WSJ - Patent Reform Bill Arises Again in Congress

Tonight, I suggest reading the Wall Street Journal article Patent Reform Bill Arises Again in Congress, discussing Congress' latest effort to change US patent law to address patent litigation abuse.

If you want details, here's Innovation Act 2015, which I will refer to as the Bill. If you want a brief account of Congress' latest patent reform, here's the key changes with brief comments:

1. Attorney Fee Awards - Current law permits the recovery of attorney fees to the prevailing party in an exceptional case, while the new law would require an award attorney fees to the prevailing party unless a judge finds that (1) the legal position and litigation conduct of the non-prevailing party was reasonably justified in law and fact; or (2) special circumstances (e.g., severe hardship to inventor) make attorney fee awards unjust. If the patent owner cannot pay the attorney fees, the court can make "the interested parties" (e.g., investors) pay the attorney fees.

My comment - This is a major change from the American rule where each party pays its own attorney fees. It will reduce patent litigation by smaller companies as they will now have to bear the risk of paying all of the attorneys if they lose and a court decides the legal position was unjustified and cannot establish special circumstances. No doubt many defendants may want this, but the Supreme Court's Highmark and Octane decisions adequately protect the "poor defendants" who hope to reduce patent litigation to just a "sport of kings."

2. Complaints Need Claim Charts - When a patent owners sues for patent infringement, the complaint will need to include a claim chart showing how the claim(s) read on the accused product or process except if it cannot be reasonably known before filing the complaint. Form 18 governing the content of complaints is eliminated, but not if you are pharmaceutical company.

My comment - this higher pleading standard will eliminate some patent infringement suits, because preparing a claim chart makes one stare at the infringement case. If you can't do a claim chart, maybe the case should not be filed. Placing the initial cost of a claim chart on the patent owner is better than asking a court to take on a poorly researched case that wastes court resources and defendant's money. Not sure eliminating Form 18 is useful. The Judicial Conference already says it plans to eliminate Form 18 in 2015 and why give pharmaceuticals "a free pass" on Form 18?

3. PTAB Claim Construction - The Bill proposes to replace the Patent Trial and Appeal Board (PTAB)'s broadest reasonable interpretation (BRI) for claims in inter partes review, post-grant review, and covered business methods with the court's narrower interpretation of claims.

My comment - This will help patents survive invalidity challenges in the USPTO, and better corresponds to the reality that patent owners rarely succeed on motions to amend claims.

4. Limit Discovery - This has a couple of parts: (1) claim construction must happen before much discovery occurs; and (2) only large companies or posting a bond will get discovery of non-core documents.

My comment - Claim construction before significant discovery sounds right, but saying a large company gets discovery without posting a bond only increases their advantages over a smaller company, and may raise disputes on whether certain requested discovery is "core" or "non-core."

5. Willful Infringement  - The Bill would require demand letters identify the patent, the patent owner, accused product, and importantly how the product infringes at least one claim of the patent.

My comment - This imposes another claim chart into the process of patent enforcement, which of course helps defendants avoid treble damages by merely showing a claim chart did not accompany the demand letter.

6. Transparency of Ownership - This penalizes a patent owner who fails to update the USPTO within 90 days on changes of ownership with no enhanced damages, or attorney fees and an award of attorney fees to the defendant who spent money researching the ownership information.

My comment - Patent ownership should be transparent during enforcement, but the consequences of missing the 90 day window sounds draconian. Paying the attorney fees to find out the actual ownership should suffice.

7. Stay of Customer Suits - Courts may stay (suspend) a patent infringement suit of a customer lawsuits when the manufacturer of the product challenges the patent.

 My comment - Why would anyone sue a customer?

Copyright © 2015 Robert Moll. All rights reserved.

US Supreme Court Certiorari - SAP America v. Versata Software - Software Patent Infringement, Expert Testimony, and Denial of Stay of Litigation Based on PTAB Invalidity Decision

Today, Mary Pat Dwyer of the SCOTUS Blog stated the petition of the day relates to the Federal Circuit's decision in SAP America, Inc. v. Versata Software, Inc.

SAP, the petitioner and defendant below, frame the issue as follows: (1) Whether a computer software manufacturer may be liable for direct infringement of a patent drawn to computer instructions where the software, as shipped, does not contain sufficient instructions to perform the claimed operations; (2) whether flaws in an expert’s methodology may be raised as part of a challenge to the sufficiency of the evidence or only to the testimony’s admissibility; and (3) whether a patent infringement action should be stayed where the Patent Trial and Appeal Board (PTAB) has declared invalid all patent claims at issue in the infringement action and the defendant, which sought such review at the first opportunity, might otherwise be compelled to pay an enormous damages judgment and be subjected to a permanent injunction on the basis of the invalid claims.

Versata Software, the respondent and patent owner, frame the issue as follows: (1) Whether both courts below erred in ruling that the trial record supported the jury’s factual determination that SAP’s software and source code, as shipped, met every limitation of the asserted patent claims without modification by the customer; (2) whether the Federal Circuit properly declined to address challenges to the expert’s methodology insofar as they were framed as challenges to admissibility where SAP conceded it was not challenging the testimony’s admissibility on methodological grounds and had waived any such challenge below; and (3) whether the Federal Circuit was required to stay this patent infringement action under the Leahy-Smith America Invents Act where SAP did not seek a stay until after the Federal Circuit had issued its opinion on the merits, and the four statutory factors each weigh against the requested stay.

Whether or not the Supreme Court hears this case, the message I am hearing is delay in requesting a stay may negate a major benefit (e.g., erasing $330M in damages) of a PTAB decision holding the patent invalid. 

See the papers, orders, and proceedings at SCOTUS blog page.

Copyright © 2014 Robert Moll. All rights reserved.

Schumer Bill to Expand Post-Grant Review Beyond Business Methods Patents Used in Financial Products and Services

On May 2, U.S. Senator Charles Schumer introduced a small but important senate bill (S. 866) that would expand post-grant review (PGR) to a patent claiming a method or apparatus for performing data processing or other operations used in the practice, administration, or management of an enterprise, product, or service. Currently, the transitional business method patent review is limited to business methods used in financial products and services. This bill would allow a PGR challenge to all business method patents under 35 USC 101, 102, 103, and/or 112. Senator Schumer's press release gives details. This bill would make business method patent review a permanent law.

Copyright © 2013 Robert Moll. All rights reserved.

Microsoft and Google's Motorola Mobility Stay Litigation Until FRAND Issue is Resolved

Microsoft and Google's Motorola Mobility filed a joint motion to stay three U.S. patent lawsuits until the fair reasonable and non-discriminatory (FRAND) issue is resolved. The court's decision on FRAND will be especially important to Google since Motorola Mobility was presumably bought in part for the value of the  standard essential patents. It sounds like unreasonable high royalty demands (e.g., 2.25% for a standard essential patent) when hundreds of patents must be licensed to practice the standard are about to become even less popular.

See FOSS Patents: Microsoft and Google agree to stay three U.S. patent lawsuits until FRAND issues are resolve

Copyright © 2012 Robert Moll. All rights reserved.