Patent Reform Legislation: More Potential Impact on Patent Owners

Current Patent Reform Legislation

Whether one’s role in the IP community is as an inventor, agent, attorney, examiner, or business owner, a number of significant reforms to the U.S. patent system in the last decade have been a source of angst to owners and developers of intellectual property. The parade of landmark Supreme Court decisions and Congress’s passing of the America Invents Act has quickly made obsolete the relatively static patent laws we knew in the twentieth century. In the last decade alone, we’ve seen the Supreme Court repeatedly reverse district court and Federal Circuit decisions regarding patentable subject matter under 35 U.S.C. 101 (most notably in Bilski, Prometheus, Alice and Myriad). Technology developers now question whether or not they have actually produced something that’s patentable.

The Supreme Court’s opinion in Alice provides a roadmap for invalidating many, many software and internet patents, and patent owners and applicants are seeing that the Federal Court and the USPTO’s Patent Trial and Appeal Board are overturning patents and denying applications at historic high rates. Just as unsettling is the prospect of further legislation and higher court rulings that could add to the present turmoil in the U.S. patent system. And the bias in the current U.S. patent system against inventors and patent owners could get worse. It’s therefore worth examining two recent legislative proposals and their potential impacts on the U.S. patent system.

Innovation Act

The first legislative proposal is the Innovation Act, a bill which passed the House in late 2013, but failed to progress through the Senate. This bill is once again up for consideration (with certain reforms), and is directed towards cutting down the number of patent lawsuits by non–practicing entities (NPEs). The bill generally requires plaintiffs to be specific as to the exact means by which their patent is being infringed (claim by claim), as well as mandatory fee–shifting, where a losing plaintiff/patent owner would be responsible for paying the attorney fees of the winning defendant). Another noteworthy change in the bill would affect the Post Grant Review (PGR) process. Currently, post-grant patent challengers are barred from raising in later court proceedings “any ground that the petitioner raised or reasonably could have raised” throughout the review process. The new bill would remove the portion regarding grounds the petitioner “reasonably could have raised”, meaning that a challenger could theoretically file for Post Grant Review on ground A, eventually lose on this ground, and then seek a further PGR of the same patent on ground B.

The Innovation Act has been criticized for its potential to raise the cost of patent litigation and prolong lawsuits, while discouraging small patent owners from asserting their exclusive rights. In the view of many, the reforms included in the Act would continue to push the U.S. patent system away from protecting inventors, and would discourage technology developers from engaging in the costly process of acquiring patents that have a higher potential than ever of being overturned. So even though the Act’s main focus is to prevent abuse of the patent system by NPEs (“patent trolls”), the effects will undoubtedly spill over to weaken the hand of technology developers generally.

STRONG Patents Act

The second legislative proposal worth noting is the Support Technology and Research for Our Nation’s Growth, or STRONG Patents Act of 2015. Introduced this year in the Senate, STRONG proposes a number of revisions to the patent system, most notably requiring the PTAB during PGR to review patent claims the way a district court would. Currently, the PTAB evaluates claims under a “broadest reasonable interpretation” standard, while district courts employ a standard of “ordinary and customary meaning.” STRONG would also place the burden of proof in a PGR on the entity challenging the patent, and would also require that claims under review be assumed valid. Other important provisions of STRONG would empower the FTC to pursue patent owners who sent frivolous demand letters, change the way damages are calculated in patent cases, and direct how the USPTO can use the fees it collects. STRONG is seen as being particularly helpful for inventors and entities seeking to enforce their patents. Many have argued that this type of law is necessary in the wake of cases like Alice, where patents that were once considered valid and enforceable are now too easily overturned. Unfortunately, the legislation would do nothing to clarify the definitions of “abstract ideas” as they relate to software in the Alice ruling.