Patent Law Bill to Rein in Litigation Abuses . . . (No really)!

Last week, House Judiciary Committee Chairman Bob Goodlatte (R-VA) introduced H.R. 3309, entitled “Innovation Act,” a 51-page bill proposing a number of significant amendments to the Patent Act (Title 35 U.S.C.). We reported last month on an earlier proposed draft of this bill.

As we noted last month, among the more noteworthy provisions of the bill is a proposed new 35 U.S.C. § 281A, which heightens the pleading requirements for patent cases. Specifically, the proposed new section mandates providing detailed information about the patents alleged to be infringed, identifying each accused product/process, and providing information with “detailed specificity” regarding how the product infringes. This provision also sets forth that, for any required information not disclosed, the plaintiff must establish why such undisclosed information was not readily accessible, and the efforts made by such party to access it.

Also proposed is a revised 35 U.S.C. § 285, which requires the losing party in cases to pay the costs of the prevailing party unless the judge finds that the non-prevailing party’s position “was substantially justified or that special circumstances make [such] an award unjust.” This provision turns on its head the traditional “American Rule,” under which each party pays its own costs. If the bill passes, it certainly will be interesting to watch how future jurisprudence under revised § 285 will shape the contours of “substantially justified” and “special circumstances.”

The bill also includes a new 35 U.S.C. § 299A, which limits discovery prior to a claim construction ruling to information necessary for claim construction. As IP practitioners are aware, discovery is one of the most costly, disruptive and resource intensive aspects of any litigation.

One additional significant provision in the bill speaks to the identification of interested parties under proposed 35 U.S.C. § 299(d). This provision defines an “interested party” as a person other than the party alleging infringement that: is an assignee; has a right, including a contingent right, to enforce or sublicense the patent(s)-in-suit; or has a direct financial interest in the patent, including the right to any part of an award of damages or any part of licensing revenue. The latter provision carves out as exceptions to the definition an attorney or law firm providing legal representation in the case if compensation reasonably related to that representation is the sole basis for the financial interest; or, a person whose sole financial interest in the patent or patents at issue is ownership of an equity interest in the party alleging infringement, unless such person has the right or ability to “influence, direct, or control” the litigation.

So among the other and myriad proposed and pending legislation aimed at “patent trolls,” the Innovation Act will be one to watch, given its overall tenor of reining in abusive patent litigation practices. A summary of the bill may be viewed here.

Next we will report on the Senate’s just-introduced bill, The Patent Litigation Integrity Act, S. 1612. Stay tuned!

Robert E. Rudnick is a Director in the Gibbons Intellectual Property Department. Thomas J. Bean, a Director in the Gibbons Intellectual Property Department, and Ralph A. Dengler, a former Director in the Gibbons Intellectual Property Department, co-authored this post.
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