The document summarizes recent developments regarding patent reform legislation. It discusses the key provisions of two bills: H.R. 1260 and S. 515. Both bills would transition the U.S. to a first-inventor-to-file system and establish new derivation proceedings to replace interferences. They also address provisions around enhanced damages, inequitable conduct, interlocutory review of claim construction, and post-issue proceedings. The status and expected timeline of the bills are also summarized.

1. 1
Patent Reform Act of 2009: Overview of Recent Developments
Brad Pedersen and Greg Gardella
November 10, 2009
Legislative Process
Current Proposals
Current Status
First Inventor to File
Derivation Proceedings
Enhanced Damages
Inequitable Conduct
Interlocutory Review of a Claim Construction
Updates

2. Patent Reform Act of 2009:
Overview of Recent Developments
Greg H. Gardella
Fish & Richardson P.C.
gardella@fr.com
(612) 337-2594
November 10,
2009
Brad Pedersen
Patterson, Thuente,
Skaar & Christensen
pedersen@ptslaw.com
612.349.5774

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Legislative Process
Sponsor introduces draft bill
Bill usually referred to committee
– Hearings
– Amendments
Committee votes to report bill
– Issues written report explaining
provisions and committee decisions
Floor activity
– Debate and amend
– Vote
Conference Committee
– House and Senate appoint members
from the reporting committee
– Resolves differences between versions
Full vote
– No amendments
– Sent to President if passed by both
House and Senate http://lexisnexis.com/tabula-
rasa/congressional/billbecomeslaw

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Current Proposals
H.R. 1260
– House Judiciary Committee
hearings
– Committee has solicited
comments and amendments
– Committee vote not scheduled
S. 515
– Amended in Senate Judiciary
Committee
– Full debate and vote not
scheduled
S. 610
– Referred to Judiciary Committee
– No action taken
S. 515
H.R.
1260
S. 610

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Current Proposals
H.R. 1260 (Reps. Conyers, Smith, Berman, Goodlatte and Jackson-Lee)
– Content almost identical to S. 515 as introduced
• Additional provisions for PTO studies and reports on the law’s effects
• Identical version passed in House in 2007; stalled in Senate in 2008 after economic
decline
– Supported by electrical, mechanical, and software groups
S. 515 (Sens. Leahy, Schumer, Crapo, Whitehouse and six others)
– Amended in committee, referred to full Senate for debate
– Congressional Budget Office cost estimate = $3 million to implement bill
from 2010-2019
– Hatch pulled support due to watering down of damages provisions and
failure to address inequitable conduct
S. 610 (Sen. Kyl)
– Not moving forward (Sen Leahy is chair of Judiciary Comm.)
– No co-sponsor in House
– Supported by biotech and pharma groups

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Current Status
From PatentDocs: “Joseph Matal, Republican General Counsel,
Senate Judiciary Committee (and formed Kyl staffer) . . . shared
his views that the opposing voices in the Senate will ‘reach a
deal’ on the bill, with some minor changes, and that the House
would ultimately accept the bill as passed by the Senate.”
Senator Leahy has indicated that S.515 will be brought to the
floor of the Senate before the end of the year.
Gary Locke (Secretary of Commerce) has indicated the Obama
Administration’s support for the S. 515.
USPTO has been contributing to manager’s amendment
Key is that everyone realizes a need to fix the financial issue
But fix can’t give USPTO substantive rule making authority

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First Inventor to File & Pre-Issue Submissions
(Common to HR1260 and S.515)
Establish “first inventor to file” system
– Attempting to bring U.S. in line with rest of the world
– But, FITF and provisions for grace period don’t get there
– Biggest difference will be the “springing public
disclosure exception” that is used to trigger grace period
– Can’t swear behind 102(e) secret prior art
Third party can submit prior art during examination
and statement regarding relevance of the art
– There are actually two places in the bill that permit this

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First Inventor to File – FITF will be different
FIG. 1 – Scenarios where both parties are seeking a patent
(based on hypothetical evaluation of about 200 typical fact patterns)

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First Inventor to File – FITF will be different
FIG. 2 – Scenarios where only 1 party is seeking a patent
(based on hypothetical evaluation of about 200 typical fact patterns)

10. 10
First Inventor to File – FITF will be different
FIG. 3 – the “Springing Public Disclosure Exception”

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First Inventor to File – FITF will be different
FIG. 4 – the Effectively Filed Difference for Prior Art vs. Enablement
= ?

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Derivation Proceedings
The replacement for interferences
Changes still being made to Section 135
– Permits later filing applicant to initiate proceeding if a
case is made that the invention of an earlier filing
applicant was obtained, directly or indirectly, from the
later filing applicant
– Mostly, this is equivalent to “bad actor” exception under
EPC Article 55
– There is a potential for an “innocent deriver” situation
where party shares non-public, non-confidential
information and second party uses that to derive
invention

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Derivation Proceedings
The replacement for interferences
FIG. 5 – Scenarios where derivation can be an issue

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Enhanced Damages
(Common to HR1260 and S.515)
Objective recklessness standard for willfulness
determination
– Codify In re Seagate
Treble damages limited to situations when judge
finds that infringer recklessly continues to infringe
after receiving notice

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Calculating Reasonable Royalty
H.R. 1260: Courts must choose from three methods:
– The entire market value of an infringing product, but only when the
claimed invention's specific contribution over prior art is the predominant
basis for the infringing product's market demand
– An established royalty based on marketplace licensing of a “similar non-
infringing substitute in the relative market”
– If neither of the first two methods apply, then the portion of the economic
value of the infringing product or process properly attributable to the
claimed invention's specific contribution over the prior art
S. 515 (amended)
– Trial court serves as “gatekeeper,” instructs jury regarding which damage
calculation methodologies and factors have a legally sufficient
evidentiary basis
– Gives more discretion to district courts, preserves Georgia Pacific factors

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Reexaminations
H.R. 1260:
– “request for reexamination by the Office of any claim on a patent on
the basis of any prior art or documentary evidence.”
S. 515 (amended):
– Eliminates “could have raised” estoppel
– Eliminates bar on pre-November 29, 1999 applications
– Doesn’t allow non-documentary evidence
From PatentDocs’ Summary of Matal talk:
– Reexaminations would require prima facie case of invalidity --
evidence that, if unrebutted, would be sufficient to invalidate a patent.
– Limitation of one inter partes reexamination, after which any
challenge would be by litigation.
– The Office has agreed to a 12-month time limit on reexaminations, and
has identified procedural changes to be instituted to achieve this goal.

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Post-Issue PTO Proceedings
Renamed Patent Trial and Appeal Board of
administrative patent judges to hear post-grant
opposition proceedings – different than, and in
addition to, reexams
Any ground of invalidity other than best mode
S. 515 & H.R. 1260: Must file within 12 months of
issue
Kappos wants to have a four year phase-in of post-
grant opposition proceedings, with an increase cap on
the number proceedings instituted each year

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Inequitable Conduct
H.R. 1260
– Does not address inequitable conduct
S. 515
– Does not currently address inequitable conduct
– Matal said there is a "slim chance" that the Senate bill will contain any
extensive reform of inequitable conduct (PatentDocs)
– Matal indicated that Senator Hatch was insisting on a form of reissue
proceeding, to be called "supplemental examination," which would permit
a patentee to submit art to the Office that had not been submitted during
initial examination. New submissions would be limited to patents and
printed publications, and submitting a patent to this reissue procedure
would preclude inequitable conduct from being raised in any subsequent
litigation. (PatentDocs)

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Venue
H.R. 1260
– Venue only proper where:
• Defendant is incorporated, has principal place of business, or is permanently located and
committed substantial infringing acts
• Plaintiff resides if plaintiff is a nonprofit or individual inventor
– Court should transfer venue if no “undue hardship” to plaintiff
S. 515 (amended)
– Transfer patent cases on a showing that another district is “clearly more convenient”
• Codify In re TS Tech, 551 F.3d 1315 (Fed. Cir. 2008)
– Pilot program for district courts to direct patent cases to interested judges
– PatentDocs: Venue provision to be limited to codification of the TS Tech case, at
the insistence of Senator Cornyn of Texas

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Interlocutory Review of Claim Construction
H.R. 1260
– Party seeking review must petition the district court within
10 days of claim construction order
– District court has discretion to approve the application and
determine whether to stay proceedings during the appeal
S. 515 (amended)
– Can only appeal claim construction order if it “may
materially advance the ultimate termination of the
litigation,” or “will likely control the outcome of the case”

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S. 515 – Best Mode
H.R. 1260
– Preserves best mode requirement
– Best mode cannot be grounds for post-grant review of patent through
reexamination or cancellation petition
S. 515 (amended)
– Eliminate best mode requirement
– Failure to comply with the best mode requirement “shall not be a basis on
which any claim of a patent may be canceled or held invalid or otherwise
unenforceable”

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Updates
Patent reform timeline and updates available at:
www.fr.com
> Fish Patent Law Updates
> 2009 Patent Law Reform Update

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Questions?

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Greg H. Gardella
Twin Cities Office
gardella@fr.com
612-337-2594
Thank you!