LegiStorm

Summary:

This report describes how current patent litigation reform legislation would change existing patent law to address the perceived problems caused by entities that engage in patent litigation tactics that have been criticized as abusive or deceptive. The bills introduced in the 114th Congress include the Innovation Act (H.R. 9), Protecting American Talent and Entrepreneurship Act (PATENT) Act (S. 1137), Demand Letter Transparency Act of 2015 (H.R. 1896), Targeting Rogue and Opaque Letters (TROL) Act (H.R. 2045), and the Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015 (S. 632). The legislation includes the following changes to the patent system: Heightened Pleading Requirements: The Innovation Act and the PATENT Act would require parties alleging patent infringement in a civil action to include in the court pleadings specified details concerning each claim of each patent infringed, and the acts of the alleged infringer. Limits on Discovery: The Innovation Act (as reported by the House Judiciary Committee) and the PATENT Act propose limitations on discovery pending the resolution of certain motions, including motions to dismiss, transfer venue, and drop parties. Transparency of Patent Ownership: The Innovation Act and the PATENT Act would require plaintiffs in patent cases to disclose to the United States Patent and Trademark Office (USPTO), the court, and all adverse parties information relating to entities that own or have a financial interest in the patent. Customer-Suit Exception: The Innovation Act and the PATENT Act would allow a court to stay litigation against a customer of a product that contains allegedly infringing technologies, if the manufacturer of the product is a party to the same or other action on the same patent and other requirements are satisfied. Shifting of Attorney Fees: The Innovation Act would require a district court to award attorney fees to a prevailing party in patent cases, unless the court finds that the nonprevailing party’s position and conduct “were reasonably justified in law and fact or that special circumstances ... make an award unjust.” The PATENT Act would require the prevailing party to make a motion to the court to determine whether the nonprevailing party’s position and conduct were “objectively reasonable”; if they were not, then the court must award reasonable attorney fees to the prevailing party unless there are special circumstances that would make an award unjust. Fee Recovery: The Innovation Act and the PATENT Act contain provisions that address the situation when the nonprevailing party alleging infringement is unable to pay the fee award and other expenses. The Innovation Act (as reported) and the PATENT Act would allow a defendant to submit a statement early in the litigation claiming that the plaintiff’s primary business is the assertion and enforcement of patents; the plaintiff would then need to certify that it has sufficient funds to satisfy any potential award of attorney fees that may be assessed, and to identify (and provide notice to) any “interested parties” that could be held accountable for the award if the plaintiffs are unable to pay it. Demand Letters: Several bills propose various approaches to address demand letters. The STRONG Patents Act and the TROL Act would impose specific enforcement and content requirements for demand letters. The Innovation Act expresses the sense of Congress that purposely evasive demand letters are abusing the patent system in a manner contrary to public policy. The Demand Letter Transparency Act proposes both disclosure and content requirements directed towards “abusive” demand letter practices, and the PATENT Act focuses on pre-suit notifications. Patent Litigation Reform Legislation in the 114th Congress Congressional Research Service Post-Grant Review Reforms: The Innovation Act, PATENT Act (as reported by the Senate Judiciary Committee), and the STRONG Patents Act would mandate that the Patent Trial and Appeal Board (PTAB), in inter partes review (IPR) and post-grant review (PGR) proceedings, follow the same claim construction standard used by district courts. The Innovation Act and the PATENT Act (as reported) would require the PTAB to consider prior claim construction by a court in a civil action in which the patent owner was a party. In addition, the Innovation Act and the PATENT Act would narrow the estoppel effect arising from a PGR. The Innovation Act (as reported) and the STRONG Patents Act would heighten the standing requirements for persons wanting to initiate a PGR or IPR. The STRONG Patents Act would also require the IPR/PGR petitioner to prove unpatentability of a patent claim by “clear and convincing evidence.” Elimination of USPTO Fee Diversion: The STRONG Patents Act would permit the USPTO to spend all fee revenue that it collects without further appropriation action or fiscal year limitation. Venue: The Innovation Act (as reported) would impose limitations on the judicial districts in which a civil action may be brought for patent infringement or for a declaratory judgment that a patent is invalid or not infringed. Assistance for Small Businesses: The Innovation Act, STRONG Patents Act, and the PATENT Act contain provisions designed to help small businesses that participate in the patent system either as patent owners or as defendants.