2. ■ Current Situation at USPTO
■ Federal Patent Reform
−Executive
−Congress
−Courts
■ 50 States Patent Reform
Overview
2
3. Executive Branch Agencies
Involved in Patent Policy
Executive
Office of the
President
Dep’t
Commerce
U.S. Patent &
Trademark
Office
Int’l Trade
Administration
Small Business
Administration
Dep’t
Homeland
Security
Customs &
Border
Protection
Immigration &
Customs
Enforcement
Dep’t Justice
Solicitor
General
Civil Division
Antitrust
Division
Dep’t State
Dep’t Health &
Human
Services
Food & Drug
Administration
Council of
Economic
Advisors
U.S. Trade
Representative
Office of
Management &
Budget
U.S. Int’l Trade
Commission
Federal Trade
Commission
Office of
Science &
Technology
Policy
National
Economic
Council
Independent Agencies
Government
Accountability
Office
3
4. ■USPTO Director is the President’s advisor
on IP policy issues.
“The Office shall advise the President,
through the Secretary of Commerce, on
national and certain international intellectual
property policy issues.”
35 U.S.C. § 2(b)(8)
Role of USPTO in Patent Reform
4
10. “Patent Troll” Problem
America Invents Act “only went about halfway to
where we need to go.”
-President Obama (Feb. 2013)
10
11. White House Proposals
June 4, 2013
Legislative recommendations
1. Require applicants to disclose the “Real Party-in-
Interest”
2. Permit more discretion to the court to award fees to
prevailing parties
3. Expand the PTO’s Transitional Program for Covered
Business Methods
4. Protect off-the-shelf use by consumers and
businesses
5. Change the ITC standard for obtaining an injunction
6. Use demand letter transparency to help curb abusive
suits
7. Ensure the ITC has adequate flexibility in hiring
qualified Administrative Law Judges
Executive Actions
1. Make “real party-in-interest” the new default
2. Tighten functional claiming
3. Empower downstream users
4. Expand dedicated outreach
5. Strengthen Enforcement Process of Exclusion
Orders 11
12. 2013-14 Federal Government
Actions on Patent Reform
Legislative Branch
Hearings
Introduced Bills
• H.R. 3309 (Goodlatte)
• S. 1720 (Leahy)
• S. 1013 (Cornyn)
• S. 2049 (McCaskill)
• H.R. [2nd draft] (Terry)
• many others
Executive Branch
1. Ownership transparency
2. Claim clarity
3. Protecting small
businesses
4. Edison Scholars Program
5. Strengthen ITC exclusion
6. “Patents for Humanity”
7. Crowdsourcing prior art
8. Examiner training
9. Pro bono assistance
Judicial Branch
• Alice v. CLS Bank
• Nautilus
• Octane Fitness
• Highmark
• Limelight
• Medtronic
• US Judicial
Conference
amending Civil Rules
12
13. Interplay between Congress and
Courts
Legislative Issue How That Issue Is Being
Addressed by Courts
Fee shifting (HR 3309) – would amend §285
to require the non-prevailing party to pay the
prevailing party’s attorney fees.
Octane Fitness and Highmark – overturned
the Federal Circuit’s narrow interpretation of
§285, thereby making fee-shifting more likely.
Stay of Customer Suit (HR 3309, S. 1720) –
would create a statutory mechanism for a
manufacturer to stay and intervene in a
customer’s suit.
In re Nintendo (Fed. Cir. 2014) – ordering
E.D. Texas to sever and stay the suit against
Nintendo’s customers (pending suit against
Nintendo in W.D. Wash.)
Heightened Pleading (HR 3309) – would
require plaintiff to plead infringement in more
detail.
U.S. Judicial Conference has proposed to
amend the Federal Rules of Civil Procedure
by deleting Rule 84 (Forms) and eliminating
Form 18 (Patent Infringement).
Discovery Limits (HR 3309) – would impose
limits on discovery in patent cases.
U.S. Judicial Conference has proposed major
revisions to discovery-related Rule 26.
13
14. 2013-14 Congressional Bills
Proposal Goodlatte
H.R. 3309
Leahy
S.1720
Cornyn
S.1013
McCaskill
S. 2049
Terry
H.R. [draft]
Schumer
S.866
Issa/Chu
H.R. 2766
Cardenas
H.R. 4763
Obama
‘Fact Sheet’
Loser Pays Fee-
Shifting X X X
Real Party in
Interest X X X X
Joinder of
Interested Party X X
Stay of Customer
Suit X X X
Discovery Stay X X
Pleading more
detail X X
Discovery limits
and cost shifting X X
Demand Letters X X X X X
Post-Grant Claim
Construction X X
CBM Review
Expansion X X X
Bankruptcy
protection X X
Double Patenting X X
ITC Domestic
Industry X X 14
16. GAO Report (Aug. 2013)
17% 24%
76% 59%
■ Increase in suits by PMEs was “not statistically
significant,” based on “random, generalizable” data from
Lex Machina.
■ By contrast, other peoples’ studies were based on 16
17. ■ “Here in Washington D.C., facts and
data are simply not the subject of
polite conversation. Facts and data
complicate the Washington narrative.
In D.C., people have a set of a priori
arguments they wish to make and
they mold information to fit the
arguments.”
■ “I am here to offer a data-driven
second opinion.”
■ “[P]atent litigation at the end of 2014
was actually commensurate with
2009-2010 levels.”
Former USPTO Director Kappos
17
18. ■ 113th Congress – H.R. 3309 (“Innovation Act”)
− 10/23/2013 – Introduced in House
− 11/20/2013 – Voted out of House Judiciary
Committee (vote: 33-5)
− 12/05/2013 – Passed the full House (vote: 325-91)
− 1/3/2014 – End of 113th Congress (H.R. 3309 dies in
Senate)
■ 114th Congress – H.R. 9 (“Innovation Act”)
− 2/5/2015 – Introduced in House
− 6/11/2015 – Voted out of House Judiciary
Committee (vote: 24-8)
“Innovation Act” history
18
19. H.R. 9: “Loser Pays” Fee-Shifting
■ Current Law:
− “American Rule” – each side pays own legal fees,
regardless if you win or lose.
− Exception: only in “exceptional cases” (35 U.S.C §
285)
▪ Supreme Court in Octane Fitness interpreted this
phrase more broadly.
■ H.R. 9
− “British Rule” fee-shifting to prevailing party, unless…
(1) losing party’s position was “substantially justified”
or
(2) “special circumstances” make an award “unjust”.
− Allows attorney fees to be recovered against any 19
20. ■Comparison of fee-shifting awards (pre-
Octane versus post-Octane).
20
Is There A Need For Loser-Pays
Legislation After Octane Fitness?
Source: FCBA (2015)
21. H.R. 9: Stay of Customer Suit
■ Court must stay any patent infringement suit brought
against a customer, if the manufacturer/supplier agrees to
defend the customer in the suit.
− Customer includes anyone who buys or uses the
product (or a component of the product).
− Manufacturer/supplier includes anyone who
manufactures or supplies the product (or a component of
the product).
Manufacturer Customer
Sells product
Supplier A
Supplier B
Sells component B
Sells component A
Re-Sells product
End
User
21
22. ■ Letter to Congress: “[L]oser pays (automatically awarding attorney
fees to a prevailing party) and joinder, (requiring joinder of any
party with a financial interest in the litigation, such as a university
inventor) as written, would have the effect of making patent
licensing negotiations more complex and likely discourage at least
some of our members from licensing their inventions at all. In
addition, these provisions would make litigation so potentially
risky that few legitimate patent holders without deep pockets would
dare risk doing so.”
Lobbying Against Patent Reform
(Jan. 20, 2014)
22
23. Lobbying For Patent Reform
Legislative Goals:
1. Reform Abusive Demand Letters
2. Make Trolls Explain Their Claims
3. Protect Innocent Customers
4. Make Patent Litigation More Efficie
nt
5. Stop Discovery Abuses
6. Make Abusive Trolls Pay
7. Provide Less Expensive Alternative
s
23
24. ■ Shifts balance in favor of patent owners
1. Apply “clear and convincing” evidence standard in IPR.
2. Eliminate “broadest reasonable interpretation” standard in IPR.
3. Eliminate USPTO fee diversion, and give the USPTO the ability
to access and spend the fees it collects without regard to fiscal
year limitations.
4. Amend 35 U.S.C. 284 with respect to willful damages and
specifically authorize district courts to award enhanced
damages at their discretion if “by a preponderance of the
evidence” the infringement was demonstrated to be “willful or in
bad faith.”
5. Add 35 U.S.C. 271(j), which applied to divided infringement,
specifically saying “it shall not be a requirement that the steps
of the patented process be practiced by a single entity.”
“STRONG Patents Act” (S. 632)
(introduced March 3, 2015)
24
25. ■50 States have
“consumer
protection” laws.
■More than half of all
States have
introduced patent-
specific “demand
letter” legislation.
25
State Legislation of Patent
“Demand Letters”
Source: Baluch 2014
26. ■ Must identify Patent Owner’s name and address
■ Must identify Patent Number
− One state (WI) requires copy of patent
− One state (UT) requires identification of
specific claims of patent
■ Must identify factual basis for belief that recipient
of letter may be infringing.
− Some states require infringement analysis.
▪ Two states (WI, UT) require disclosure of all
prior or current court or PTO proceedings
involving the patent. 26
State Legislation of Patent
“Demand Letters”
27. For More Detailed Information
Andrew S. Baluch,
“PATENT REFORM
2015”, available for
free download
http://ssrn.com/abstra
ct=2414306
27