No defense or damages limitation has ever turned on the niceties of recordation of ownership at the USPTO. This would be a sea change in patent law.
Senators Leahy and Tillis have proposed another patent law amendment for the Endless Frontiers Act (SA 2060). SA 2060 rewrites and broadens a prior amendment that, in its old form, at least had something to do with the topic of the EFA (strengthening our competitiveness with China). The old version would have put an onus on foreign patent owners to become “transparent” in their ownership interests, by penalizing failure to record their ownership transfers at the USPTO. The new version evidently reflects a realization that such a carve out would violate international law. It now puts the same onus on everybody. Since it would affect everyone, this new amendment has evolved outside the original purpose of the EFA.
SA 2060 would also be a breathtaking expansion of the power of adjudged willful infringers to avoid responsibility for their trespasses against patent owners. The most likely patent owners to fall prey to SA 2060 are individual inventors and small companies. SA 2060 essentially says that if the paperwork for an ownership transfer is not handled properly within a short 90-day time frame from the date of a transfer (i.e., if it is not “recorded” with the USPTO) then every infringer that our judicial system has determined is the “worst of the worst” will get away with it. As a penalty for nonrecordation, a jury’s finding of willfulness could never lead to enhancement of damages to punish that willfulness. The words of SA 2060 put it this way: for the period when the paperwork is not perfect, “no party may recover, for the infringement of that patent in any action, increased damages under section 284.”
It has been said that transparency in rights ownership is a good thing, and who could oppose a little nudge to increase transparency when it comes to patent ownership? Yes, transparency is a good thing. So is punishment of intentional and willful infringement. The problem with SA 2060 is it fails to realize that the true need for transparency is already met in existing law.
First, in such rare cases that a patent owner has not recorded a transfer to itself at the USPTO, that patent owner will always have to prove its standing whenever it brings a patent infringement lawsuit. The plaintiff does so by producing the transfer documents. When it really counts—at the filing of a lawsuit—ownership interests are always transparent. They have to be, to satisfy federal court standing requirements.
Second, the law already encourages transparency. The big irony of SA 2060 is that recordation has a long tradition as an action taken to protect the transferee, not to create traps for an unwary transferee. Just like in real estate law, recording ownership of the intangible property embodied in a patent protects the new owner by putting the world on notice of the transfer, preventing another (through fraud or otherwise) from ever becoming “a holder in good faith without notice.” Recordation avoids the nightmare scenario of the same owner selling the same property twice, resulting in the second transferee possessing quiet title. As such, incentives already exist for patentees to take advantage of no-cost recording of transfers at the USPTO. The general law of property already encourages the same “transparency” sought by SA 2060—just without bewildering windfalls and rewards for adjudged-unethical infringers.
No defense or damages limitation has ever turned on the niceties of recordation of ownership at the USPTO. This would be a sea change in patent law. Something so radical at least should rise or fall based on thorough and thoughtful legislative debate, investigation and committee work, including testimony by experts in real estate law and patent practice.
Imagine if you owned a home and every time you called the police about a trespasser on your lawn or in your property, the police checked the county records. And then imagine the police and prosecutors were forced to give a windfall to the trespasser if property-transfer records were not absolutely flawless—let’s say allowing only misdemeanor tickets and fines when the law would otherwise permit felony charges and imprisonment. It beggars the imagination why anyone would think this is a good idea.