Congress to Consider Alternative Patent Litigation Reform Bill

Last month, the so-called “Innovation Act of 2015” (H.R. 9) was introduced in the U.S. House of Representatives. That bill proposed several reforms of the patent system, including restrictions on patent litigation such as a partial “loser pays” provision for infringement cases. We reviewed some of those proposed changes HERE.

The Innovation Act has triggered concern in some quarters that it might go too far in limiting patent enforcement rights, especially in light the popularity of inter partes review proceedings under Leahy-Smith America Invents Act (“AIA”) and recent Supreme Court cases generally viewed as favoring defendants.

Last week, three senators introduced an alternative reform bill, named the “Support Technology and Research for Our Nation’s Growth (i.e., ‘STRONG’) Patents Act of 2015. The sponsors argue in the proposed legislation’s proposed findings that the AIA has caused “unintended consequences[,] including the strategic filing of post-grant review proceedings to depress stock prices and extort settlements.” In addition, the sponsors suggest that “efforts by Congress to reform the patent system without careful scrutiny create a serious risk of making it more costly and difficult for legitimate innovators to protect their patents from infringement, thereby weakening United States companies and the United States economy.” The bill’s findings also note that recent Supreme Court decisions in “Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark Inc. v. Allcare Health Management System, Inc., 134 S.Ct. 1744 (2014) [have] significantly reduced the burden on an alleged infringer to recover attorney fees from the patent owner, and increased the incidence of fees shifted to the losing party[.]”

As a result of these concerns, the STRONG Patents Act takes a different tack in approaching patent system reform. Rather than making patent infringement actions more difficult maintain, the bill seeks to strengthen patents rights, including by reforming the still-evolving procedures in AIA post-grant proceedings, which it targets as being too favorable to petitioning parties challenging patents. Major provisions of the STRONG Patents Act include:

AIA Post-Grant Proceedings Reforms. The bill proposes changes to AIA post-grant proceedings to “ensure balance.” Changes include requiring PTAB panels to construe claims using the district court standard, rather than construing claims to have their broadest reasonable meaning; more liberal availability of claim amendments; and restoring an issued patent’s presumption of validity by requiring challengers to prove invalidity by clear and convincing evidence. The bill also would require one PTAB panel to decide whether to institute proceedings and a different PTAB panel to decide the merits of a challenge.

Pleading Standard. The bill would increase the patent infringement pleading requirement to match the standard for other civil cases under Iqbal and Twombly, including by deleting Form 18 from the Federal Rules of Civil Procedure. Under the so-called “Twiqbal” standard, a pleading must contain enough factual allegations to state a plausible claim for relief, but not the detailed contentions that would be required under the Innovation Act.

Willfulness Infringement. The bill would change the standard for willful patent infringement from the Seagate standard to that applied by the Supreme Court in Octane Fitness. Under the new standard, the court could award multiple damages if the patentee proves by a preponderance of the evidence that the infringement was willful or in bad faith.

Divided Infringement. The bill responds to the Supreme Court’s Akamai v. Limelight case relating to divided infringement by clarifying that in cases of indirect infringement, it is not necessary for all steps of a patented process be performed by a single entity.

Other Provisions. In addition, the STRONG Patents Act includes several other provisions, including: eliminating USPTO fee diversions, clarifying the status of universities under the AIA’s “micro-entity” fee schedule, and empowering the Federal Trade Commission to regulate abusive patent demand letters.

The STRONG Patents Act was introduced by Senators Chris Coons (D-Del), Richard Durbin (D-Il), and Mazie Hirono (D-HI). The full text of the bill is available HERE.