Competing Bills Target Patent Troll Business Model

Congress has gotten the patent troll memo in a big way. The political stage is being set for a summer of legislative festivities. Like any good summer festival, Congress is separately establishing main and side stage legislative spectacles. The side stage spectacles, the more alternative acts, such as the Shield Act; Patent Abuse Reduction Act of 2013; and the Patent Quality Improvement Act will occupy many until the main stage effort takes shape. Last Friday the main stage act was announced.

House Judiciary Committee Chair Bob Goodlatte (R-VA), a key participant in the legislative effort behind the America Invents Act (AIA) released a draft bill that seeks to sweep in many of the concepts of the competing bills, while introducing fixes to the AIA. (here). The bill puts a new spin on the competing legislative proposals that address discovery controls, loser pay mechanisms, and the revision to notice pleading (brief overview here). Certainly these “troll” specific proposals will get the bulk of the attention from Congress and the public. As to the proposed “improvements and technical fixes” to the AIA, the draft post grant proposals are a mixed bag.

First, the “technical fix” aspect of the AIA changes relates to post grant estoppel. The House Bill seeks to address what many have argued was a technical defect in the AIA, namely, the failure to omit the “reasonably could have raised” estoppel component of 325(e)(2). This “technical fix” did not make it into the first technical amendment as there are many opposed to such a legislative change. Still, this change has long been discussed as necessary to make Post Grant Review (PGR) more attractive to potential challengers.

The second change would make Patent Trial & Appeal Board (PTAB) proceedings unattractive to patent challengers. The proposed change seeks to mandate district court claim construction practices on the PTAB:

‘‘(14) providing that for all purposes under this chapter, each claim of a patent shall be construed as such claim has been or would be in a civil action to invalidate a patent under section 282, 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, the prosecution history pertaining to the patent, and prior judicial determinations and stipulations relating to the patent.’’

Consistent with 35 U.S.C. § 282(a), the above provision would require the PTAB to apply a presumption of validity in construing patent claims. Also, the proposal could force the USPTO to honor prior “judicial determinations” such as Markman Orders.

Courts construe patent claims with a presumption of validity. On the other hand, PTAB proceedings assess patentability, not validity. There is no presumption of patentability at the PTAB. Instead, amendments and expansion of the intrinsic record are permitted. (long the justification for applying the broadest reasonable claim construction rubric).

This proposed “improvement,” if enacted into law, will undermine the purpose and efficacy of the PTAB patentability proceedings as an alternative to high cost patent litigation. Strange that such a proposal would be added to a bill seeking to thwart abusive litigation practices. Undermining a favorable, low cost venue for patent challengers seems more than a bit misplaced.

Other changes to PTAB practice include the adoption of the definition of “business method” as provided in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012–00001, Paper 36 (January 9, 2013). This would effectively moot the current law suit on point. Also, the declaratory judgment aspects of 35 U.S.C. §§ 315/325 may be excused for petitioners stepping in for their customers in some instances.

Clearly, this bill is just a jumping off point and there are sure to be many, many amendments and modifications to come.