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A New Bill Proposes Changes in Patent Litigation

There has been growing concern in Congress and the White House regarding patent licensing and patent litigation tactics utilized by patent trolls. The term “patent troll” generally refers to non-academic entities enforcing patents that they own, but do not put into practice. The House of Representatives recently approved the Innovation Act (H.R. 3309), aimed at curbing abusive behavior in patent litigation.

The major provisions of the House bill are as follows:

  1. Increased pleading requirements for parties alleging patent infringement. Plaintiffs will be obliged to provide greater detail regarding the infringed claims in a patent and recite how the accused process, machine, manufacture, or composition of matter meets each element of the asserted claims. This provision is intended to reign in speculative litigation and identify the relevant issues at the outset of litigation.
  2. Increased likelihood that the losing party in a patent infringement case will have to pay the prevailing party’s attorneys’ fees. Willfully infringing defendants and frivolous plaintiffs already risk the penalty of paying the prevailing party’s attorneys’ fees. This bill provides that attorneys’ fees must also be paid when the losing party’s position is not reasonably justified. The bill also provides for more lenient joinder of interested parties to pay these fees, to avoid fee dodging by asserting patents through unfunded shell companies.
  3. Courts are authorized and encouraged to better control and limit discovery. For example, discovery in litigation, prior to the construction of terms in asserted patent claims, is limited to information necessary to determine the meaning of the terms.
  4. Any action or litigation that stems from purposely evasive demand letters sent to end users should be considered a fraudulent or deceptive practice and an exceptional circumstance when courts consider whether the litigation is abusive. An evasive demand letter is one that lacks basic information about the patent in question, what is being infringed, and how it is being infringed. This provision is intended to inhibit the much-maligned practice of mass mailing vague demand letters to consumers.
  5. Plaintiffs must disclose greater detail about the interested parties in the patent litigation, including the ultimate parent of any interested party. This provision is intended to prevent the ultimate party behind patent litigation from hiding behind proxies or shell companies.
  6. For litigation against a customer that is centered upon a manufacturer’s activities, the bill provides options for joining the manufacturer to the suit or staying the customer suit.  
  7. The bill includes several other provisions which are not focused on patent litigation. Trademark licensees are provided greater protection in bankruptcy. The Patent Office is directed to provide education and awareness on abusive patent litigation practices to small businesses. The judicially-created doctrine of double-patenting is codified into law. The bill also corrects technical issues in the America Invents Act passed in 2011.

A roughly equivalent bill in the Senate, the Patent Transparency and Improvements Act (S. 1720) was introduced in November. The Senate bill is narrower in scope than the House bill, and any final law addressing these issues will most likely be an amalgamation of the House bill and the Senate bill. In a Senate Judiciary Committee hearing on December 17, 2013, several Senators suggested dedicating more time and holding additional hearings before voting on the matter. It is unlikely that any new law will be created within the next few months.

If you are an entity with a patent portfolio, but lack the capability or desire to put the patents into practice, this House bill may potentially limit your ability to enforce your patents. Alternatively, if you are a company facing the costs of addressing demand letters from non-practicing entities, this bill may represent a ray of hope for the future.

If you have any questions regarding these or other patent matters, please contact Brian Chellgren or another patent attorney at Bingham Greenebaum Doll LLP.

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