Congress Winds Down to August Recess

It is highly likely that a new patent reform bill will be passed into law this fall given the intense congressional interest in the topic. Over the past few weeks, there has been an unprecedented flurry in the number of initiatives, executive actions, and bills proposed. Whether this political attention is truly responsive to the outcry of technology innovators being shaken down by “patent trolls” is unclear. Certainly there are some in Washington that simply recognize the existence of bipartisan support for legislation that can be spun during an election season as helping small businesses….needed or not. Whatever the motivation, something will almost certainly be passed into law…..but what? 

Rather than go through the details of each proposal being floated, there are concepts common to all. I provide an assessment of the likelihood of each to exit Congress as law in the coming months.

1. Real Party in Interest: Several bills note that it is often difficult to ascertain the true owner of a patent. It is explained that shell companies are created to assert the patent while the true owners remain hidden from the public. The proposed legislation/executive action would require a stricter idenitfication of owenership at the USPTO.
Impact on Abusive Litigation Practices: Insignificant most trolls don’t need, or care about anonymity.
Likelihood of Becoming Law: High few will oppose/lobby against this one.

2. Covered Business Methods: Schumer bill and complimentary House bill propose making this “transitional” program permanent and clarifying that a covered patent need not be related to a financial service. Bill also proposes clarification that covered patents may impact enterprise systems (i.e., e-commerce)
Impact on Abusive Litigation Practices: High With enhanced provisions for staying costlier litigation, and limited estoppel, expansion would greatly aid patent challengers.
Likelihood of Becoming Law: High Identical bills already in both Senate and House on same points, limited lobbying to oppose.

3. Loser Pays: The Shield Act of 2013 and other bills propose to impose sanctions on frivolous litigation by forcing a losing plaintiff (that goes through trial and exhausts appeals) to pay the legal fees of their opponent. As Judge Rader recently pointed out, courts already have this power and don’t exercise it.
Impact on Abusive Litigation Practices: Moderate  Small to medium size companies do not have the resources to fight through to appeal.
Likelihood of Becoming Law: Low  — Plaintiff bar has kept this control from personal injury suits for years, don’t see it happening here.

4. Heightened Pleading Standard for Patent Cases: Patent trolls notoriously abuse the pleading form practice of patent litigation to withold important information from their adversary for as long as possible, such as infringed claims, accused products, etc. Several proposals would get away from such “notice pleading” and require specific products be accused, claims identified, etc.
Impact on Abusive Litigation Practices: Moderate Trolls will just work around it by filing 100 page complaints against smaller companies knowing full well most will settle.

Likelihood of Becoming Law: Moderate/Low Also hurts legitimate high-tech industries that may need discovery for detailed assertions.

5. Stricter Requirements for Software Related Patents: Computer related inventions are often claimed functionally, which leads to a claim scope that is not enabled by most patents (i.e., every known process for implementing the function). The USPTO is already training examiners to reject such claims as lacking written description, and forcing applicants into means-plus-function claiming where possible.
Impact on Abusive Litigation Practices: Moderate/Low The current inventory of patents will keep the troll machine going for another decade at least.

Likelihood of Becoming Law/USPTO Practice: High USPTO is already working on this issue.

6. Modification to PGR Estoppel Provision: CBM estoppel only applies to issues actually raised in the proceeding. PGR on the other hand applies to anything raised, or “reasonably could have been raised.” Since it is possible to file a PGR for any statutory ground of invalidity, the concern is that an unsuccessful PGR will destroy all invalidity defenses in a later litigation. It has been argued that this stricter estoppel was an scriveners error in the statute. The proposal is to adopt the CBM standard for estoppel.
Impact on Abusive Litigation Practices: Low Practically speaking PGR, due to its 9 month window, is of little value in abusive litigation scenarios.
Likelihood of Becoming Law: Low — Bio/Pharma Lobby doesn’t want generics using PGR to challenge valued drug continuatons on 101/112 grounds.

7. Modification of USPTO Claim Construction: It is proposed that the USPTO apply the same claim construction and presumption of validity as applied in the distrcit courts in IPR, PGR and CBM proceedings.
Impact on Abusive Litigation Practices: Helps Trolls

Likelihood of Becoming Law: Low Application of presumption of validity to USPTO post grant proceedings is a non-starter. Will not go anywhere in present form. Expect this concept to morph into provision requiring USPTO to uses Philips v. AWH for all post grant proceedings (including reexamination and reissue).

Look for an entirely new bill from Senator Leahy incorporating many of the more favored concepts, as well as more focused bills from others as we approach September.