Last month Senator Grassley (R-Iowa)introduced the bipartisan Protecting American Talent and Entrepreneurship Act of 2015 (PATENT) Act. The PATENT Act addresses patent litigation primarily and the proposed legislation is decidedly anti-patent owner. Some of the key provisions include:
SEC. 3. PLEADING AND EARLY DISCLOSURE REQUIREMENTS: Form 18 is eliminated. Plaintiffs must identify each patent and claim allegedly infringed, which products or processes are infringing, and describe the alleged infringement. Allows plaintiffs to describe information in general terms if it is not accessible to them. Clarifies that pleadings can be amended and allows for confidential information to be filed under seal. Exempts 271(e) (Hatch-Waxman and biosimilars) proceedings. Requires plaintiffs to make additional disclosures to the court and the PTO about the plaintiff and the asserted patents shortly after filing.
Author Comment: Any competent and legitimate patent plaintiff counsel will require a pre-suit infringement opinion that should include detailed claim charts applied against the accused product or method. Therefore, this provision should not impact parties that are properly administering the law.
SEC. 4. CUSTOMER STAY: Allows a case against a customer to be stayed while the manufacturer litigates the alleged infringement, provided that the manufacturer is involved in a lawsuit in the US involving the same issues. The customer stay is available only to those at the end of the supply chain, who are selling or using a technology that they acquired from a manufacturer, without materially modifying it. Allows for a stay to be lifted where it would cause undue prejudice or be manifestly unjust.
Author Comment: This provision is fine in most cases and does provide an out in unusual circumstances. However, it will undoubtedly cause plaintiffs to lose some leverage which is consistent with the general tenor of the legislation.
SEC. 5. DISCOVERY LIMITS: Requires a court to stay expensive discovery pending resolution of preliminary motions—specifically motions to dismiss, transfer venue, and sever accused infringers. Gives a court 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 otherwise prevent specific prejudice to a party. Allows parties to consent to be excluded from discovery limitations. Exempts Section 271(e) (Hatch-Waxman and biosimilars) cases. Clarifies that timelines for responsive pleadings provided by the Federal Rules of Civil Procedure are not altered, and nothing prohibits a court from ordering or local rules from requiring the exchange of contentions.
Author Comment: This is another feature of the legislation that isn’t necessarily unjust but inherently favors defendants.
SEC. 7. FEES AND RECOVERY: Provides that reasonable attorney fees will be awarded if a court determines the position or conduct of the non-prevailing party (plaintiff or defendant) was not objectively reasonable, unless special circumstances make an award unjust. The winner must show that the non-prevailing party’s position was not objectively reasonable and the judge must make a ruling for fees to shift – this is not a presumptive fee shifting rule. Fee shifting extends to cases where a party attempts to unilaterally withdraw from a case on the eve of a trial. Keeps 271(e) (Hatch-Waxman and biosimilars) proceedings under current law.
Author Comment: This is consistent with the current case law.
Fee Recovery: Requires a plaintiff to identify interested parties in the litigation, and provides a process for a court to recover fees where the abusive litigant is judgment-proof. If a plaintiff cannot certify it has sufficient funds to satisfy a fee award, it must notify interested parties, who can opt out of their interest. Permits a court to exempt institutions of higher education and qualifying parties in the interest of justice.
Author Comment: This provision allows the accused party to allege (good faith belief is sufficient) that the primary business of the accuser is the enforcement/licensing of patents (aka, non-practicing entity or “patent troll”). In response the plaintiff must:
- certify it has funds to pay a fee award if its conduct is found objectively unreasonable;
- demonstrate its primary business is not patent trolling;
- identify interested parties that will be the fee award if granted or state it has no such interested parties.
What amount will satisfy this? Will they need a bond? What assets would count towards this? Perhaps other patent portfolios? Who will certify the valuation? This provision appears to create more problems than it solves and some otherwise valid patent cases may rise or fall on this provision.
SEC. 8. PRE-SUIT NOTICE/DEMAND LETTERS: Prevents vague patent infringement demand letters from being preludes to litigation by requiring that certain information be included in order for the letter to be considered evidence that subsequent infringement was “willful”. If the required information is not in the written notice, the recipient’s time to respond to a later complaint is extended by 30 days.
Author Comment: If implemented this may end up a malpractice point for patent prosecutors who send the first demand letter then later turn the case over to a litigation firm. What is sufficient? Will claim charts be needed? This will greatly increase costs to patent owners. How will FRCP 408 be applied?
SEC. 9. ABUSIVE DEMAND LETTERS: Provides that, if someone violates Section 5 of the FTC Act in connection with patent assertion and has engaged in widespread demand letters abuse, civil penalties for FTC rule violations will attach. The provision does not impinge on legitimate licensing activity or expand the authority of the FTC.
Author Comment: General, non-specific demand letter should generally be ignored anyway. However, there are certain types of patent litigation, where the particular facts of the case permit widespread “notice.” This is another anti-plaintiff provision.
SEC. 10. TRANSPARENCY: Requires patent holders to disclose to the PTO whenever there is an assignment of interest in the patent that results in a change of ultimate parent entity. If a patent holder fails to disclose, it will not be able to recover increased damages of attorney fees (unless this would be manifestly unjust).
Author Comment: Additional shifting of procedural requirements to the patent owner.
CONCLUSION: There is a clear tenor to this legislation that is anti-patent owner, anti-plaintiff. With the entire patent bar acclimating to the AIA legislation and the Supreme Court’s new-found fondness for issuing patent decisions perhaps we are entitled to a breather? Patents, 04-29-15, PATENT Act - Short Section by Section.pdf (71.3KB)