A New Patent Reform Compromise: Is the Way to Passage Finally Clear?

04 March 2010 Publication
Authors: Stephen B. Maebius

Legal News Alert: Intellectual Property

On March 4, 2010, the Senate Judiciary Committee announced a final compromise amendment to the Senate patent reform bill. The existence of this compromise had been announced at a February 25, 2010, Senate Judiciary Committee Executive Business Session. At that meeting, Chairman Patrick Leahy (D-Vt.) announced that he had reached a tentative agreement in principle on revisions to the pending patent reform legislation. Sen. Leahy thanked several committee members from both parties, including Sen. Orrin Hatch (R-Utah). He also indicated he had worked with the U.S. Patent and Trademark Office (PTO) on the details of the revised legislation.

The March 4, 2010 announcement more fully identified the senators who negotiated and are sponsoring the new amendment: Chairman Leahy, Sen. Hatch, and Senators Jeff Sessions (R-Ala.), the Committee’s ranking Republican; Chuck Schumer (D-N.Y.), Jon Kyl (R-Ariz.), and Ted Kaufman (D-Del.).

In his earlier announcement, Sen. Leahy did not indicate that he had reached an agreement with members of the House of Representatives on the details of the bill, he did state that he looked forward to working with them to craft a bill that would “benefit[] all corners of the patent community.”

The proposed legislation currently includes several substantial changes to U.S. patent law:

  1. Implements a first-to-file standard for resolving inventorship disputes
  2. Modifies existing and creates new post-grant review procedures
  3. Eliminates failure to disclose the inventor’s best mode of carrying out the invention as an infringement defense
  4. Creates a “supplemental examination” procedure that can be used to cure alleged inequitable conduct
  5. Places the trial judge in a gatekeeper role regarding admissible evidence and theories of damages
  6. Adopts the Federal Circuit’s “objective recklessness” standard for willful infringement
  7. Adopts the “clearly more convenient standard,” In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008), for transfer of venue
  8. Revises the standing provision for bringing false marking claims
  9. Grants the PTO authority to set its fees at a level that covers the costs of examining and granting patents and registering trademarks

The most important of these changes from earlier legislative drafts are discussed in more detail below.

Post-Grant Review
The compromise legislation provides four different avenues for post-grant review of an issues patent. First, within nine months of grant, any patent can be challenged on any issue of patentability. To start the review, the party challenging the patent must demonstrate that it is more likely than not that the information it presents renders at least one of the patent’s claims invalid. Once started, a panel of three Administrative Patent Judges (APJs) must conclude the proceeding within 12 months, unless the PTO finds good cause for a single six-month extension of this deadline.

Second, a third party can request an inter partes reexamination of the patent. The legislation removes the prohibition against inter partes reexamination of patents granted prior to 1999. The bases for inter partes reexamination are limited to patents and printed publications that create “a reasonable likelihood” that the third party will prevail with respect to a claim of the patent. The reexamination will be heard by APJs and is subject to the same time restrictions as the initial post-grant review.

Third, ex parte reexamination continues to be available, largely unchanged from its current form.

Fourth, the compromise legislation creates a new post-grant procedure intended to reduce the frequency of inequitable conduct allegations. In this procedure, a patentee would be allowed to request “supplemental examination” of the patent to have the PTO consider any information considered relevant to the patent. Any patent that survives the supplemental examination process cannot be held unenforceable based on information considered by the PTO.

Patent owners are protected from improper use of these procedures by several provisions. First, a party challenging a patent in a post-grant review proceeding is estopped from seeking a subsequent post-grant review on any ground that was, or reasonably could have been, raised in the initial proceeding. Second, in a district court case, a party may not assert any ground of invalidity that it actually raised in the administrative post-grant review. Third, an alleged infringer may only see administrative review within three months of the date it files its answer in the litigation.

Willfulness
The compromise legislation codifies the Federal Circuit’s “objective recklessness” standard, see In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007), for findings of willful infringement. The compromise bill contains several additional provisions that further reduce the likelihood that willful infringement will be found. First, willfulness and damages are presumptively to be tried after validity and infringement are determined. Second, willfulness must be pled with particularity. Third, a demand letter is not sufficient to support a willfulness determination unless it identifies the infringed claims and infringing products with particularity and explains the basis for the infringement allegation. Fourth, if the trial judge decides that the validity and infringement phase of trial presented a “close case,” willfulness may not be found.

Venue
The compromise legislation provides that cases shall be transferred upon a showing that the transferee venue is clearly more convenient than the venue in which the civil action is pending. This is a codification of the standard adopted by the Federal Circuit in In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008).

False Marking
The proposed legislation substantially tightens the standing provisions of 35 U.S.C. § 292. If the legislation is adopted, only parties who have suffered a competitive injury due to false marking of a product with patent number. The recovery is limited to damages adequate to compensate for the injury. Furthermore, this standing provision “shall apply to all cases, without exception, pending on or after” enactment of the legislation. Thus, the legislation eliminates the qui tam that have become increasingly common since the Federal Circuit’s decision in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).

Prospects for Passage
This compromise appears to enjoy broad support in the Senate and is likely to pass sometime in early spring. The House, however, has not agreed to the provisions in the bill. It is likely that the bill may be stalled for some time while the House Judiciary Committee further considers patent reform issues. Thus, it remains unclear whether patent reform legislation will be adopted by the Congress prior to the November elections. 


Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

George C. Best
Partner
Palo Alto, California
650. 251.1147
gbest@foley.com

Jon W. Dudas
Partner
Washington, D.C.
202.945.6107
jdudas@foley.com

Philip G. Kiko
Of Counsel
Washington, D.C.
202.672.5509
pkiko@foley.com

Stephen B. Maebius
Chair, Intellectual Property Department
Washington, D.C.
202.672.5569
smaebius@foley.com 

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