Senate Judiciary Committee Advances PATENT Act

June 9, 2015

pic-court-gavelOn June 4, the Senate Judiciary Committee approved a bill by Chairman Charles Grassley (R-Iowa), the Protecting American Talent and Entrepreneurship Act (PATENT) Act, which is intended to stem so-called “patent trolls,” but which NSBA has opposed due to its inclusion of provisions which are unfair and unworkable for the nation’s smallest inventors and patent holders

The vote was 16-4 with two Democrats—Sens. Chris Coons (Del.) and Richard Durbin (Ill.) and two Republicans—Sens. David Vitter (La.) and Ted Cruz (Texas)—opposed. Upon introduction of S. 1137 in April, one of the bill cosponsors Charles Schumer (D-N.Y.) indicated that the bill would be on the president’s desk before the end of the year, and it appears likely the president will sign the measure.

In advance of the mark-up, Senate Judiciary Committee Chairman Grassley, Ranking Member Patrick Leahy (D-Vt.), and Judiciary Committee members John Cornyn (R-Texas), Chuck Schumer (D-N.Y.), Orrin Hatch (R-Utah), Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.) released a managers’ amendment that included technical changes and, as discussed upon introduction of the bill, provisions to address concerns regarding post-grant review proceedings at the Patent and Trademark Office (PTO).

Upon releasing the managers’ amendment, the cosponsors noted that the language addressing the amendment of patent claims in post-grant proceedings (contained within Section 11 of the bill, which makes other changes to post-grant proceedings) is a placeholder. The senators intend to continue to work on and refine this placeholder language as the bill moves forward.

Specifically, the managers’ amendment:

  • Modifies the fee shifting provision to clarify that undue economic hardship to a named inventor or an institution of higher education are “special circumstances” that could make a fee award unjust, and clarifies the burden of proof in the fee provision.
  • Modifies the provision governing recovery of fee awards to ensure that traditional lenders are not on the hook for potential liability simply for making a commercial loan.
  • Includes technical fixes to the provision governing demand letters.
  • Includes a technical fix to adjust waiting periods from 120 days to 90 days, consistent with a broader change in the Federal Rules of Civil Procedure currently being implemented by the Judicial Conference.
  • Includes measures relating to patent policy at the Patent & Trademark Office:
    • Amends current law governing information sharing between global patent offices when applicants have filed in multiple offices.
    • Ensures that the PTO’s issuance of petition decisions by employees is consistent with the Appointments Clause of the Constitution.
    • Allows potential members of the Public Patent Advisory Committee (PPAC) to obtain conflict of interest waivers to allow for their participation, in line with standards applied to other federal advisory committees.
    • Clarifies that properly licensed foreign universities may be eligible for micro entity fees.
    • Provides papers and fees filed via the PTO’s electronic filing system with the same benefits and protections as those filed via the United States Postal Service, regardless of the time-zone.
    • Extends the PTO’s fee setting authority by 7 years.
  • Includes S. 1402 (Patents for Humanity Program Improvement Act) to strengthen the PTO’s Patents for Humanity Program, a prize program for inventors whose innovations promote humanitarian goals around the world.
  • Adds new Section 11, which makes reasonable changes to address concerns about abusive conduct in the inter parties review and post grant proceedings before the Patent Trial and Appeals Board (PTAB) at the PTO.
    • Claim construction standard: Applies the district court (Phillips) claim construction standard in IPR and PGR proceedings, and directs the PTAB to consider if claims have previously been construed in district court. Estops parties from eschewing in later court or PTO proceedings arguments made on claim construction to the PTO.
    • Presumption of validity: Makes explicit in statute that, for purposes of PTAB adjudications, patents are presumed to be valid. Retains current law providing that the petitioner has the burden to prove a proposition of unpatentability by a preponderance of the evidence.
    • Measures to limit serial challenges at the PTO: Makes clear that the Director has discretion not to institute an IPR or PGR if doing so would not serve the interests of justice. Instructs the Director, in making that decision, to consider factors such as whether the same art or arguments have already been decided in a prior judicial or PTO proceeding involving the patent, and whether the patent is already to the subject of another proceeding before the PTO.
    • Measures to improve the institution decision: Allows patent owners to submit evidence in response to a petition to institute an IPR or PGR, and petitioners to file a reply to respond to new issues. Directs the PTO to modify the institution process so that institution and merits decisions are not made by the same panels.
    • Preventing gamesmanship: Directs the PTO to hold a rulemaking on instituting a Rule 11-type obligation in IPR and PGR proceedings. Requires PTAB decisions to be publicly available and searchable on the web. Removes the ability to join additional claims to a timely-filed IPR after the time for filing has elapsed, except for claims that are newly-served against the petitioner in an amended complaint (which get 1 year from amendment).
    • Amending patent claims: Includes placeholder language relating to the amendment of patent claims in IPRs and PGRs. The Managers have agreed that further work is needed to address concerns with currently proposed text.

The managers’ amendment is a full substitute of the original PATENT Act. The new language can be found here. A redlined version of the bill can be found here.

Additionally, during consideration the Judiciary panel rejected a number of other amendments by Sens. Coons, Durbin and Vitter that aimed to exempt small businesses, start-up firms and universities from the bill’s heightened pleading standards, discovery and fee-shifting rules.

After last week’s contentious reworking of the Senate’s patent reform bill, the House Judiciary Committee is expected to mark up its Innovation Act (H.R. 9) on Thursday, June 11. Chairman Bob Goodlatte (R-Va.) has been floating changes to his bill that would make plaintiffs be more specific in their claims when they allege infringement. Universities would also not be held responsible for court fees when firms license their patents and then embark on frivolous lawsuits. Goodlatte’s manager’s amendment would also put geographical limitations on infringement lawsuits – requiring them to be held in courts where the defendant does business or where the invention in question was conceived.

To read NSBA’s letter of opposition to the PATENT Act (S. 1137), please click here.
To read NSBA’s letter of opposition to the Innovation Act (H.R. 9), please click here.

For additional details on the patent reform debate over the last few months, click here.

To contact your member of Congress and voice your concerns about this ongoing patent reform debate, please click here.