Posts Tagged: "Innovation Act"

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.

Most Congressional offices now understand how loser-pay, bonding and joinder stops the flow of capital to innovation startups, how customer stays make defending patent rights impossibly difficult, why eliminating PRG estoppel perpetuates litigation shifting almost all of the costs onto inventors, and how IPR’s and CBM’s unjustly strip property rights and devalue all patents. Rank and file offices seem to be listening. However, key offices are deliberately deaf.

Members of both major American political parties from both the Senate and the House of Representatives came together at a press conference held on the afternoon of Tuesday, July 14th, to oppose the most recent round of proposed patent reform bills in either chamber of Congress. Meanwhile, rumors are swirling that suggest that the Innovation Act (H.R. 9) has been tabled for the rest of the summer in the House of Representatives.

Dissent among members of Congress on the nature of the Innovation Act was evident from the opening remarks of the committee’s two ranking members. Congressman Bob Goodlatte (R-VA), the House Judiciary Committee Chairman and the Innovation Act’s major sponsor, stated that the Innovation Act would “ensure that the patent system lives up to its constitutional underpinnings” while targeting the abusive patent litigation which has been central to the debate on patent trolls. The ranking Democratic member of the committee, Congressman John Conyers (D-MI), said the bill was overly broad and yet it didn’t adequately address issues significant to this debate, including abusive demand letters and the ending of fee diversions from the U.S. Patent and Trademark Office’s budget.

Goodlatte was incredulous, explaining that he sees no substantive difference between the language in the Innovation Act and the language in the PATENT Act. The difference between the House bill and the Senate bill boils down to the presumptions made and who will wind up bearing the burden of proof. Congressman Goodlatte is sophisticated and knowledgeable. Surely he has to understand both that there is a difference and that the difference is meaningful.

The House Judiciary Committee will hold a hearing on Thursday morning, June 11, 2015, at 10am ET in order to markup the Innovation Act. The Manager’s Amendment is currently available on the hearing webpage. Additional proposed amendments by Judiciary Committee members are excepted to come in and be posted sometime later today. While a markup of this legislation has been rumored numerous times only to be postponed, it seems that this hearing will go forward. It is widely expected that the Innovation Act will easily clear the House Judiciary Committee. The resulting bill with whatever amendments may be approved may move quickly to the full House of Representatives for a vote.

The need for Rep. Issa’s company to enforce its rights reminds us that inventors and small businesses often have to protect their patents through litigation. But the patent legislation supported by Rep. Issa will make it much harder for all patent owners to protect their rights, imposing extensive financial and procedural burdens that go far beyond what is necessary (or helpful) to curb abusive litigation practices. Whereas true patent reform should be a scalpel, this patent legislation is a sledgehammer. All legitimate inventors and startup companies, like Reps. Issa and Massie, are treated as acceptable collateral damage in the effort to eliminate the handful of bad actors who file nuisance lawsuits.

According to Grassley’s office, the amended PATENT Act will provide important reforms for the way that the Patent Trial and Appeals Board (PTAB) of the United States Patent and Trademark Office (USPTO) operates. For instance, the managers amendment would: (1) Require the PTAB to apply the claim construction standard used in federal district court (i.e., the Phillips standard) and further requires the PTAB to consider if claims have previously been construed in district court. (2) Makes explicit that for purposes of PTAB adjudications patents are presumed to be valid, although does so retaining the current law providing that the petitioner has the burden to prove a proposition of unpatentability by a preponderance of the evidence. (3) Makes clear that the Director has discretion not to institute an IPR or PGR if doing so would not serve the interests of justice. (4) Allows patent owners to submit evidence in response to a petition to institute an IPR or PGR, and petitioners to file a reply to respond to new issues. (5) Directs the PTO to modify the institution process so that the same panels do not make institution and merits decisions. (6) Directs the PTO to engage in rulemaking in order to institute a Rule 11-type obligation in IPR and PGR proceedings.

Strong patent protection is almost universally considered critical to robust innovation. Venture capital and private investment in new technology-based businesses heavily depend upon it. Yet, the Innovation Act is positioned to significantly reduce the value of patents by making the risk of enforcement prohibitively high.

Another discrepancy is between the stated legislative goals and the actual proposed language. This is perhaps demonstrated in starkest relief in the “customer stay” provision found in both the Innovation Act bill in the House of Representatives and in the PATENT Act bill in the Senate. It ostensibly would exist to protect downstream customers of a patent infringer, such as a small coffee shop offering Wi-Fi service using a device that unbeknownst to the coffee shop infringes a patent. But while the Senate Judiciary Committee’s summary of the PATENT Act says that the “customer stay is available only to those at the end of the supply chain,” like the coffee shop, the language found in the bill is actually far broader in scope.

Patent reform is the new normal and we can expect that it will continually be raised in every new Congress for the foreseeable future. Currently there are four serious proposals for patent reform in various stages of consideration in Congress. They are: (1) The Innovation Act; (2) The TROL Act; (3) the STRONG Patents Act; and (4) the PATENT Act. There is also another bill – the Innovation Protection Act – that likely has no chance of passing but which is eminently reasonable. A summary of each of these five bills follows, along with one thing to watch for which could completely upset all predictions.

Microsoft applauded the introduction of the PATENT Act. Universities seem to be on the fence, recognizing that the Senate alternative is an improvement, but likely to support amendments. The Innovation Alliance opposes the bill, pointing primarily to customer stay language that could effectively immunize large corporations from patent infringement liability. Meanwhile, according to BIO, any patent reform bill that does not address abusive filings of inter partes review (IPR) petitions will be opposed.

Yesterday the House Committee on Energy and Commerce voted to approve the Targeting Rogue and Opaque Letters (TROL) Act by a vote of 30-22. Meanwhile, the Protecting American Talent and Entrepreneurship Act (the PATENT Act) was introduced into the Senate. It is now also believed that Congressman Goodlatte may have a hearing or markup with respect to the Innovation Act at some point during the week of May 11th. However, there whispers that the Innovation Act may not be able to make it out of the House Judiciary Committee.

A clique of multinational corporations is pushing legislation that will be a disaster for the rest of us, especially our universities with research components. Small inventors and their patrons in academia are being asked to swallow large dosages of poison encapsulated in the bill. Two features are especially concerning: mandatory fee shifting and involuntary joinder. Together and separately, they seriously weaken and put at risk the university technology transfer process, so necessary to America’s innovative and entrepreneurial way of life.

On Monday, May 11, 2015, IPWatchdog will a co-sponsor a roundtable discussion on patent reform. This event will take place at the law offices of McDermott Will & Emery, which is located directly across the street from the U.S. Capitol. Bernie Knight, a partner with McDermott and a former General Counsel to the United States Patent and Trademark Office, will co-moderate the event along with me. We hope you can join us for this discussion.