Less than five years after passing the America Invents Act (“AIA”), both the House and Senate have introduced bills to further reform the Patent Act, specifically in response to addressing the issue of abusive litigation by “patent trolls.” In the House, “The Innovation Act,” H.R. 9, was introduced in February, 2015. This bipartisan bill largely parallels legislation the House passed during the last Congress that ultimately died in the Senate. The House will likely pass this bill in the very near future, sending it again to the Senate. In the Senate, in May, 2015, the “Protecting American Talent and Entrepreneurship Act,” or PATENT Act, S. 1137, was introduced. This bill also has bipartisan support and was recently approved by the Senate Judiciary Committee.

Overall, both bills are quite similar as they both have the same general intent: to limit baseless, abusive litigation by trolls. However, there are some significant substantive differences between the bills in how this goal is reached. These differences focus primarily on the areas of fee shifting and recovery; pre-litigation demand letters by patent owners; claim construction during AIA review proceedings; and venue.

Loser Pays

Both The Innovation Act and PATENT Act institute a “loser pays” scheme making the losing party in litigation responsible not only for its own costs and legal fees, but also those of the prevailing party. This is ostensibly aimed at curbing troll litigation because the prospect of potentially bearing a defendant’s costs and fees may make a patent owner think twice before filing suit, especially where defense of a patent case may cost several hundred thousand dollars or more. Under the House bill, this fee shifting is automatic and the loser is required to pay unless it can show it was reasonably justified in bringing the suit or other special circumstances apply. The Senate PATENT Act, however, requires the winning party to bring a motion for fees and the court will generally award those fees unless the losing party can show its conduct was “not objectively reasonable.”

Demand Letters

The first inkling of any sort of claim by a third-party is usually in the form of a demand letter ostensibly describing an aggrieved party’s claims. In practice, however, many of the demand letters issued — especially by those considered “trolls” — are often vague, misleading and incomplete.

Both the House and Senate bills address this issue. The House bill does so only nebulously, noting that vague, misleading demand letters can be an abuse of the patent system and stating that unless a demand letter is sufficiently detailed, it cannot be used in litigation to show intentional infringement. However, The Innovation Act does not contain detail as to what levels of specificity may be required. On the other hand, the Senate PATENT Act contains specifics, lists various items a demand letter must contain and also provides for civil penalties relating to repeated, widespread demand letter abuse. The Senate bill provisions parallel similar provisions recently adopted by many states, including Florida, under their Unfair Trade and Deceptive Trade Practices Acts.

Claim Construction in Post-Grant Review

Parties can request the Patent Trial and Appeal Board (“PTAB”) review an issued patent. The two main review proceedings are Post-Grant Review (“PGR”) and Inter-Parties Review (“IPR”). Under each, a party can challenge patentability of claims in an issued patent.

In IPR and PGR proceedings, the questions of claim construction generally and how the PTAB should construe patent claims are significant. Currently, the PTAB is to construe claims generously under what is known as the “broadest reasonable interpretation” standard. The House Innovation Act has a provision that restricts this standard and instead requires the PTAB to construe claims more narrowly, a position many litigants and lower courts prefer. Conversely, the Senate PATENT Act contains no language addressing claim construction, thus leaving things status quo under the “broadest reasonable interpretation” standard.

The proposed House standard potentially makes it more difficult to successfully challenge a patent in the PTAB because the narrower a claim is construed, the less vulnerable it might be to certain attacks such as obviousness. However, and directly contrary to this view, a very recent decision by the Court of Appeals for the Federal Circuit upheld the “broadest reasonable interpretation” standard as the proper PTAB claim construction standard. Given this, debate on the very issue of standard of review could become very relevant as both bills continue moving forward.

Venue

Patent infringement actions are the domain of the Federal Courts. Over the last few years, several federal districts have seen significant increases in patent litigation activity, becoming generally known as friendlier toward patent cases and patent plaintiffs. While the Senate PATENT Act does not address the question of proper venue for patent litigation, the House Innovation Act does. Under The Innovation Act, the venue chosen by plaintiff must have some reasonable connection to the dispute between the parties. While the Senate legislation preserves status quo, this Innovation Act provision could help stem the tide of cases into a few “prized” districts.

We will continue monitoring these bills as they move forward and provide further updates as new substantive issues develop.

Photo Courtesy of Cliff under Flickr Creative Commons License