A new industry coalition has been formed to push Congress to enact additional patent reform measures during the 114th Congress. United for Patent Reform is a mega-coalition of retailers and the tech industry. The coalition has the familiar tech giants who seem to always be supportive of patent reform, particularly patent litigation reform — Facebook, Google, Amazon, Oracle, Cisco and Adobe; but the group also boasts the likes of Macy’s, JC Penney, the National Restaurant Association, Realtor, and National Home Builders. The Hill is reporting that the group has planned lobbying visits, is going to be pursuing a media campaign, and will take the fight to lawmakers home districts.
UPR lists 7 goals for patent reform, which include regulating abusive demand letters, making patent trolls explain their claims, protecting innocent customers, making patent litigation more efficient, stopping discovery abuses, making patent trolls for filing frivolous lawsuits (i.e., fee shifting), and providing less expensive alternatives to challenge patents in administrative proceedings. The presentation of the issues will be appealing to many, and the list does include several things that should be relatively non-controversial, such as regulating fraudulent and misleading demand letters.
Who can argue with stopping discovery abuse, or even having frivolous patent trolls pay. The real questions on those fronts will be: (1) who is a patent troll; and (2) what is the definition of abuse. Already district courts have all the discretion they need to award fees when litigation is frivolous or vexatious, the problem is district court judges rarely, if ever, exercise that authority. It would also do everyone well to remember what Senator Mazie Hirono (D-HI) said during the confirmation hearing of Michelle Lee in December: “One person’s patent troll is another person trying to protect his or her patent.” Indeed, the term “patent troll” has largely come to mean “someone who is suing me for patent infringement,” which is in no small part due to the successful campaign waged by high tech companies to vilify not only abusers, but all inventors.
Congress won’t accomplish much, if anything, if it gets mired in the substance of patent law during the inevitable patent reform cycle in the 114th Congress. Similarly, vilifying all innovators as if everyone who owns a patent is somehow evil and a patent troll will only work to divide the industry, and likely divide enough Senators to make getting anything enacted a virtual impossibility. But if Congress decides to focus on process, procedure and non-substantive patent matters like fraudulent and misleading demand letters, real reform is not only possible but likely. Further, by focusing on process and procedure anything that does get done would improve the patent system, won’t harm innovators and would strike a significant blow against the business model employed by the abusers.
Regardless of what you think about patent reform, one thing that everyone should agree on is the need for greater clarity with respect to patent infringement complaints. There is a model complaint for patent infringement actions that is attached to the Federal Rules of Civil Procedure, specifically Form 18 of the FRCP. Form 18 was obviously created by someone who knows little or nothing about patents or patent infringement. All that is required is that from a substantive standpoint is that the plaintiff assert the title of the patent. Indeed, Form 18 produces a complaint that is 2 pages in length, including the signature block and headings. The only substance, if you can call it that, is found in paragraphs 2 and 3, which state:
2. On <Date>, United States Letters Patent No. <__________________> were issued to the plaintiff for an invention in an electric motor. The plaintiff owned the patent throughout the period of the defendant’s infringing acts and still owns the patent.
3. The defendant has infringed and is still infringing the Letters Patent by making, selling, and using electric motors that embody the patented invention, and the defendant will continue to do so unless enjoined by this court.
It is impossible to infringe a patent though. While this may seem like a minor technicality, it really isn’t. As the United States Patent and Trademark Office correctly explains, “[a] person ‘infringes’ a patent by practicing each element of a patent claim…” Thus, infringement is about engaging in activity that is covered by one or more patent claims. Furthermore, it is actually possible for a patent to exist with no claims, for example in the situation where all claims have been lost due to reexamination the patent still remains in force, although it has no claims and therefore could not be used to support infringement allegations.
Form 18 has long been known to be defective. Indeed, Form 18 is so defective that if it is used without any additional substantive allegations a district court judge couldn’t even award a default judgment if the defendant chose not to participate in the lawsuit. This is significant because a default judgment is the ordinary result when a defendant does not respond to a lawsuit. In U.S. Federal Courts a default judgment is not automatic. The plaintiff must apply to the district court for a default judgment. See Federal Rule of Civil Procedure 55(b).
Once a default has been entered the well-pleaded facts of the complaint are accepted as true, but that does not mean that everything in the complaint is taken as true. Facts not established by the pleadings, claims that are not well-plead, and unsupported conclusions of law are not binding on the district court and cannot support entry of a default judgment. Thus, Judges still have a legal responsibility to review the complaint filed to see whether the relief sought can be granted based on the allegations made. Since it is a legal impossibility to infringe a patent in and of itself, a complaint that provides nothing more than what is set forth in Form 18 is legally insufficient. Without an allegation that a particular claim has been infringed a district court Judge would be powerless to award judgment in favor of the plaintiff who used such a sparse and legally inadequate complaint. 
It is well know in the legal industry that it is strictly speaking unnecessary to respond to a complaint presented that merely makes the allegations of Form 18. Virtually every time I mention it to a defense attorney they acknowledge having had discussions internally about that, sometimes even with the clients. It can, however, be exceptionally difficult to seek relief from a default judgment if one is entered. Therefore, with good reason the decision is nearly universally to respond to the complaint, no matter how insufficient it is on its face. It is hard to argue with such a rationale, but at the same time still unfortunate that no one has pushed the issue. If Congress wants to do something useful they could tackle this issue by requiring complaints to contain at least enough for a district court to award a default judgment, and for goodness sakes Congress should revise Form 18.
Form 18 is Insufficient
There will no doubt be some who will take issue with my characterization that Form 18 is clearly insufficient. Whenever I have mentioned this over the years there have always been some self-professed procedural mavens who say that I am wrong because Congress has defined it as sufficient by including it in the Federal Rules of Civil Procedure. That is a nice, if not clever, argument, but no matter how the argument is characterized it is wrong.
Like in all other areas, Congress can pass laws and the Supreme Court of the United States can review those laws to determine whether they are Constitutional. If Congress does not act to enhance pleading requirements it is only a matter of time before the Supreme Court will become the final arbiter of whether the model complaint found in Form 18 is appropriate. Given recent decisions from he Supreme Court there can be little doubt that the Supreme Court will find Form 18 inappropriate.
The Federal Rules of Civil Procedure, as the Supreme Court has interpreted them most recently in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), require far more than what Form 18 deems acceptable. Any fair reading of Iqbal and Twombly reveal that the Supreme Court is fed up with the filing of federal complaints that have little or no useful information conveyed to the defendant. This type of litigation ambush is fundamentally unfair, violates notions of substantial justice embodied in our laws, and it just isn’t allowed any more. While neither Iqbal or Twombly were patent cases, it would be nonsense to predict that this Supreme Court would narrowly interpret the requirements to initiate a federal complaint. This Supreme Court has been famous for wanting to apply all process rules across the board and sees no reason to distinguish the process and procedures used in one substantive area from another. Thus, as a result of Twombly and Iqbal the model patent infringement complaint found in Form 18 no longer satisfies the requirements of Federal Rule of Civil Procedure 8. District Court Judges have acknowledged as much in a number of cases over the past several years.
What’s the Big Deal?
The problem with inadequate complaints is that they are used most frequently in the patent space by the abusers. While a patent infringement complaint does not need to set forth the patent owners entire case and all theories, it needs to at least establish some reason on its face to believe that infringement has occurred. With Form 18 requiring no factual assertions other than the title of the patent and its number, the defendant is not put on any notice about what claim or claims are believed to be infringed, or even what product or service is allegedly infringing.
The response when the complaint is so insufficient on its face is to file a motion to dismiss, or in the alternative require the plaintiff to provide more information. Like everything else in litigation this costs money. If the patent owner is looking for a few thousand dollars many will simply write the check rather than risk losing, or winning after having paid defense attorneys far more. Combine this with the fact that plaintiffs are generally given broad latitude to file at least one amended complaint and abusive patent owners are allowed to harass their way to a nuisance settlement. Even if the district court were to dismiss the case it would almost certainly be done so without prejudice, which means they can be brought back later with a sufficient complaint. In essence, today there is no real penalty for initiating a naked patent infringement complaint for the purpose of harassing a defendant into settling. In fact, filing a naked patent infringement complaint and harassing defendants still remains a pretty good business model, at least if you are asking small enough sums.
Something has to be done about these bad actors and the place to start is to require more substance in patent infringement complaints. This will separate those who are merely harassing from patent owners with a legitimate case who have actually spent time engaging in pre-filing investigation. Complaints need to articulate a discernible theory that puts the defendant on notice. Naked patent infringement complaints cannot be tolerated any more and there must be consequences. Of course, there needs to be latitude to some extent for the district courts to allow for an amended complaint where there is at least a good faith effort to put the defendant on notice of the claim.
It won’t take much additional work on the part of the attorneys representing the patent owner to identify which claims are allegedly being infringed, what product or service is implicated, and why there is at least some reason to believe that infringement has occurred or remains ongoing. But will Congress take this reasonable step, or focus on divisive issues like fee-shifting that will likely derail a bipartisan, industry supported bill. Time will tell.
 Legal citations to support this proposition regarding default judgments could be voluminous. Suffice it to say that in addition to FRCP 55 the following clearly explain the supervisory role the court must play in reviewing the sufficiency of the complaint before entering a default judgment. Thomson v. Wooster, 114 U.S. 104, 113 (1885); Nishimatsu Construction Co., Ltd. v. Houston National Bank, 515 F.2d 1200, 1206 (5th Cir.1975); In re Family Resorts of Am., Inc., 972 F.2d 347 (6th Cir. 1992) (“Upon entry of default, only those well-pleaded allegations relating to liability are taken as true.”); Wooten v. McDonald Transit Associates, Inc. (5th Cir., Jan. 2, 2014); See also Charles A. Wright et al., Federal Practice & Procedure § 2688 (3d ed. 1998) (“[W]hen it seems advantageous, a court may conduct a hearing to determine whether to enter a judgment by default. . . . [T]he court, in its discretion, may require some proof of the facts that must be established in order to determine liability.”).