United States: 2015 Patent Reform: Protecting American Talent And Entrepreneurship Act Of 2015 (S. 1137)

Senate Judiciary Committee Chairman Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT), joined by Senators John Cornyn (R-TX) and Chuck Schumer (D-NY), introduced the bipartisan Protecting American Talent and Entrepreneurship Act ("PATENT Act") on April 29, 2015.1 The third major patent reform bill introduced this year, the 55-page PATENT Act is the first reform bill to garner bipartisan support.2

The PATENT Act's main purpose is to curb the abusive patent litigation practices that plague small businesses.3 According to Senator Grassley, these "frivolous lawsuits cost [small businesses] millions of dollars and force them to settle despite having a strong defense. The meaningful reforms in our bipartisan bill are needed to ensure that the innovation and entrepreneurship our patent system was designed to protect isn't undermined."4

During the recent Senate Judiciary Committee hearing on the bill, several witnesses supported the bill but also urged reform to inter partes review ("IPR") and post-grant review ("PGR") proceedings to make it more difficult to invalidate patents.5 However, other witnesses representing the telecommunications industry opposed those changes and stressed the value of IPR and PGR proceedings for ensuring fair challenges to invalid patents.6 In response to these comments, Senator Grassley explained that he is "committed to looking at these concerns, determining whether they are valid or not, and working with colleagues to see what can be done to improve the process."7 Thus, while support exists for the bill in its current form, amendments are possible as the legislation moves forward.

The section below discusses the likely implications of four key provisions of the PATENT Act designed to discourage abusive patent litigation.

Key Provisions of the Patent Act

Heightened Pleading Standards. Unlike the Innovation Act (H.R. 9) and the STRONG Patents Act (S. 637) introduced earlier this year, the PATENT Act introduces heightened pleading standards for all civil actions in which a party alleges infringement (in a complaint, counterclaim, or cross-claim), except in Hatch-Waxman and biosimilar litigation under 35 U.S.C. § 271(e)(2).8

The bill eliminates Form 18, "Complaint for Patent Infringement," from the Federal Rules of Civil Procedure (generally requiring identification of the asserted patent and a general description of the accused product) and requires a party alleging infringement to include the following specific information in its pleadings, if known: (i) each patent and claim allegedly infringed; (ii) the accused process, machine, manufacture, or composition of matter (the accused instrumentality); (iii) the name or model number of each accused instrumentality; (iv) description of the elements of each allegedly infringed claim, as well as how the accused instrumentality infringes each element; and, (v) in cases of indirect infringement, a description of the acts that are alleged to contribute to or induce infringement.9 The bill allows claimants to file pleadings without this required information if such information is not "accessible," as long as a party provides general descriptions of the required information and states why the information is not accessible.10

The bill, if enacted, would impose heightened pleading requirements for all patent owners trying to enforce their patent rights, not just nonpracticing entities. The pleading rules introduced by the bill go beyond the requirements defined by the U.S. Supreme Court in Bell Atlantic v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). These heightened requirements thus might be inconsistent with the Supreme Court's general approach that patent law should conform to the same general rules controlling other types of federal civil litigation.11 Some of the proposed changes are also already contemplated by the Committee on Rules of Practice and Procedure of the Judicial Conference in its recently published proposed amendments to the Federal Rules of Civil Procedure, which contains specific proposed changes for patent litigation procedures.12 Additionally, many district courts that handle the majority of patent cases have adopted local rules that require filing of patent infringement contentions early in the litigation, along with disclosure of the theories of liability upon which the parties intend to rely.13 Thus, the pleading provisions of the bill, if enacted, might have less practical effect than intended.

Attorneys' Fees. The bill also attempts to codify the "sense of Congress" that in patent cases, nonprevailing parties should pay reasonable attorneys' fees if their litigation position or conduct is not "objectively reasonable."14 Upon motion by the prevailing party, if the court finds that the conduct or position of the nonprevailing party was not objectively reasonable, the court shall award reasonable attorneys' fees to the prevailing party—with an exception for special circumstances that would make an award unjust.15 Additionally, the bill requires each plaintiff to identify interested parties in the litigation, certify to the court that it has sufficient funds to satisfy any award of reasonable attorneys' fees, and demonstrate that its primary business is not the assertion and enforcement of patents or resulting licensing.16 A plaintiff filing such a certification must first notify the interested parties, who may be held accountable for the fee award unless they renounce their interest.17 The bill permits courts to exempt institutions of higher education and nonprofit technology transfer organizations (and others, in the interest of justice) from being charged with the fee award.18

These fee-shifting provisions might have consequences that extend beyond just preventing abusive patent litigation. For example, the Supreme Court recently lowered the threshold for awarding attorneys' fees, announcing that (i) the statutory "exceptional case" determination should be based on "the substantive strength of the party's litigating position" or "the unreasonable manner in which the case was litigated" (rather than requiring the case to be subjectively baseless and brought in subjective bad faith), and (ii) district courts should determine in their discretion whether a case is exceptional under a preponderance of the evidence standard (rather than requiring clear and convincing evidence).19 The bill would alter this standard by requiring courts to conduct an "objectively reasonable" inquiry in every patent case. These provisions might have a chilling effect on patent litigation, deterring patent owners from bringing legitimate suits and deterring counsel who might have contingency fee arrangements with their clients. Thus, in its current form, the bill might have unintended consequences for patent enforcement across the board, not just for nonpracticing entities.

Discovery in Patent Litigation. The bill tackles the issue of disproportionate discovery burden in patent disputes by requiring a court to stay discovery pending resolution of motions to dismiss, transfer venue, and sever accused infringers.20 However, courts have discretion to allow limited discovery necessary to resolve these motions or a motion for a preliminary injunction, or if it finds that additional discovery is necessary to preserve evidence or prevent prejudice.21 Notably, parties can consent to be excluded from these discovery limitations.22

The bill also requires the Judicial Conference of the United States to develop rules regarding the extent to which each party is entitled to receive "core" or "non-core" documentary evidence, as well as the extent of and limitations to discovery of electronic communications.23 Thus, instead of introducing changes to reduce the burdens of document production that often plague defendants, the bill directs the Judicial Conference to address the issue.

IPR and PGR Proceedings. The bill introduces minimal changes to IPR and PGR proceedings.24 For example, restrictions barring PGR petitioners from later asserting in a civil action that a claim is invalid on any ground that the petitioner "reasonably could have raised" during a PGR are eliminated.25 However, unlike the Innovation Act (H.R. 9) introduced earlier this year, the Senate bill does not change the standards for claim construction in IPR and PGR proceedings from the "broadest reasonable interpretation" to the narrower "customary meaning" standard that is applied by district courts.26 Further, the bill does not impose the clear and convincing evidentiary standard or the presumptions of validity for granted patents on petitioners in IPR and PGR proceedings.27 

The  accompanying chart summarizes the bill's key provisions and compares them to the Innovation Act (H.R. 9) introduced earlier in the 114th Congress.28

Footnotes

1.See Press Release, Senator Chuck Grassley, "Senators Aim to End Patent Abuses that Cost U.S. Economy Billions of Dollars Every Year" (Feb. 5, 2015).

2.For a summary of the previous bills, see Nix & Thurlow, " 2015 Patent Reform Innovation Act (H.R. 9) and STRONG Patents Act (S. 632)."

3.See Grassley Press Release, supra note 1.

4.Id.

5."The PATENT Act: Hearings on S. 1137 Before the Comm. on the Judiciary," 114th Cong. (May 7, 2015).

6.Id.

7.Id.

8.S. 1137, 114th Cong. (2015).

9.Id., pp. 2-4.

10.Id.,p. 5.

11.See, e.g., Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 833 (2015) ("Even if exceptions to the Rule [52 of the Federal Rules of Civil Procedure] were permissible, we cannot find any convincing ground for creating an exception to that Rule here [for patent cases]."); see also, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394 (2006) ("We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards."); Nix & Castanias, " Key Patent Law Decisions of 2014."

12.See Committee on Rules of Practice and Procedure of the Judicial Conference, "Preliminary Draft of the Proposed Amendments to the Federal Rules of Appellate, Bankruptcy, Civil, and Criminal Procedure," (Aug. 2014).

13.See, e.g., N.D. Ohio L.P.R. §§ 1.1-6.2; S.D. Cal. Patent L.R. §§ 1.1-4.5.

14.Id., p. 24.

15.Id., pp. 24-25.

16.Id., pp. 25-27.

17.Id., p. 27.

18.Id. p. 29.

19.Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749, 1755-58 (2014); 35 U.S.C. § 285.

20.Id., pp. 16-17.

21.Id.,p. 17.

22.Id., p. 18.

23.Id., pp. 19-20.

24.See generally, S. 1137, 114th Cong. (2015).

25.Id., p. 50.

26.H.R. 9, 114th Cong. (2015), pp. 49-50.

27.See generally, S. 1137, 114th Cong. (2015).

28.For a comparison chart of H.R. 9 and S. 632, see Nix & Thurlow, " 2015 Patent Reform Innovation Act (H.R. 9) and STRONG Patents Act (S. 632)."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions