This article originally appeared in IPWatchdog, and is republished here with permission.
It’s that time of the year—Halloween candy is still lingering in bowls, turkey and dressing is tantalizingly close, holiday cheer abounds. While winter skies are overhead, Congress is working to strengthen the U.S. Patent system with the STRONGER Patents Act. The bill was most recently debated by the Senate Judiciary Committee’s IP Subcommittee in September and has stolen the spotlight from the Section 101 reform debate, which for the moment seems to have stalled. Much has been written about the main provisions of the STRONGER Act, such as making inter partes review (IPR) and district court standards and procedures the same. Like extra Halloween candy or Aunt Imelda’s sweet potato pone, Congress has included a number of extra goodies for patent owners that have not been widely appreciated.
Candy Corn: The STRONGER Patents Act includes new limitations on ex-parte reexaminations. Sections 105 and 106 of the Act contain two new limitations. Section 105 requires a reexamination request to identify the real party in interest. Currently, a reexamination request may be filed anonymously. This has benefited parties that believe a patent should be invalidated but do not want to identify themselves to the patent owner. For example, a company considering entering a market where an existing player has a patent might file a reexamination request to seek to invalidate a patent before beginning infringement. As a potential new entrant in the market, they can stay under the radar by filing anonymously. The Act will no longer allow such a strategy. This strengthens patents but reduces the incentive for third parties to file reexamination requests. Possibly more importantly, section 106 prohibits the U.S. Patent and Trademark Office (USPTO) from instituting a reexamination if the request is filed more than one year after a patent infringement complaint has been filed.
Pecan Pie: In 2006, the Supreme Court issued Ebay v. MercExchange, which reversed long standing precedent from the Federal Circuit holding that irreparable harm was presumed after a patent was held valid, enforceable and infringed on the merits. Under that law, an infringer had to consider the likelihood that a permanent injunction would likely issue if they lost on the merits. The Act effectively reverses Ebay and restores the presumption of irreparable harm and the presumption that damages post-trial are inadequate to compensate for the infringement. This will strengthen patents by increasing the risk faced by infringers if they do not prevail on the merits. While this is perhaps one of the more well-known provisions of the Act, it is worth reiterating here considering its importance in light of the Ebay decision’s considerable weakening of patents as a result of making preliminary injunctions less available.
Wild Rice: Establishing requirements for demand letters. Currently, there is a patchwork of state laws governing letters asserting possible patent infringement and treating them as various forms of unfair competition. Section 201 through 204 establishes uniform requirements for such letters. Failure to comply with the requirements will constitute an unfair or deceptive trade practice. To avoid a claim, a demand letter must meet several requirements, including a clear statement regarding the right of the sender to enforce the patent and a clear statement of the basis for the claim. A proper demand letter will need to include a claim chart which identifies the assert claim(s), identifies the alleged infringement and shows how the claim applies to the infringement. The Federal Trade Commission (FTC) is authorized to enforce these requirements and all state laws dealing with demand letters are preempted. Loose claims of infringement will now be subject to penalties assessed by the FTC.
Homemade Bread: Patent infringement litigation can be very challenging for a small business. When small businesses are enforcing their rights, numerous detailed procedural requirements can permit determined infringers to make the process lengthy and expensive. When defending against a claim of infringement, those same requirements can make a monetary settlement a practical necessity despite clear defenses. The Act requires the designation of at least six districts that are already participating in the Patent Pilot Program to develop procedures for expediting patent infringement litigation involving small businesses. This will permit testing various ways to streamline patent cases when small businesses are involved. For example, the early appointment of a special master to make a preliminary assessment, which may either lead to early settlement or limiting the issues and therefore the cost. As an incentive to the district judges that agree to participate, they will be allowed an additional clerk or secretary to help with the work to develop small business procedures.
Cranberry Sauce: Ending fee diversion. Congress has elected to treat fees paid to the USPTO as general revenue and then funded the Office with general appropriations. This has disconnected the fees charged from the amounts needed to properly operate the USPTO. To obtain its funding, USPTO official necessarily are involved in the general budget process. The Act ends this practice. The Act allows the USPTO to keep and use in its operations the income it collects through fees. While largely hidden from the intellectual property community, this may be the most significant aspect of the Act. By allowing the USPTO to retain the fees it collects, the Office can plan for its necessary expenses including personnel, infrastructure and office space. Fees can be set by the Office and they can be confident that they will be able to plan the use of such fees to strengthen the overall system.
Thus, while the more well-known provisions hold the spotlight, Congress has packed the STRONGER Patents Act with plenty of goodies to put smiles on patent owners’ faces for the holidays.