Patent Trolls and The Innovation Act

bigstock--131568629by Michael Pezzulli1

In my earlier post, I discussed why Patent Trolling has been problematic for so many in the patent ecosystem.

Fortunately, help may be on the horizon. Currently there is a bill in Congress called the “Innovation Act.”2

The Innovation Act is significant in that it directs a party alleging patent infringement in a civil action to include in the court pleadings, if the information is reasonably accessible, specified details concerning:

  • each claim of each patent allegedly infringed;
  • for each claim of indirect infringement, the acts of the alleged indirect infringer that contribute to, or are inducing, a direct infringement;
  • the principal business of the party alleging infringement;
  • the authority of the party alleging infringement to assert each patent and the grounds for the court’s jurisdiction;
  • each complaint filed that asserts any of the same patents; and
  • whether the patent is essential or has potential to become essential to a standard-setting body, as well as whether the United States or a foreign government has imposed any specific licensing requirements.

The Innovation Act (in it’s current form) does the following:

  • Requires courts to award prevailing parties reasonable fees and other expenses incurred in connection with such actions, unless: (1) the position and conduct of the nonprevailing party was reasonably justified in law and fact; or (2) special circumstances, such as severe economic hardship to a named inventor, make an award unjust.
  • Directs courts, upon a motion of a party, to require another party to certify whether it will be able to pay any award of such fees and expenses. Allows the court, if a nonprevailing party is unable to pay such a fee, to make a joined party liable for the unsatisfied portion.
  • Requires the court, upon a motion by a prevailing party defending against an allegation of infringement in a case in which the nonprevailing party alleging infringement is unable to pay an award of fees and expenses, to join an interested party if the prevailing party shows that the nonprevailing party has no substantial interest in the subject matter at issue other than asserting the patent claim in litigation.
  • Defines “interested party” as a person, other than the party alleging infringement, that: (1) is an assignee of the patent; (2) has a right, including a contingent right, to enforce or sublicense the patent; or (3) has a direct financial interest in the patent, including the right to any part of an award of damages or licensing revenue.
  • Limits discovery during a claim construction period to only the information necessary to determine the meaning of patent terms. Makes such limitation inapplicable to an action seeking a preliminary injunction against an allegedly infringing instrumentality that competes with a product or a process of the party alleging infringement.
  • Allows parties to voluntarily consent to be excluded from patent discovery limitations under this Act and to instead proceed according to the Federal Rules of Civil Procedure.
    Expresses the sense of Congress that: (1) parties who send purposely evasive demand letters to end users alleging patent infringement are abusing the patent system in a manner that is against public policy, and (2) actions or litigation stemming from such purposeful evasion should be considered a fraudulent or deceptive practice and an exceptional circumstance when considering whether the litigation is abusive.
  • Prohibits a claimant seeking to establish willful infringement from relying on evidence of pre-suit notification of infringement unless the notification provides specific information regarding the particular patent, claimant, and infringement.
  • Requires plaintiffs, upon filing an initial complaint, to disclose to the U.S. Patent and Trademark Office (USPTO), the court, and each adverse party the identity of: (1) the assignee, (2) any entity with a right to sublicense or enforce the patent, (3) any entity that the plaintiff knows to have a specified financial interest in the patent or the plaintiff, and (4) the ultimate parent entity of any such identified assignee or entity. Directs plaintiffs, or subsequent owners of the patent, to provide the USPTO with updates after the initial identification.
  • Requires courts to grant a motion to stay an action against a customer accused of infringing a patent based on a product or process under specified conditions when: (1) the manufacturer is a party to the action or to a separate action involving the same patent related to the same product or process; and (2) the customer agrees to be bound by any issues in common with, and finally decided as to, such manufacturer in the action to which the manufacturer is a party.
  • Authorizes the court, if the manufacturer consents to or declines to appeal a judgment regarding an issue in common with such a customer, to determine, upon grant of a motion, that the consent judgment or unappealed decision is not binding on the customer.
  • Directs the Judicial Conference of the United States to develop discovery rules for patent actions.
  • Requires the Judicial Conference to consider proposals to delay determinations as to whether discovery of emails, text messages, or instant messages is appropriate until after the parties have exchanged initial disclosures and core documentary evidence.
  • Requires the Supreme Court to eliminate the model patent infringement complaint form currently provided in the Federal Rules of Civil Procedure. Permits the Supreme Court to prescribe new model allegations that would notify accused infringers of specific information about patent claims.
  • Requires courts in cross-border bankruptcy cases involving the recognition of a foreign proceeding under the Model Law on Cross-Border Insolvency to apply U.S. bankruptcy laws relating to the retention or termination of licensed intellectual property rights after a trustee has rejected an executory contract.
  • Allows a licensee to elect to retain its right to intellectual property if a foreign representative rejects or repudiates a contract under which the debtor is the licensor.
  • Expands the definition of “intellectual property” as it applies to the federal bankruptcy code to include trademarks, service marks, or trade names, thereby providing for trademark licenses to be retained instead of voided in bankruptcy.
  • Directs the USPTO to notify the public on its website when a patent case is brought in federal court, including by providing information about the patent owners.
  • Amends the Leahy-Smith America Invents Act (AIA) to:
    • limit the grounds for invalidity of a patent claim that a post-grant review petitioner is prohibited, by estoppel, from asserting in subsequent civil actions or certain U.S. International Trade Commission proceedings to only those grounds that the petitioner actually raised during post-grant review;
    • require claims of patent in post-grant and inter partes review proceedings to be construed in the same manner as a court would construe such claims in a civil action to invalidate the patent;
    • codify judicial doctrine relating to the consideration of prior art in cases of double patenting for the purpose of determining the nonobviousness of a second patent’s claimed invention, thereby specifying that such doctrine continues to apply under the AIA’s first-inventor-to-file patent system;
    • revise the transitional covered business method patent review program to expand the scope of prior art that may serve as the basis of a challenge and permit the USPTO to waive filing fees;
    • exclude any time consumed by an applicant’s request for continued examination from the calculation of a patent term adjustment that is based on the USPTO failing to issue a patent within three years.
  • Extends by an additional 10 years the duration of the patent pilot program under which certain U.S. district court judges can request to be assigned to patent cases.
  • Extends from one year to 18 months the time limit for the USPTO to commence a misconduct proceeding to suspend or exclude a person from practicing before the USPTO once the misconduct forming the basis for the proceeding is made known to the USPTO.
  • Reestablishes a requirement that international applications be filed in English.

The Innovation Act as of June 11, 2015 has been Ordered to be Reported (Amended) by the Yeas and Nays: 24-8. Pay close attention to this bill.3 It fixes many of the issues of Patent Trolling.

There is an old hunting phrase, “sometimes the hunter becomes the hunted.” Soon the Patent Troll could be “trolled upon.”

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1. Michael Pezzulli, a Texas attorney and Shareholder at Holmes Firm PC, has been Board Certified in Civil Trial Law for 30 years and has tried the spectrum of cases, including patent and trademark disputes. He has one patent issued in his name (4,760,773) and two on the drawing board.
2. H.R.9-Innovation Act, 114th Congress (2015-2016)
3. https://www.congress.gov/bill/114th-congress/house-bill/9

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