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

By Steve Brachmann
July 30, 2015

michelle-lee copy

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.

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

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 14 Comments comments.

  1. Night Writer July 30, 2015 7:55 am

    I just don’t think anything Lee has to say is worth listening too except for the fact she is in power. It is like listening to Stalin. It is only relevant because he was in power. We can only hope that Lee is removed as soon as possible.

    Nothing like appointing a person that has never practice prosecution to be in charge of 8,000 people that do prosecution. Thanks Obama.

  2. Curious July 30, 2015 9:47 am

    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.
    Let’s be clear regarding the USPTO’s expertise — they examine patents. This means understanding the prior art and the law regarding examination. While it may seem natural (to some) that the USPTO should have an opinion on what happens after the patent leaves the USPTO, I just don’t see it. Where the USPTO (e.g., Lee) is opining on things outside their expertise, all I see is them acting as a mouthpiece for the administration (or Google).

    While I appreciate Lee’s suggestions that these bills need to be toned down (I suspect resulting from a recognition of the shifting in sentiment in Congress rather than some deep-seated belief), I don’t understand the USPTO competence, for example, in opining upon the pleading requirements in patent litigation.

  3. Anon July 30, 2015 10:07 am

    One does wonder if Miss Lee has been approached by the Executive Office in formulating a reply to Ron Katznelson’s “Truth in Tr011” propaganda piece.

  4. Curious July 30, 2015 10:12 am

    Nothing like appointing a person that has never practice prosecution to be in charge of 8,000 people that do prosecution. Thanks Obama.
    I’m not going to quibble with Lee’s qualifications. She has a great resume: MIT, clerked at the Federal Circuit, partner at a major law firm, in-house counsel for Google. You really couldn’t ask for better experience.

    The problem with Lee is that she has been infected with Google’s (severe) anti-patent attitude. As a result (and evidenced from some of her comments), she doesn’t see patents as a driver of our economy but a necessarily evil that needs to be toned down.

    Why is Google anti-patent when they have spent a lot of money recently acquiring patents? Google is run by smart people that aren’t going to put all their eggs in one basket. As such their patent strategy is two-fold — (i) weaken the patent system and (ii) acquire patents in case (i) does not succeed.

    Despite being founded based upon patented technology, the reason why Google doesn’t like patents merely comes down to money (like most things). Google got really big really fast by using lots and lots of different technology. Google’s problem is that they were not the original inventors of much of this technology. Google is so incredibly profitable because, in part, they rarely paid for the technology that they use.

    As Google became bigger, the original inventors (or owners of their intellectual property) came calling asking for their fair share resulting from Google’s use of that technology. Ultimately, it became a business decision for Google. It was easier (and cheaper) to take down the patent system than it would be to pay for the technology.

    While it may not be in the United State’s best interest to weaken the patent system, it is in the best interest of Google’s shareholders to do so. That is why our patent system is still under attack and almost every one of the provisions in these bills are pro-infringer and not pro-inventor.

  5. Anon July 30, 2015 12:17 pm

    When exactly did

    Don’t be evil

    become

    Don’t be evil**

    **unless the price is right.

  6. Curious July 30, 2015 3:05 pm

    **unless the price is right
    It boils down to “what’s mine is mine, and what’s yours is … well, I want yours too.”

    Nobody likes to give away their hard (??) earned (“billions and billions” — Sagan would be proud) of dollars — they want to keep them.

  7. Night Writer July 30, 2015 8:15 pm

    It is a really good point Curious that expertise in examining patent applications does not make one an expert in providing incentives to promote innovation.

    I don’t think Lee is qualified for her job, though. She has never prosecuted patents and is now in charge of 8,000 patent examiners. That is crazy.

    As to Google: I think they don’t want patents for a few reasons. One is that they still get 90 percent of their revenue from their search engine and have said that they are afraid that an innovation will come along and dry that up in months. Second, they have said their advantage is size and infrastructure. Patents tend to disrupt that type of advantage. Third, I think they see themselves as investing a lot on money in innovation no matter if patents are there or not as their size will guarantee their ability to use whatever they invent.

    So, they don’t want patents. I wouldn’t want them either if I was in their position and only cared about myself.

  8. Nate Browne July 31, 2015 2:05 am

    Ever wondered why the patent trolls don’t operate in England, Canada or Australia? It is because “practice and procedure” in those jurisdictions has made it difficult for them to launch the sorts of frivolous actions that seem quite common place in the US.

    As I see it, the reform contemplated by HR 9 amounts, substantially, only to change the procedural aspects of the law and not the substantive aspects and Ms Lee’s submissions support this view. By the way, I think it is un-American to continuously frame these reforms as being the product of some sort of “liberal” agenda (particularly in light of the fact that the sponsor and cosponsors are from both sides of the political divide) and similarly un-American to attack the credentials of Ms Lee.

    It was only relatively recently that the US joined the rest of the world in moving to a “First-to-file” system (FTF; and not a genuine FTF system at that) and I think that HR 9 (with some tweaking) is needed to drag the US into conformity with the rest of the world.

  9. Brian Smith July 31, 2015 2:56 am

    Nate Browne : “I think that HR 9 (with some tweaking) is needed to drag the US into conformity with the rest of the world”.

    Nate : how many $billion tech companies have come out of : England, Canada or Australia ?

    You are obviously not American …

  10. Anon July 31, 2015 7:30 am

    I think that it is un-American to attempt to force people to be quiet when they see actions that harm America and speak out against those actions.

    The descriptions used then are either apt or not – If not apt, then the better rebuttal is to point out why they are not apt.

    The truth of the matter, Nate, is that the innovation system in the U.S. has been under attack by both extremes of the political system. So attempting to label the attackers as only being of the “Left” variety is in fact a mistake.

    It is decidedly not a mistake though to note that there is a “Left” variety actively attacking the innovation system. Quite in fact, that is even a worse mistake.

    As to “:joining the rest of the world” – please explain how moving backwards from an innovation leadership position is a good thing (and better yet, please note for whom this is a “good thing.”) Patent law is – and remains – a sovereign-centered concept. Ease of moving between sovereigns – exactly like ease of moving cost factors to the lowest cost factor location in the world – is to the benefit of the soul-less, nation-less Multi-national corporation. This is the attacker from the other extreme than the “Left” variety.

    Innovation systems need protection from both the “Left” and from the “Right.” Disruptive innovation – the best kind of innovation – is a threat to both. Far too often this critical understanding is absent from those wanting a quiet peace for our times.

  11. Curious July 31, 2015 8:15 am

    Ever wondered why the patent trolls don’t operate in England, Canada or Australia?
    Perhaps because they don’t contain defendants worth pursuing? The major corporations (who are really driving reform) don’t care about the “troll” issue. Frivolous actions are easily defeated.

    The problem with these patent acts is that are not directed to trolls — they are directed to all patent holders (including the supposed “good” kind). Moreover, they disproportionately (negatively) impact less well-funded patent holders — again, not a problem to the major corporations. While these acts are being trumpeted as being “anti-troll” — in reality, they are anti-small inventor.

    It was only relatively recently that the US joined the rest of the world in moving to a “First-to-file” system
    Another change that favors big over small.

    similarly un-American to attack the credentials of Ms Lee
    It is ENTIRELY American to attack the credentials of our leaders and their appointees.

  12. Night Writer July 31, 2015 8:16 am

    Nate Browne says: similarly un-American to attack the credentials of Ms Lee

    You obviously have no idea what it means to be a citizen of the U.S.A.

    What is un-American is to tell a citizen it is un-American to criticize the government. I’d guess that you are somehow related to paid trolls in the anti-patent movement. Maybe not. Maybe just a garden variety d0pe. This group of paid trolls dominates patentlyo and I would guess you want to take this blog over too.

    >>change the procedural aspects of the law

    OK, you’re not a lawyer either. And, get that the US is the engine of innovation of the entire world because of our patent system. The fact is that Google spent more money than any other corporation lobbying Congress last year. High on their list is morphing or burning down the patent system.

  13. Curious July 31, 2015 8:18 am

    Disruptive innovation – the best kind of innovation – is a threat to both.
    What is laughable about our current state of affairs is that claims directed to “[d]isruptive innovation” are far more likely to fail under 35 USC 101, 112 today than they would have 5 years ago.

  14. Night Writer July 31, 2015 11:16 am

    Curious, I think with Alice it becomes more of a dog show. You have to convince the judge that they shouldn’t invalidate your claims under Alice. Please Mr./Ms. Judge don’t execute me. Beg boy. Beg.

    That is the system we have now. It may be that a judge in the NDCA might just say well this would disrupt Google and we can’t have that so this is abstract. I’d say there is very high likelihood that a judge would do this.

    We have devolved to no law. You go and beg your case and then the Royal judge decides your fate.