November 1984. In addition to being named the chairman of the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet, Representative Coble has received his other subcommittee assignments on both of his full committees. Congressman Coble will serve on a total of five subcommittees on the Judiciary and Transportation and Infrastructure panels.
On December 18, 2012, the House of Representatives passed the AIA technical amendments bill by a vote of 308 to 89. Here is the link to the bill as passed.
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During the last six days of a session the Speaker of the House of Representatives is allowed to suspend Rules in order to expeditiously dispose of non-controversial matters quickly before the end of a session. See Suspension of the Rules.
This year there will be several intellectual property bills that will move under suspension of House Rules on Tuesday afternoon, December 18, 2012. One is a substitute version of HR 6621, the America Invents Act (AIA) technical corrections bill.
Section 1(m) has been amended to include a PTO study in lieu of the original pre-GATT provision.