Thursday, 26 September 2013

Proposed Troll-Fighting Reforms Would Pick Up Where AIA Left Off

This week, U.S. Representative Bob Goodlatte (R-Va) floated a discussion draft of a bill that would amend the U.S. Patent Act to make it more difficult for some NPEs (aka “patent trolls”) to use infringement litigation to terrorize companies. 

In 2011, Leahy-Smith American Invents Act (“AIA”) introduced some reforms, including tightened joinder rules and post-grant administrative patent challenges. Goodlatte’s proposed bill would make other, more far-reaching changes. Highlights include:

  • A party asserting a claim for patent infringement would be required to plead the claim in exacting detail, including identifying each patent infringed, each claim infringed, the exact product or activity alleged to infringe each claim, the factual and legal basis for the allegation that each limitation of each claim is infringed by each product or process, the basis for any allegation of indirect infringement, a list of all lawsuits asserting each patent, and other information. In essence, the bill would require each pleading to contain a detailed claim chart for each claim and accused product or process. This would be an enormous change from current practice, which requires only notice pleading. See K-Tech Telecoms., Inc. v. DirecTV, 714 F.3d 1277, 1283-84 (Fed. Cir. 2013). The plaintiff also would be required to disclose in a filing with the USPTO all assignees, licensees, or entities with a financial interest in each patent.
  • A defendant could request the court to add any “interested party” to the action by showing that the named claimant “has no substantial interest in the patent or patents at issue other than asserting” the patent in the lawsuit. An interested party could include any entity with a “direct financial interest” in an asserted patent, including a right to share in a damage recovery, but would not include law firms operating under a reasonable contingency fee arrangement.
  • A fee-shifting provision would require the court to award a victorious party its costs and attorneys’ fees unless the court ruled that “the position of the nonprevailing party or parties was substantially justified or that special circumstances make an award unjust.” If a losing plaintiff could not pay such an award, the court could order an “interested party” to pay.
  • Generally, discovery would be bifurcated, with discovery limited to claim construction issues until the district court issued a claim construction order.
  • In some circumstances, an action alleging infringement against a customer using an accused product or process would be stayed to allow claims against the supplier of the accused products to proceed first.
  • The bill would aim to implement practices developed by the Judicial Conference of the U.S. to control discovery costs, including procedures for controlling costs of e-discovery.
  • Finally, the bill would make other changes to the Patent Act, including eliminating civil actions to obtain patents under 35 U.S.C. § 145, expanding the estoppel arising from post-grant review proceedings, and expanding the Covered Business Method Patent Review procedures.

A copy of the discussion draft, posted by the Electronic Frontier Foundation (which supports patent reform legislation) is HERE.

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