On December 5, 2013, the House of Representatives passed the
Innovation Act (H.R. 3309) (the "Act") by a vote of
325-91. The Act proposes several changes to the patent litigation
system such as enhanced pleading requirements, fee shifting,
discovery limits, patent ownership disclosures, and stays of
customer suits. The Act also amends certain aspects of America
Invents Act (AIA) proceedings, codifies obviousness-type double
patenting for first-to-file patents, and provides for a reduction
of patent term adjustment. Some of the proposed changes of the Act
are described below.
Pleading Requirements in Litigation
The Act requires a party alleging patent infringement to include in
the initial complaint an identification of each patent and each
claim allegedly infringed, and an identification of each accused
process, machine, manufacture, or composition of matter alleged to
infringe (unless the information is not reasonably accessible). The
pleadings would also require a statement of where each element of
each asserted claim is found within or met by the accused
instrumentality. The complaint must also provide an identification
of the right of the party to assert the patent and information on
whether any patent at issue has been specifically declared by a
standard-setting body to be "essential, potentially essential,
or having potential to become essential to that standard-setting
body."
Fees and Expenses
The Act provides that reasonable fees and other expenses shall be
awarded to the prevailing party in a litigation unless the court
finds that the position and conduct of the non-prevailing party
were reasonably justified in law and fact or that special
circumstances make an award unjust. A party that unilaterally
offers a covenant not to sue is considered a non-prevailing party
for purposes of awarding fees and costs, unless such party would
have been entitled to voluntarily dismiss the action without a
court order. If a non-prevailing party is unable to pay and has no
substantial interest in the subject matter at issue other than
asserting the patent claim in litigation, the court may join an
"interested party" and make it liable for the unsatisfied
portion of the award. An "interested party" can be a
patent assignee, a party that has contingent rights to enforce or
sublicense the patent, or a party that has financial interest in
the patent.
Discovery Changes
With some exceptions, the Act provides that, when claim
construction is required, discovery shall be limited to information
necessary for determining the meaning of the claim terms until a
claim construction decision is issued.
The Act also instructs the Judicial Conference of the United States
to develop rules and procedures to "address the asymmetries in
discovery burdens and costs" in patent cases. Such rules and
procedures shall include how and when payment for discovery beyond
core documentary evidence is to occur, and what information must be
presented to demonstrate financial capacity before permitting
additional discovery.
Patent Ownership Disclosure Requirements
The Act provides that a party asserting a patent must disclose to
the United States Patent and Trademark Office (USPTO), the court,
and to each adverse party the identity of the patent assignee, any
entity with a right to sublicense or enforce the patent, any entity
with a financial interest in the patent, and the ultimate parent
entity.
Stays of Suits Against Customers
The Act provides that, when a manufacturer and its customer are
both sued for infringing the same patent, the suit against the
customer is to be stayed if the customer agrees to be bound by any
issues that it has in common with the manufacturer.
Willful Infringement
The Act provides that a claimant seeking to establish willful
infringement may not rely on evidence of pre-suit notification of
infringement unless that notification identifies with particularity
the asserted patent, the product or process accused, and the
ultimate parent entity of the claimant, and explains, to the extent
possible following a reasonable investigation, how the product or
process infringes one or more claims of the patent.
Changes to AIA Proceedings
(a) Limitation of the scope of Post-Grant Review (PGR)
estoppel
The Act proposes narrowing the scope of the estoppel in PGR for
future civil actions from grounds that the petitioner "raised
or reasonably could have raised" to only the grounds
"raised" in the PGR.
(b) Change of claim construction standard in Inter Partes
Review (IPR) and PGR to that of a district court
The Act states that each claim of a patent shall be construed as
such claim would be in a civil action to invalidate a patent,
including construing each claim of the patent in accordance with
the ordinary and customary meaning of such claim as understood by
one of ordinary skill in the art and the prosecution history
pertaining to the patent. If a court has previously construed the
claim in a civil action in which the patent owner was a party, the
USPTO shall consider such claim construction. This is a change from
the current broadest reasonable interpretation standard which is
used in these proceedings.
(c) Expansion of prior art in Covered Business Method (CBM)
proceedings
The Act proposes expansion of prior art for CBM proceedings, by
providing that earlier filed patents or published patent
applications can be used as prior art as of their filing
dates.
Double Patenting is Codified for AIA Patents
The Act codifies the judicially created doctrine of
obviousness-type double patenting in cases where both patents are
issued from first-inventor-to-file (i.e., AIA) applications.
Effect on Patent Term Adjustment (PTA)
The Act eliminates certain patent term adjustment if an applicant
files a Request for Continued Examination later than three years
from the patent application filing date. The appropriate PTA
calculation in such a circumstance is currently the subject of
cases pending before the Federal Circuit.
The Innovation Act will now move to the Senate, where a bill
introduced by Senator Leahy (S. 1720) is currently pending.
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