Patent reform legislation has now been introduced in both the House and the Senate. The provisions call for major reforms and mirror much of the proposed legislation from 2008. If anything, this is not a consensus Bill. File Attachment: SenateBill.pdf (116 KB) File Attachment: HouseBill.pdf (180 KB)
Proposed changes in the Senate Bill include:
- First to File: Moving to a first-to-file system that credits invention based on the filing date of the patent application rather than on the date of actual invention. The provision eliminates the one-year grace period for most cases. Thus, any independent third-party publication prior to filing is considered prior art regardless of the date of invention. Likewise, secret prior art (102(e)) cannot be 'sworn behind' based on prior invention. This provision obviously hurts folks who delay in filing patent applications.
- Damages: Must look to the invention's "specific contribution over the prior art" to determine damages. There is an interesting provision that a reasonable royalty may be calculated as the price of licensing a "similar noninfringing substitute in the relative market." In some cases, this could push damages to zero if the noninfringing substitute is in the public domain. The provision also codifies that treble damages are limited to instances where a judge finds that an adjudged infringer recklessly continued to infringe after receiving particularly specified written notice sufficient to create declaratory judgment jurisdiction and without relying on reasonable advice of counsel.
- Expanded Reexamination Proceedings: Reexaminations may be requested based on published prior art, or evidence of prior public use or sale in the US. Inter partes reexaminations would begin to look more like court cases and would be heard by administrative patent judges. The Bill would clarify that parties would be estopped from filing inter partes reexamination requests after a district court judgment.
- Additional Post Grant Review: Within 12 months of issuance, a third party can file a cancellation petition based on any ground of invalidity (rather than simply prior art). The post grant reviews would also be conducted by the administrative patent judges.
- Pre-Issuance Submissions: Third parties can submit prior art during examination of the patent as well as a statement regarding the relevance of the art. The art should be submitted the latter of (1) six months after publication or (2) before the first office action on the merits.
- Patent Litigation Venue: "A party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court." Venue is only proper were (a) defendant is incorporated; (b) defendant has its principle place of business; (c) where the defendant is permanently located and has committed substantial acts of infringement; or (d) where the plaintiff resides if the plaintiff is a nonprofit or individual inventor. The court should transfer venue to avoid evidentiary burdens when transfer can be accomplished without causing undue hardship to the plaintiff."
- Interlocutory Appeals: The Federal Circuit will have jurisdiction over interlocutory appeals of claim construction when approved by the lower court.
- Administrative Patent Judges: The BPAI would become the Patent Trial and Appeal Board (PTAB). Interferences would be gone, however they would be replaced by derivation proceedings as well as reexamination and post-grant trials.
- PTO Powers: The PTO has power to set its fees, including reducing fees.
- Oath: Easing the rules to more easily allow rights-holders to file patent applications on behalf of the inventor.
- Federal Circuit Judges: Making legal it for a Federal Circuit judge to reside more than 50 miles from DC.
As you can see, this is very much the type of reform that companies like Google would like to see. Google is regularly faced with charges of patent infringement and rarely sues for infringement. Some of these changes will benefit the system as a whole, but it is clear that this is not "balanced" reform. The damages provision will almost certainly reduce patent awards. And, perhaps equally important, the damages provision provides adjudged infringers a real cause to appeal jury awards if they did not directly follow the expert testimony.
I believe that the expanded use of reexaminations and post grant review and prior art submissions will be beneficial, and I have faith that the administrative patent judges will be able to handle their newfound responsibilities. That said, these provisions provide challengers with new ways to attack patent rights.
The plaintiff bar in the Eastern District of Texas is quite good, and defendants are doing what they can to escape from their grasp. The venue provision moves in that direction and would thus weaken the value of patents.
The trick with the first to file system is to realize that it is not about some mythical race to invent between competitors. Rather, it is about keying the priority on the date of filing the application rather than the date of invention or even one year prior to filing. This provision weakens patent rights because more materials will be considered prior art. It is possible to switch to a first-to-file system without eliminating the grace period so dramatically – this legislation does not, however meet that standard.
The Bill is sponsored by both Senators Leahy (D-VT) and Hatch (R-UT). Representative Conyers (D-Mich) introduced parallel legislation in the House, the legislation is largely similar, but does contain some differences. (I have not reviewed the House version in detail). Some opposition has already formed. Reps Manzullo (R-IL) an Michaud (D-ME) issued a joint press release titled "New patent bill encourages IP theft, destroys American jobs." Their focus was on the damages provision.
There are some changes from the 2008 legislation.
- The Bill does not require that all applications be published at 18 months.
- Applicants would not be required to search prior art.
- The 2009 Bill allows public use or sale in the US to be reasons for challenging patents.
- CHECK 21 provisions are gone.
- Fee Diversion is allowed in the 2009 Bill. (Oddly, Leahy explained that PTO Examiners perfer a system of fee diversion)
- The 2009 Bill does not address inequitable conduct.
- Stephanie Condon writes "Controversial provisions remain in patent reform bill."
- Diane Bartz writes "Congress takes up patent redo, damages fight looms."
- David Ingrim writes "Lawmakers Pledge Bipartisan Effort on Patent Changes."
- Zusha Elinson writes "Silicon Valley Raises Voice on IP Reform."
- Brent Kendall writes for Dow Jones "The patent system has not been overhauled in more than 50 years." [huh?]