Both the legislature and the judiciary are currently engaged in
attempts to curb so-called "patent trolling" – the
use of patents solely for litigation instead of innovation,
development, and protection of marketed products. Rising concerns
over this behavior led to the recent passage of H.R. 3309 (the "Innovation Act")
with overwhelming bipartisan support, only about a month after the
bill was introduced to the House. The Innovation Act aims to
encourage innovation by creating a number of alleged procedural
safeguards against frivolous patent infringement claims, including
heightening pleading requirements, limiting discovery, and shifting
fees to the prevailing party. It also contains provisions for
making post-grant review procedures before the Patent Trial and
Appeal Board a more attractive alternative to challenging patents
in court. The Innovation Act has generated its own set of concerns,
however, particularly among small corporate or individual patent
owners, who worry that the bill may unfairly limit the rights of
all patent owners, and among certain members of the judiciary, who
feel that the bill is an improper legislative encroachment on
judicial authority.
The Innovation Act followed quickly on the heels of the Leahy-Smith America Invents Act, which was
actively debated in Congress for more than five years. By contrast,
the Innovation Act was introduced to the House on October 23, 2013,
and passed on December 5, 2013. Several members of Congress,
including Congressmen John Conyers and Melvin Watt, as well as
former PTO director David Kappos, attempted in vain to urge
Congress to proceed with caution and questioned the apparent need
for urgency. Because the bill passed so quickly, there is a
perception that Congress never had a chance to hear from several
interest groups with significant stakes in patent rights, such as
individual inventors and small or early stage companies.
Some commentators have argued that the lack of input from
individual or small corporate patent holders is problematic and
that the bill contains several provisions which could weaken the
patent rights of such parties. Although the bill is theoretically
targeted at patent trolls or non-practicing entities
("NPEs"), the same provisions that would limit an
NPE's ability to enforce its patent rights also limit any other
patent owner's ability to enforce its patent rights. For
example, some argue that the provision lowering the standard for
shifting litigation fees to the prevailing party could prevent
small entities that cannot pay both sides' fees from pursuing
legitimate infringement claims. Intellectual property rights are
often a significant if not principal asset of early stage
companies, and the provisions of the Innovation Act that make it
more difficult to enforce those rights could make it harder for
start-up companies to attract investors.
Several members of the judicial branch, most notably Chief Judge
Rader of the Federal Circuit, believe that the Innovation Act is a
legislative intrusion on the judiciary, and that the judiciary is
better equipped to deal with any type of frivolous litigation. The
fee shifting provision is also of particular concern to the
judiciary, since there are currently two cases pending before the
Supreme Court that focus on the same topic. If the Innovation Act
passes before the end of the term, it may prevent the Supreme Court
from addressing the issue.
While the Innovation Act has received significant criticism,
representatives from several large companies have spoken in favor
of the legislation, particularly of provisions that would make
post-grant procedures before the Patent Trial and Appeal Board a
more attractive and lower-cost alternative to litigation. The White
House has also signaled its approval. The debate is now raging in
the Senate, where the bill is facing more opposition than in the
House and must compete with a much more limited version that was introduced by
Senator Patrick Leahy.
Stay tuned to future issues of Nutter's IP Bulletin, where we
will address any significant future developments regarding the
Innovation Act.
This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.