Close but Not Identical, House Unveils Patent Reform Bill

By Gene Quinn
March 25, 2011

Speaker Boehner (L) swears in Congressman Smith (R), House Judiciary Chair, a key player in patent reform.

Late in the afternoon on Thursday, March 24, 2011, the purported patent reform bill from the House of Representatives began circulating.  The House patent reform bill is largely identical to the Senate version – S. 23.  There are some differences, one rather major difference, but the Senate first to file provisions remain intact.  The House bill would still grant the Patent Office the right to use all of the funds collected, as did S. 23.  The House bill also would grant the United States Patent and Trademark Office fee setting authority, as did S. 23, but then curiously goes on to set the fees that the USPTO charges.  It seems unclear why on one hand you would set the fees and in another section of the bill say that the USPTO can vary any fees defined.

Aside from the minor differences in language that are largely differences without a distinction, the one big thing that the House bill would do is extend the prior user rights defense under 35 U.S.C. 273 to patent infringement to all patents and not just business method patents.  Look for a big fight on that one.  The other differences of consequence seem to be that the House of Representatives really likes the thought of adding language authorizing automatic stays of pending litigation, which the Senate does not include.  Additionally, the House bill does not adopt the Senate’s language altering the residency requirement for Federal Circuit Judges.

There will be much time to debate the consequences of the House patent reform bill and the likelihood of some patent reform being enacted.  I anticipate those against first to file will be out in force again, and I suspect that there will be many who will seek to rip out the prior user rights provision of the House bill.  For today, the purpose of this article is to identify the differences in the two bills.  Far more analysis will be forthcoming.

* * * * * * * * * * * * * * * * * * * * * * * * *

Section 4 of the respective Senate and House bills are quite different.  Both would amend 35 U.S.C. 273.  The House bill would also expand the prior user right defense to all patents, which is quite a significant change from prior user rights only being a defense in the case of business method patents, as is currently the case.

Senate Section 4:

(a) Defense to Infringement Based on Earlier Inventor- Section 273(b)(6) of title 35, United States Code, is amended to read as follows:

‘(6) PERSONAL DEFENSE- The defense under this section may be asserted only by the person who performed or caused the performance of the acts necessary to establish the defense as well as any other entity that controls, is controlled by, or is under common control with such person and, except for any transfer to the patent owner, the right to assert the defense shall not be licensed or assigned or transferred to another person except as an ancillary and subordinate part of a good faith assignment or transfer for other reasons of the entire enterprise or line of business to which the defense relates. Notwithstanding the preceding sentence, any person may, on its own behalf, assert a defense based on the exhaustion of rights provided under paragraph (3), including any necessary elements thereof.’.

House Section 4:

Section 273 of title 35, United States Code, is amended as follows:

(1) Subsection (a) is amended —

(A) in paragraph (1), by striking “use of a method in” and inserting “use of the subject matter of a patent in or outside”;
(B) by striking paragraph (3); and
(c) by redesignating paragraph (4) as paragraph (3).

(2) Subsection (b) is amended —

(A) in paragraph (1), by striking “for a method”;
(B) in paragraph (2), by striking “patented method” and inserting “patented process”; and
(C) in paragraph (3) —

(i) by striking subparagraph (A);
(ii) by redesignating subparagraphs (B) and (C) as subparagraph (A) and (C), respectively; and
(iii) by adding at the end of the following:

“(D) Funding. —
“(i) Defense Not Available in Certain Cases. — A person may not assert the defense under this section if the subject matter of the patent on which the defense is based was developed pursuant to a funding agreement under chapter 18 of this title or by a nonprofit institution of higher education, or a technology transfer organization affiliated with such an institution, that did not receive funding from a private business enterprise in support of that development.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate § 315(a) regarding inter-partes reexam other proceedings:

Infringer’s Action- An inter partes review may not be instituted or maintained if the petitioner or real party in interest has filed a civil action challenging the validity of a claim of the patent.

House § 315(a) regarding inter-partes reexam other proceedings:

(1) Inter Partes Review Barred by Civil Action. — An inter partes review may not be instituted if, before the date on which the peition for such a review is filed, the petitioner, real party in interest, or privy of the petitioner filed a civil action challenging the validity of a claim of the patent.

(2) Stay of Civil Action. — If the petitioner, real party in interest, or privy of the petitioner files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for inter partes review of the patent, that civil action shall be automatically stayed until either —

(A) the patent owner requests to lift the stay;
(B) the patent owner files a civil action or counterclaim alleging that the petitioner, real party in interest, or privy of the petitioner has infringe the patent; or
(C) the petitioner, real party in interest, or privy of the petitioner requests to dismiss the civil action.

(3) Treatment of Counterclaim. — A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate bill has no counterpart to §320.

House §320 regarding request for stay in inter-partes reexamination:

If a party seeks a stay of a civil action alleging infringement of a patent under section 281, or a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930, relating to an inter partes review under this chapter, the court shall decide whether to enter a stay based on—

(1) whether a stay, or the denial therof, will simplify the issues in question and streamline the trial;

(2) whether discovery is complete and whether a trial date has been set;

(3) whether a stay, or the denial therof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(4) whether a stay, or the denial therof, will reduce the burden of litigation on the parties and on the court.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate § 321(c) regarding the deadline to file for post-grant review:

Filing Deadline- A petition for a post-grant review shall be filed not later than 9 months after the grant of the patent or issuance of a reissue patent.

House § 321(c) regarding the deadline to file for post-grant review:

A petition for a post-grant review may only be filed not later than the date that is 12 months after the date of the grant of the patent or the issuance of a reissue patent (as the case may be).

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate §325 regarding post grant review other proceedings:

(a) Infringer’s Action- A post-grant review may not be instituted or maintained if the petitioner or real party in interest has filed a civil action challenging the validity of a claim of the patent.

House §325 regarding post grant review other proceedings:

(a) Infringer’s Civil Action. —

(1) Post-Grant Review Barred by Civil Action. — A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner, real party in interest, or privy of the petition filed a civil action challenging the validity of a claim of the patent.

(2) Stay of Civil Action. — If the petitioner, real party in interest, or privy of the petitioner files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for post-grant review of the patent, that civil action shall be automatically stayed until either —

(A) the patent owner requests to life the stay;

(B) the patent owner files a civil action or counterclaim alleging that the petitioner, real party in interest, or privy of the petitioner has infringed the patent; or

(C) the petitioner, real party in interest, or privy of the petitioner requests to dismiss his civil action.

(3) Treatment of Counterclaim. — A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of the patent for purposes of this subsection.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate bill has no counterpart to §330.

House §330 regarding request for stay in inter-partes reexamination:

If a party seeks a stay of a civil action alleging infringement of a patent under section 281, or a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930, relating to a post-grant review under this chapter, the court shall decide whether to enter a stay based on—

(1) whether a stay, or the denial therof, will simplify the issues in question and streamline the trial;

(2) whether discovery is complete and whether a trial date has been set;

(3) whether a stay, or the denial therof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and

(4) whether a stay, or the denial therof, will reduce the burden of litigation on the parties and on the court.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate Section 11 regarding residency of Federal Circuit Judges:

(a) In General- Section 44(c) of title 28, United States Code, is amended–

(1) by repealing the second sentence; and

(2) in the third sentence, by striking `state’ and inserting `State’.

(b) No Provision of Facilities Authorized- The repeal made by the amendment in subsection (a)(1) shall not be construed to authorize the provision of any court facilities or administrative support services outside of the District of Columbia.

(c) Effective Date- This section shall take effect on the date of enactment of this Act.

The House does not have any provisions relative to amending the residency requirement for judges on the Federal Circuit.

* * * * * * * * * * * * * * * * * * * * * * * * *

Senate Section 14 would render tax strategies unpatentable, just as does the House version of the bill.  The Senate version, however, does not include the following exclusions that make clear that tax software is not unpatentable.  Senator Grassley made such a statement from the floor of the Senate to allay any fears that the Senate intended to attack tax related software.  Assuming Grassley was, in fact, speaking for the majority of Senators this provision in the House bill shouldn’t create any problems.

House Section 13 regarding Tax Strategy patents:

(c) Exclusions. — This section does not apply to that part of an invention that—

(1) is a method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax filing, including one that records, transmits, transfers, or organizes data related to such filing; or

(2) is financial management method, apparatus, technology, computer program product, or system to the extent it is severable from any tax strategy and does not limite the use of any tax strategy by any taxpayer or tax advisor.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 5 Comments comments.

  1. Mark Nowotarski March 25, 2011 3:01 pm

    Item (d) of section 13 is kind of interesting:

    Rule of Construction. Nothing in this section shall be construed to imply that other business methods are patentable or that other business-method patents are valid.

    Does that mean other sections of the bill should be used to construe that certain inventions are patentable and their patents are valid?

  2. Michael F. Martin March 25, 2011 4:47 pm

    From Sec. 17, it appears that the House has been reading the FTC Report. Compare Sec. 17 against FTC Report at 129-131

  3. ben March 26, 2011 10:41 am

    It’s all still more of the same -a get out of jail card for large multinational firms. They’re getting what they paid for. Small entities have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors. Yet small entities create the lion’s share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” Congress is rushing headlong into disaster. This bill will be a wholesale slaughter of US jobs.

    Those wishing to help fight this property grab should contact one of the groups below.

    http://www.ieeeusa.org/policy/policy/2011/022311.pdf

  4. step back March 27, 2011 5:17 pm

    So is there a prize for the first person who notes that you may have intended to say Close “BUT” not identical in your title?

    (censorship immunity card –good for 1 year)

  5. Gene Quinn March 28, 2011 11:27 am

    step-

    Whatever are you talking about? You need to read the title a little closer — LOL.

    Thanks for keeping me honest. Correction to title made at 12:27pm Eastern 3/28/2011.

    -Gene