White House Backs Recently Introduced Patent Reform Bill Known as PATENT Act

On April 29, 2015, Senators Grassley, Leahy, Corny, Schumer, Lee, Hatch, and Klobuchar introduced another patent reform bill known as the Protecting Talent and Entrepreneurship Act of 2015 (“PATENT Act”). This bill includes many provisions similar to the previously introduced Innovation Act of 2015, but takes a slightly different approach on some key issues.

Further, this bill has received bipartisan support and even support from the White House. Last week, Press Secretary Josh Earnest said in a statement, “The Protecting American Talent and Entrepreneurship (PATENT) Act, introduced by a bipartisan group of members, represents an important step toward answering the President’s call for common-sense legislation that will help deter abusive conduct and promote an efficient and strong patent system.”

The key provisions of this bill are:

• Elimination of Form 18 and Heightened Pleadings – The bill would eliminate use of Form 18 in patent infringement actions. The elimination of Form 18 would require plaintiffs to identify parties that have a financial interest in the outcome of the case (i.e. parties with more than 20 percent ownership in patent, or assignees or licensees), each patent and claim allegedly infringed, which products or processes are infringing, and describe the alleged infringement. The bill would also allow the court to dismiss any actions that are not pled sufficiently. However, if certain information is unavailable, the plaintiffs would be permitted to described information in general terms along with a statement as to why the information is not accessible.
• Customer Stay – When the same patent has been asserted against a manufacturer and its customer, the bill would also allow the customer defendants to stay litigation while the manufacturer litigates the alleged infringement suit. However, in order to obtain a stay, customers will have to agree not to separately litigation any issues adjudicated in the manufacturer suit and to be bound by issue preclusion with respect to those issues.
• Discovery Limits – The bill will require courts to stay discovery pending resolution of preliminary motions (i.e. motions to dismiss, transfer venue or sever accused infringers). The bill, however, would give courts discretion to allow limited discovery necessary to resolve these motions or a motion for a preliminary injunction, or if it finds that additional discovery is necessary to preserve evidence or otherwise prevent prejudice to a party.
• Fee Recovery – The bill would allow courts to award reasonable attorney fees if “the court finds that the position of the non-prevailing party was not objectively reasonable in law or fact or that the conduct of the non-prevailing party was not objectively reasonable.”
• Demand Letters – The bill would prevent the use of pre-suit demand letters for the purposes of establishing willful infringement when the letters do not provide sufficient disclosures (i.e. identify asserted patents and claims, accused products, grounds for alleged infringement, and parties with financial interest in the outcome of the case). This bill would also permit the FTC to impose civil penalties against parties that engage in “widespread sending of written communication” of demand letters in bad faith.
• Increased Transparency – The bill would also require patent holders to disclose to the PTO and to the court any assignment of patent rights that results in a change of ultimate parent entity during a pending litigation. If a patent holder fails to disclose, it will not be able to recover increased damages of attorney fees (unless this would be manifestly unjust).

Interestingly, several provisions, such as the heightened pleadings and customer stays, of this bill do not apply to the Section 271(e) cases (Hatch-Waxman and biosimilars).

Gibbons P.C. will continue to report on developments in patent reform bills.