Update On Patent Trolling Legislation In The 114th Congress

Feb
27

patent

H.R. 3309, “The Innovation Act”

On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, the “Innovation Act,” to address the growing problem of abusive patent litigation by so-called patent trolls.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  Key provisions of H.R. 3309 contained heightened pleading standards; required patent plaintiffs to name anyone who had a financial interest in the patent being litigated; required courts to delay the discovery process until after claim construction was determined; created a voluntary process for small businesses to postpone patent lawsuits while their larger sellers defended similar patent lawsuits against the same plaintiff; and allowed a manufacturer to intervene in a lawsuit against its customers, with the action stayed for the customer if both the customer and manufacturer agreed.  The centerpiece of the legislation was a controversial fee-shifting provision that required courts (with some exceptions) to award prevailing parties reasonable attorneys’ fees and other expenses when parties brought frivolous lawsuits or claims that had no reasonable basis in law or fact.

Supporters of H.R. 3309 praised its passage as instituting important patent reforms made necessary after passage of the “America Invents Act” (P.L. 112-29).  Proponents included the technology sector and notable internet companies such as Google, Microsoft, Amazon, and Apple.  H.R. 3309 was also favored by brick-and-mortar industries such as restaurants, retailers, realtors, hotels, casinos, airlines, and the auto industry.

On the other side, opponents of H.R. 3309 were concerned that the fee-shifting provision would likely favor wealthy parties while discouraging small businesses from pursuing legitimate patent infringement claims.  Opponents included the biotechnology and pharmaceutical industries, the Intellectual Property Owners’ Association, patent attorneys, and even universities – which warned that the legislation would harm their patent-licensing revenues.

H.R. 3309 passed with bipartisan support in the U.S. House of Representatives by an overwhelming margin of 325-91 votes, however, its companion bill failed to clear the U.S. Senate.  Problems originated in the Senate when Judiciary Committee Chairman Patrick Leahy, D-Vt., attempted to create his own bill that removed the contentious fee-shifting language from H.R. 3309.  After votes on the Senate counterpart bill stalled repeatedly, Senator Leahy withdrew the bill from the Senate Judiciary Committee’s agenda last May.

H.R. 9, Reintroduction of “The Innovation Act”

In the wake of the 2014 midterm elections, Republicans vowed to take up patent trolling legislation early in 2015.  On February 5, 2015, House Judiciary Committee Chairman Bob Goodlatte, R-Va., reintroduced the “Innovation Act” (H.R. 9) with 20 co-sponsors including eleven Democrats and nine Republicans.  The bill is identical to H.R. 3309, and its reintroduction was immediately hailed by the Information Technology Industry Council, the Computer & Communications Association, the National Association of Broadcasters, and the National Cable & Telecommunications Association.  On the other hand, a host of 250 companies, startups, universities and innovators—including Qualcomm Technologies, Merck & Co. and Monsanto—objected to the bill and cautioned Congress about overcorrecting a patent system that was overhauled by the 2011 “America Invents Act” and reined in by recent United States Supreme Court decisions.

In light of these concerns, the U.S. House of Representatives Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on February 11th, 2015 examining the effect of the U.S. Supreme Court’s decisions on patent trolling and the continued need for patent litigation reform.  During the hearing, Congressman Darrell Issa, R-Ca. – who leads the subcommittee and himself owns dozens of patents – concluded that any changes to H.R. 9 will be “minor” and must increase the vote count.  In the Senate, Senator Charles Grassley, R-Ia., replaced Leahy as Chairman of the Committee on the Judiciary.  Senator Grassley has signaled his intention to make patent reform a priority and believes patent reform can be accomplished early in the first session of the 114th Congress.  This appears to be one issue the new Republican Congress and the White House will agree on in 2015, as the White House has signaled universal support for legislation curbing abusive patent litigation.

What does this mean for you

If you are a patent owner, speak with a registered patent attorney about how H.R. 9 may impact your patent rights.  Continue to monitor this legislation as it makes its way through the U.S. House of Representatives Committee on the Judiciary and voice any concerns you may have over the fee-shifting provision to your local Congressman and Senators.  Alternatively, if you have received a cease and desist letter from a patent troll alleging patent infringement, speak with a registered patent attorney about the legitimacy of these claims and the measured response you should take.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation in a variety of technology areas including agriculture, medical devices, mechanical, computer, pharmaceutical, chemical, biotech, and life sciences. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; law clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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