Marathon Patent Group

Reasonable Sounding Patent Reform That Isn’t

May 21, 2015

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Reasonable Sounding Patent Reform That Isn’t

The patent system is maddeningly complex. So many different factors go into the awarding and enforcing of patents that making changes to the system is very difficult, because the outcome of a change may not be what the authors of the change intended.

Congressman Bob Goodlatte (R-VA) has introduced H.R. 9, the "Innovation Act." The bill actually made it through the House of Representatives last year, but failed to become law because the Senate never passed a companion bill.

Pundits debate the odds of the bill making it into law this year; some say there is bi-partisan support and it will pass. Others say opposition is building, and many in Congress are feeling the bill is unnecessary because the problem of "patent trolls" is not as bad as it once was, thanks to the post-grant review procedures from the America Invents Act and Supreme Court rulings that have thrown out a lot of the most contentious software patents and made it easier to recover attorney fees in cases of abuse.

We agree with those who say further reform is not necessary at this time.

One of the big challenges in patent reform is understanding the true consequences of changes in the system. A lot of things that sound reasonable with a cursory examination turn out to be problematic on deeper consideration.

Brian Pomper has a good article on IPWatchdog that goes into detail on some of the legal problems that could stem from the Innovation Act. Here are a few examples of clauses in the Innovation Act that sound reasonable but aren't:

  • Customer stay clause. The "customer stay clause" in the Innovation Act is intended to protect end users from lawsuits when they buy a product that they assume was made with any necessary patent licenses. It was motivated by a series of lawsuits that were brought against small business end users for activities such as having a WiFi hotspot, or using "scan to email" features on printers.

    The problem is the language used in the clause is overly broad. Complex technical products have long supply chains. It makes sense for patent owners to target the place in the supply chain that is most directly infringing the patent and that is profiting the most from the infringement.

For example, in some cases that "place" might be a device manufacturer; in other cases it might be a chip manufacturer. The customer stay clause would severely limit patent owners' ability to enforce their patents against the right party.

The clause is unnecessary because judges already have discretion to stay litigation against a consumer if the litigation should be against a manufacturer. And there are other ways (via the FTC, for example) to go after the unscrupulous players who target end users with abusive demand letters with no real knowledge of infringement and no intention of actually filing a lawsuit.

  • Limiting initial discovery to claim construction. Discovery in litigation can be very expensive. It is indeed a burden to produce all the documents that may be required. This provision at first sounds reasonable: since the first stage in a case of patent litigation is claim construction (determining what the patent actually protects) why not limit initial discovery to information relevant to claim construction?

    The problem is that there is very little discovery in the claim construction phase. Patent owners would not learn much in any case. It is very common in patent litigation that it is only during the course of discovery that patent owners learn about the true extent of infringement. There may be additional patents that are being infringed beyond what was originally known. There may be additional products that are infringing that were unknown prior to litigation.

    Limiting initial discovery means that such additional infringement would not be discovered until after claim construction, a process that can take many months. And once additional infringement was discovered after claim construction it would require the filing of additional lawsuits - placing an unnecessary burden on patent owners as they face both the cost of additional litigation, and the further delays in receiving the money they are entitled to.

    This clause is also unnecessary, because there are other ways to limit discovery and reduce the cost of litigation. Several courts have already adopted "model orders" whereby discovery is limited. This issue is better addressed by the courts - on a case by case basis - than by legislation.

  • Heightened pleading standards. This is another idea that sounds "reasonable" at first glance, but at least in the way it is phrased in the Innovation Act, turns out to be unreasonable.

    Right now a patent owner does not have to provide much information at all to initiate a lawsuit. Some unscrupulous firms have relied on the "asymmetry" in the cost of filing a suit versus the cost of defending a suit to extract "nuisance" settlements from defendants. One way to slow that down is to require patent owners to provide more details in their initial pleading (filing for a lawsuit).

    The problem is the way the clause is crafted in the Innovation Act would require patent owners to prove much of their case before filing a lawsuit - which is an impossibility, since as mentioned above, much of the case may only become known after discovery.

    It's one thing to require patent owners to state which products are thought to infringe which patents. But to require very specific pleading "unless the information is not reasonably accessible" is unreasonable, and will simply invite further litigation over whether a pleading included all the information that was "reasonably accessible."

    The additional pleading requirements would make it much more difficult for patent owners to uncover infringement that is not public knowledge.

We urge Congress not to pass "reasonable sounding" patent reform without thoroughly considering the real impact on patent owners and America's innovation infrastructure.

Harming the interests of the individual inventors and startup companies that are the true innovators could do irreparable harm to the American economy.

Image Attribution: By Bjoertvedt (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons