Welcome to the third part of our series examining the current patent reform legislation in Congress. In our previous newsletters, we focused on the Targeting Rogue and Opaque Letters (TROL) Act (H.R. 2045) and The Protecting American Talent and Entrepreneurship (PATENT) Act (S. 1137). This installment features H.R.9 or the Innovation Act, one of the most extensive and significant bills directed at abusive patent litigation. In its initial presentation, the Innovation Act was substantially equivalent to bill that was introduced in 2013 by Representative Goodlatte, which was withdrawn before being voted upon by the Senate Judiciary Committee.
|John and Thomas Connors present to Dr. Ahmed U.S. Patent No. 9,005, 125BI
On June 11, 2015, the House Judiciary Committee overwhelmingly voted to pass the Innovation Act, while the Senate Judiciary Committee recently passed its counterpart legislation, the PATENT Act. Proponents of the Innovation Act anticipate that this legislation will effectively curb objectionable practices without targeting specific parties, while preserving patent ownership rights and maintaining the viability of legitimate enforcement procedures. These goals are reflected in some of the key provisions of the Innovation Act, which include:
Pleading requirements. The bill mandates increased disclosure in pleadings brought in patent infringement cases. Specifically, the bill requires the plaintiff to identify the patent claims, the particular methods or actions that constitute infringement and the principal entity bringing the claim. This includes revealing the identity of "each accused instrumentality." The enhanced requirements would allow a larger, controlling business to be added as a party to the litigation.
Demand letters. One of the premises of the Innovation Act is that parties who issue deliberately vague demand letters engage in a practice that violates the public policy goals of patent law. Under the Innovation Act, sending a demand letter would be deemed a fraudulent action unless specific conditions were satisfied.
Attorney's fees. The Innovation Act provides that the prevailing party be awarded reasonable fees and expenses, as opposed to parties bearing responsibility for their own attorney's fees, unless the court determines that (i) the assertions of the non-prevailing party were justified in law or fact or (ii) extreme circumstances exist that preclude attorney fee shifting provisions.
Venue. One of the amendments to the Innovation Act significantly limits where an infringement or declaratory judgment suit can be initiated. Specifically, actions must be brought in a venue that bears a substantial relationship with the events or parties in the case, such as the physical location of the facility or the place of defendant's incorporation.
Stay. The Innovation Act reflects the complementary Senate bill allowing courts to grant a motion to stay an action against retailers or end users for selling or using the potentially infringing product if the manufacturer or end user fulfills certain requirements.
Discovery. As originally proposed, the Innovation Act limited discovery during the initial phases of litigation. Amendments to these requirements brought discovery provisions in line with those specified in the PATENT Act, which restricts discovery based on rulings on certain motions filed early in the proceedings.
Under the Innovation Act, the patent owner is obligated to identify to the court and the United States Patent and Trademark Office the "ultimate parent entity," any party with licensing or enforcement rights and any other entity that the plaintiff knows has an interest in the patent. Failure by the patent owner to meet these disclosure requirements would result in preclusion from collecting reasonable fees and expenses.