On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, a bill entitled the Innovation Act. This bill has wide-sweeping provisions that, if enacted into law by passage of a similar bill pending in the Senate and with approval of the President, will profoundly alter the manner in which patent infringement actions are litigated.
Summary of the Major Changes to Patent Litigation By
the House Bill
Although the bill was in large measure touted as a way to curb the
behavior of non-practicing entities, so-called "trolls"
who do not manufacture a product or provide a service in the
marketplace other than to foster patent litigation, many provisions
of the bill would affect all litigants. Provisions of the bill
include:
More Detailed Patent Infringement Allegations in
Pleadings
So as to not be dismissed at the pleadings stage, a pleading will
have to identify each patent claim allegedly infringed, identify
(e.g., by name or model number) each accused process, machine,
manufacture, or composition of matter alleged to infringe, state
where each element of each claim is found in, and how each
limitation of each claim is met by, the accused process, machine,
manufacture, or composition of matter. Also, the principal business
of the party alleging infringement must be described, each
complaint that asserted infringement of all patents-in-suit must be
listed, and there must be a statement of whether any patent-in-suit
has been declared as essential, or has potential to become
essential by a standard-setting body, or whether any government has
imposed specific licensing requirements as to any patent.
Presumption of Attorney Fees in Every Patent Case and
Forced Joinder of Other Parties if Fees Unpaid
A prevailing party will be awarded reasonable attorney fees and
other incurred expenses in any federal civil action where a party
asserts a claim for relief relating to patents, unless the court
makes a specific finding that the position and conduct of the
nonprevailing party was reasonably justified in law and fact or
that special circumstances (such as severe economic hardship to a
named inventor) make the award unjust. Further, if a nonprevailing
party is unable to pay the award, the court must grant a motion to
join another interested party (a patent assignee, party that can
enforce or sublicense the patent, or party with a direct financial
interest in the patent) if it is shown that the nonprevailing party
has no substantial interest at issue in the lawsuit other than to
assert the patent in litigation.
Discovery Limited Before the Patent Claims Are Construed
by the Court
If claim construction is required, then discovery is restricted to
information necessary for the court to determine the meaning of the
claim terms, and this limitation on discovery will continue until
the court rules on claim construction. This limitation on discovery
will not apply to any federal civil action relating to patents that
has a specified time period (including a lawsuit that includes
allegations based on 35 USC 271(e), such as infringement actions
related to abbreviated new drug applications), to any preliminary
injunction motion, or to parties that jointly stipulate to
additional discovery. The court also has discretion to permit
additional limited discovery if necessary to resolve a properly
raised motion or to prevent manifest injustice.
Prevents Use of Pre-Suit Patent Notification as Evidence
of Willful Infringement Unless Certain Facts
Disclosed
A pre-suit notification of a patent, such as a demand letter,
cannot be relied upon as evidence of willful infringement unless
the notification identifies the particular patent, identifies the
accused product or process, identifies the ultimate parent entity
of the party claiming patent infringement, and explains with
particularity - to the extent possible following a reasonable
investigation or inquiry - how the accused product or process
infringes one or more claims of the patent.
Requires Disclosure of Relationships with Plaintiff
Asserting Patent
Upon filing an initial complaint for patent infringement, a
plaintiff must disclose to the U.S. Patent Office (USPTO), the
court, and each adverse party the identity of the assignee(s), any
entity with a right to sublicense or enforce the patent, any entity
having a financial interest in the patent, and the ultimate parent
entity of the identified entities. An entity with a financial
interest includes an entity with any right to receive proceeds
related to the assertion of the patent and, as to a plaintiff,
direct or indirect ownership or control by a person of more than
five (5) percent of the plaintiff. This duty of disclosure upon a
plaintiff is ongoing, with the plaintiff to report any changes to
the USPTO within 90 days after any change. Failure to comply with
the disclosure requirements will prevent a plaintiff or subsequent
owner from recovering reasonable attorney fees and expenses, as
well as increased damages for willful infringement for activities
occurring during the time when there was a failure of disclosure,
unless it would be manifestly unjust.
Presumption of Staying All Patent Lawsuits Against
Customers
A court must grant a motion to stay at least the portion of a
federal case relating to a patent that is asserted against a
customer of a manufacturer or supplier of a product or process
accused of infringement, if the customer and manufacturer consent
in writing to the stay, there is a federal case where a party is
the manufacturer and it involves the same patent and accused
infringement, and the customer agrees to be bound to a final
decision on all issues common with the case involving the
manufacturer. The court may lift the stay based upon a motion
showing that the case against the manufacturer will not resolve a
major issue in the customer lawsuit or that the movant is
unreasonably prejudiced by the stay and it would be manifestly
unjust to continue the stay. In addition, a lawsuit that includes
allegations based on 35 USC 271(e)(2), such as an infringement
action related to an abbreviated new drug application, is expressly
exempted.
Judicial Conference Required to Promulgate Further
Federal Rules of Procedure
The Judicial Conference of the United States is required to
develop rules and procedures to address asymmetries in discovery
burdens and costs in patent suits, including to what extent each
party shall bear the cost of producing core documentary evidence
and in making other discovery available, as well as the extent
non-documentary discovery and electronic communications may be
sought.
Amends Bankruptcy Code to Permit Trademark Licensees to
Prevent a Bankruptcy Trustee from Terminating the
License
The bankruptcy code is amended to include trademarks within the
definition of intellectual property, thereby making trademark
licenses subject to 11 USC 365(n), among other things, and to
expressly state that 11 USC 365(n) applies to a foreign
representative who attempts to reject or repudiate a contract under
which the debtor is a licensor of intellectual property, so a
licensee can exercise its rights under that section under such
circumstances.
Limits the Scope of Post Grant Review
Estoppel
The estoppel effect from post grant review proceedings under 35
USC 321 is limited to invalidity grounds that the petitioner
raised. The current estoppel as to invalidity grounds that
"reasonably could have been raised" would be eliminated
by the bill.
Requires Claims To Be Construed Differently in Inter
Partes Review and Post Grant Review
In inter partes review and post grant review proceedings before
the Patent Trial and Appeal Board of the U.S. Patent and Trademark
Office, claims are required to be construed in accordance with the
ordinary and customary meaning as understood by one of ordinary
skill in the art and the prosecution history. This may be a more
narrow construction than a manner of construction currently applied
by the Patent Trial and Appeal Board in these proceedings,
which is the broadest reasonable interpretation. In addition,
if a court had previously construed a claim or claim term in a
lawsuit in which a patent owner was a party, then the office must
consider this claim construction.
Purports to Codify Obviousness Type Double Patenting
Under the First inventor to File Regime
Adds a new condition for patentability, 35 USC 106, that
attempts to codify the current judicially created doctrine
precluding obviousness-type double patenting.
If you would like a copy of H.R. 3309, as amended by voice vote and recorded vote, please click here.
This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Gilson & Lione lawyer.