US Patent Law Reform Efforts To Resume

After a momentous U.S. Congressional election that saw more turnover in the chamber than had occurred for many years, the 112th US Congress is showing signs of continuing recent efforts to make changes to the country’s patent law. In the last few Congresses, such efforts have largely failed.  Whether the new Congress will continue that trend remains to be seen.

Comprehensive “Reform”

The new Congress, like several recent Congresses, kicked off with the introduction on January 25, 2011, of a new comprehensive patent reform bill by the chairman of the Senate Judiciary Committee, Senator Patrick J. Leahy of Vermont, together with a group of bipartisan co-sponsors.  Senate Bill 23, a/k/a the “Patent Reform Act of 2011,” is the fourth such broad patent law overhaul proposed in the last six years; the previous three bills have died in committee without reaching the Senate floor for a vote.

The previous patent overhaul bills have been perceived as largely seeking to narrow the rights of patentholders.  The new bill is similar in most respects to its predecessors.  Provisions carried over from last year’s bill include the following:

Moving the patent system from “first-invent” to “first-to-file,” joining all other major countries in awarding patents to whoever files for them first and no longer permitting later filers to surmount first filers’ rights by showing that they, and not the earlier filers, had invented first.  The later filer would still be able to surmount first filers’ rights to a patent, however, if they can show that the first filers did not actually invent the patent at all but derived it from an earlier inventor.

Modifying current law to emphasize that trial judges must serve as stringent “gatekeepers” regarding damages issues during patent infringement trials, a change that would effectively restrict the evidence and arguments that patentees could submit at trial to request damage awards against accused infringers.  The bill would also recodify existing law on enhanced damages for “willful” infringement and “false marking” of products with patent numbers they do not practice.  These changes would significantly restricting the availability of such relief.

Overhauling current post-grant procedures for additional examination of an issued patent before the U.S. Patent And Trademark Office (“USPTO”).  To obtain review, a challenger would now have to demonstrate a “reasonable likelihood” that one or more claims of the patent should not have been allowed, and would be broadly estopped from later attacking the patent in court based on contentions it “reasonably could have raised” in the inter partes review.  Unlike current law, all such post-grant reviews would permit the challenger to participate and rebut the patentholder’s arguments on a continuing basis.  A second, “first window” type of post-grant review would also be created, permitting a streamlined review of patentability within nine months after a patent issues, of the challenger can show that one or more claims is “more likely than not” unpatentable.

Expanding the right of third parties to comment on whether pending patent applications should be allowed.  On the other hand, once the patent issues, a patent owner who wishes to have his patent further reviewed in light of additional prior art would be permitted to submit additional references to the USPTO for review; however, while such “supplemental examination” is underway, the patent could not be asserted in litigation.

The new bill would restrict “false marking” damages further than its predecessors.  On the other hand, it also adds new restrictions to the appeal rights of third-party requesters in post-grant review: if the USPTO rules in favor of the patentholder, the requestor would no longer be able to appeal this determination to the USPTO’s Board of Patent Appeals And Interferences.

Tax Strategy Patents

Numerous patent applications have recently been filed (or granted) on methods for minimizing one’s tax burden.  The new overhaul bill would include a new provision effectively banning these controversial patents.

Not to be outdone, Sen. Max Baucus of Montana has introduced another bill that also seeks to also ban these patents.  Senator Baucus’s bill seeks to specify that a patent on “any strategy for reducing, avoid, or deferring tax liability” would be effectively invalid.  Like the comprehensive overhaul bill, Senator Baucus’s bill has numerous bipartisan co-sponsors.

USPTO Funding “Disaster”

Senator Leahy’s overhaul bill would, for the first time, grant the USPTO partial rulemaking authority to control its own funding through fees for patent services.  The question of the PTO’s fee-setting authority has taken center stage recently as the USPTO has struggled, amid wide criticism, to improve the quality of patent examination and reduce a massive backlog of applications.  The issue was highlighted on the same day the new overhaul bill was introduced, during a hearing before a newly created subcommittee of the House of Representatives’ Judiciary Committee.  USPTO Director David Kappos, after delivering prepared testimony before the Subcommittee on Intellectual Property, Competition, and the Internet, was grilled by Republican members of the Subcommittee on his agency’s performance and efficiency efforts over the past decade, and was warned that the House might slash funding for the USPTO along with most other agencies in the coming months.

In response to this questioning, Director Kappos argued that major cuts would be “incredibly debilitating” and “a disaster for the USPTO.”  He also renewed a longstanding plea for the USPTO to be granted fee-setting authority to permit it to pay for itself with the fees it charged without the funds being diverted to other uses by Congress.

Judicial Pilot Patent Training Program

One provision was dropped from the patent overhaul bill because it had become one of the few patent reform measures to be passed into law in the previous Congress.  Just before the 111th Congress ended its lame-duck session and disbanded, it enacted a law creating a new “pilot” program that would help train selected district courts judges in patent law issues.  The program is hoped to improve the ability of generalist judges to handle the complex issues involved in patent cases.

The short-term effect of this program are likely limited: only a limited number of district courts would be able to sign up for the program, and little or no funding for the program has yet been provided.  However, it may have important implications. Appeals in patent infringement litigation have mostly been relegated to a specialized court of appeals since 1982.  Debate has continued ever since over whether patent cases, which feature complex technologies and a specialized body of law, should continue to be heard by “generalist” courts at the trial level when they are heard by a specialized court on appeal.  Therefore, it is possible that this pilot “patent expertise” program could mark the beginnings of a movement in the direction of specialized “patent courts” at the trial level.

One interesting aspect of the pilot patent expertise program is that it permits the U.S. District Court for the Eastern District of Texas to apply to participate.  The Eastern District, despite being located in a relatively remote rural area, has developed a reputation of being very friendly to patentholders and consequently is a popular location for patent cases.  Earlier proposals for this program had complex eligibility requirements that, reportedly intentionally, would have made the Eastern District ineligible to participate.   However, just before the program was passed into law, “minor” amendments were made to its provisions, the effect of which was to allow all districts to apply for participation—including, if it desires, the controversial Eastern District of Texas.

Kenneth Weatherwax, Irell & Manella

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