Where Are We on U.S. Patent Reform?

With a number of reform options on the table in the House, the Senate proposed PATENT Act has been the hot topic over the past weeks. The PATENT Act was introduced by by Senator Grassley (R-IA) and Senator Leahy (D-VT) on April 30, 2015. It is comprised of the following key reforms:

Like the Innovation Act, the PATENT Act includes fee shifting, but with a key differentiation: rather than a presumption that fee shifting will apply, the PATENT Act suggests that fee shifting should only occur in cases where the winning party is able to prove that their opponent was not “objectively reasonable.”
In an effort to control costs, the PATENT Act would have district courts stay discovery until any early dispositive motions are addressed. It would also implement higher pleading standards for patent infringement complaints.
The PATENT Act includes a requirement for the USPTO to maintain records of patent ownership as a resource.
Finally, and most controversially, the PATENT Act has a customer stay provision. This provision is designed to make sure that consumers are not at risk of frivolous infringement suits. However, the contested aspect in the PATENT Act is the phrasing of the provision, which could potentially open the door for even massive manufacturers like Apple to stay litigation by claiming they are consumers of chips and components produced abroad.

Opinions on the PATENT Act so far have been guardedly positive, but with some reservations remaining. Groups like Universities and companies like Microsoft that had opposed the Innovation Act have offered support for the PATENT Act, and the White House has signaled approval.

However there is still serious opposition. The Innovation Alliance refuses to support the act based on concerns over the scope and language of the customer stay provision. The Biotechnology Industry Organization has pledged not to support any reform effort not including measures reforming the IPR process to prevent the “Kyle Bass problem.” The National Venture Capital Association has also expressed reservations, saying that in its current form the PATENT Act could hurt investment.

The PATENT Act is only the latest in a growing series of patent reform proposals. Here is a quick look at the alternatives on the table, with this array of options, many with overlapping provisions it will be important to monitor the progression of patent reform as it moves through both houses of congress over the next few months.

Summary of Patent Reform Bills Under Consideration:

The Innovation Act was reintroduced on February 5, 2015 by Congressman Bob Goodlatte (R-VA), Chairman of the House Judiciary Committee, after having passed the House but failed in the Senate during the 113th Congress. Key components include:

Fee-shifting
Heightened pleading standards for plaintiffs
A customer-stay provision designed to protect to customers and shield them from patent litigation that intended for manufacturers of infringing product.

The TROL Act or Targeting Rogue and Opaque Letters Act is probably the most issue specific of any of the available options, and also the first to be voted out of Committee, with approval from the House Committee on Energy and Commerce on April 29th by a vote of 30 to 22. The TROL Act is specifically focused on addressing the issue of bad faith patent demand letters and as such has the support of some licensing companies such as Qualcomm that do not operate based on the NPE letter model. The Act contains the following key measures:

Clarifies that bad faith patent demand letters can be a violation of the Federal Trade Commission Act
Authorizes the FTC or state attorneys general to act to stop the abusive behavior
Provides a good faith affirmative defense.

The STRONG Patents Act or The Support Technology and Research for Our Nations Growth Patents Act was introduced March 3, 2015 by Senators Chris Coons (D-DE), and co-sponsored by Dick Durbin (D-IL) and Mazie Hirono (D-HI). The Act was designed to serve as a counterpoint to the Innovation Act. Key measures include:

Reforms to the Patent Trial and Appeal Board including abandoning the current broadest reasonable interpretation standard and adding a presumption of validity for patents under review
Removes fee diversion
Facilitates obtaining willful damages
Increases Federal Trade Commission (FTC) ability to prosecute fraudulent or misleading demand letters

The Innovation Protection Act was Introduced in April 2015 by Congressman John Conyers, Jr. (D-MI). This is another very targeted bill which if passed would provide permanent USPTO funding by requiring that fees collected by the USPTO remain available for USPTO use until expended.