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“Innovation Act” Passes U.S. House, Part 2

The Innovation Act is breathtaking in its scope and complexity – is all this really necessary, just to address “patent trolls”?

By Jonathan T. Kaplan, Esq.                                  February 2, 2014

My last blog post introduced the “Innovation Act” (more formally, H.R. 3309), a large and complex bill, that is supposed to address the problem of “patent trolls.”  But rather than being a targeted fix to a specific problem, H.R. 3309 proposes a major overhaul, to the way U.S. patents can be enforced in court.

If enacted into law, H.R. 3309 would represent the second major overhaul to the U.S. patent system in less than three years.  Just 28 months ago the “America Invents Act” (AIA) became the law (on Sep. 16, 2011), and the AIA itself represented the most significant changes to U.S. patent law in about 170 years.

In this post I will try to convey the breathtaking scope and complexity of H.R. 3309, by presenting a brief overview of its key sections.  In a following post, some of these sections will be analyzed, and we will look at what the GAO (as well as other authoritative sources) have to say on the issues.

H.R. 3309 is divided into 10 sections.  Frequent phrases used throughout the sections, for specifying the kinds of cases to which H.R. 3309 is applicable, are: “a civil action arising under any Act of Congress relating to patents” or “a civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents.”  As a shorthand for both these phrases, the following term is used: Civil Patent Action.  The 7 key sections of H.R. 3309 (Sections 3-9) are summarized below.

Section 3: seeks to control the patent litigation process in a very detailed way.  Contains 5 key subsections:

  • (a) Entitled “Pleading Requirements,” it sets a very detailed list of requirements, divided into 10 sub-subsections, for the starting of any Civil Patent Action.
  • (b) Entitled “Fees and Other Expenses,” it requires a court, unless an exception applies, to award “reasonable fees and other expenses” to a “prevailing party” in a Civil Patent Action.
  • (c) Entitled “Joinder of Interested Parties,” it addresses the situation in which a “nonprevailing party alleging infringement is unable to pay the award of fees and other expenses.”  Under these circumstances, the court is allowed to “join an interested party” if the prevailing party is able to show that the nonprevailing party “has no substantial interest in the subject matter at issue other than asserting such patent claim in litigation.”
  • (d) Entitled “Discovery Limits,” and applicable to any Civil Patent Action.  If a court determines that a ruling “relating to the construction” of claim terms “is required,” then discovery is limited “to information necessary for the court to determine the meaning of the terms.”
  • (f) Entitled “Demand Letters,” it states that “pre-suit notification of infringement” may not be used to establish willful infringement, unless that notification meets certain requirements.

Section 4: requires detailed disclosures, related to the ownership of patents sought to be enforced.

Section 5: applies to any Civil Patent Action.  Provides that the court shall stay an action “against a covered customer related to infringement of a patent,” if certain requirements are met.  The provision is meant to apply to a customer who is charged with patent infringement simply by virtue of normal use of a product or service sold by some other entity (called the “covered manufacturer”).  In this situation, if the covered customer and manufacturer agree, a court can stay (or halt) the litigation against the covered customer.

Section 6: defines an agenda for the Judicial Conference of the United States.  The Judicial Conference is the principal body for setting policy and guidelines for the Federal Courts.  Section 6 consists of five subparts:

  • (a) For any Civil Patent Action, the Judicial Conference “shall develop rules and procedures … to address the asymmetries in discovery burdens and costs.”  In addition to this general directive, there is included a list of 4 “issues and proposals” that should be addressed.
  • (b) For any Civil Patent Action, the Judicial Conference “shall develop case management procedures.”
  • (c) Directs the Supreme Court to eliminate “Form 18” from the Federal Rules of Civil Procedure.  Form 18 provides a very simple model complaint, for initiation of a patent infringement suit.  The Supreme Court is allowed to prescribe a new form, but certain minimum requirements for the form are specified.
  • (d) This section makes various changes relating to the treatment of intellectual property during bankruptcy.

Section 7: addresses small business education, outreach, and information access.  It consists of two subsections:

  • (a) Directs the USPTO to “develop educational resources for small businesses to address concerns arising from patent infringement.”  Also directs the USPTO, the Small Business Administration, and the Minority Business Development Agency to “provide education and awareness on abusive patent litigation practices.”
  • (b) Directs the USPTO to create “a user-friendly … Web site … to notify the public when a patent case is brought in Federal court.” The information displayed by the website is to include at least some of the information required by Section 4 of H.R. 3309.

Section 8: requires the performance of studies by government agencies.  It consists of the following three subsections:

  • (a) Directs the USPTO to take the lead in conducting a study on the “secondary market” for patents.
  • (b) Directs the USPTO to take the lead in conducting a study of patents owned by the U.S. Government.
  • (c) Directs the GAO to perform a study on the quality of patent examination by the USPTO.

Section 9: entitled “Improvements and Technical Corrections” to the AIA.  Represents a “miscellaneous” section, containing additional changes on a wide variety of topics.  Many of the changes are quite substantial.  It consists of 8 sub-sections, labeled (a) to (h).

Mr. Kaplan runs a small IP law firm, specializing in patents, located in the northern suburb of Portland, OR.  He has over 20 years of experience (the first 10 with large nationally-prominent law firms), is admitted to practice law in three states (CA, NY, and WA), and is USPTO registered.

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