Patent Progress’s Guide to Patent Reform Legislation

There are now fourteen bills that have been introduced this Congress to deal with some aspect of the patent troll issue. We thought it might be helpful to give you a quick rundown of each of the currently pending bills:

There are a few basic areas that are being addressed:

  • making the Covered Business Method review program available to more industries to allow them to deal with existing bad patents patent trolls often assert

  • curbing abusive litigation tactics patent trolls use

  • protecting end-users

  • adding transparency to get at who is really supplying patent trolls with patents and with funding

I’ll go through them individually below.

What Happens Next

Patents come under the purview of the Judiciary Committees in the House and Senate. Rep. Goodlatte (R-VA) introduced his bill, the Innovation Act, in the House on October 23, 2013, and Sen. Leahy (D-VT) introduced his bill in the Senate on November 18, 2013.

The first hearing on the Innovation Act was on October 29, 2013. Markup of the Innovation Act was on November 20, 2013, using the Manager’s Amendment as a starting point. The House Judiciary Committee reported the bill favorably (as amended) by a vote of 33-5. The Innovation Act passed the House of Representatives on December 5, 2013, by a 325-91 vote.

The Senate held a hearing on December 17, 2013. The Senate held staff briefings at the end of January. After numerous delays, Senator Leahy pulled patent reform from the Judiciary Committee agenda. This makes it unlikely that comprehensive patent reform will pass this Congress.

Innovation Act (H.R. 3309)

This bill passed the House of Representatives on December 5, 2013, by a 325-91 vote.

Rep. Goodlatte released this bill on October 23, 2013 after releasing two discussion drafts, the most recent of which was on September 23. The bill addresses every area of reform that’s being considered. It raises the pleading requirements for the complaint in patent infringement cases. The complaint is supposed to tell the defendant what it is accused of, but there’s a quirk that allows patent infringement complaints to be quite vague. The bill requires the identification of patent claims asserted, with details about the accused methods or acts, the principal business of the party alleging infringement, and the real parties of interest. Like the Patent Abuse Reduction Act, the bill also makes it possible to add any real party in interest to the litigation.  This would matter in the case where a patent troll technically owns the patent, but a large percentage of the income goes to a larger company; the larger company could be brought into the suit under the bill.

The bill also addresses the cost of discovery in patent cases, which run into the millions of dollars. The bill defines “core documentary evidence,” which the producing party pays for. For any other discovery, if you request it, you pay for it. The bill would also put discovery mostly on hold until claim construction is complete.

The bill includes a cost and fee-shifting provision. Unlike the SHIELD Act, this fee-shifting can go either way, and no bond is required, unlike the Patent Litigation Integrity Act. There are exceptions if the loser’s positions were “objectively reasonable and substantially justified” or if it would be unjust to award fees.

The bill also adds protections for end users. The intent of the bill is to allow a manufacturer to step in and essentially take over the case. The end user’s case would be completely on hold until the case against the manufacturer is resolved.

The bill had a provision to protect the current scope of the Covered Business Method review program. That provision was removed by the Manager’s Amendment.

The Innovation Act was co-sponsored by Reps. DeFazio (D-OR), Coble (R-NC), Lofgren (D-CA), Smith (R-TX), Eshoo (D-CA), Chaffetz (R-UT), Bachus (R-AL), Marino (R-PA), Farenthold (R-TX), and Holding (R-NC).

The Innovation Act was approved by the House Judiciary Committee by a 33-5 vote on November 20, 2013. It was passed by the House of Representatives on December 5, 2013 by a 325-91 vote.

Patent Transparency and Improvements Act (S. 1720)

Sen. Leahy (D-VT) introduced this bill on November 18, 2013. The bill focuses on end user protection, demand letters, and transparency of patent ownership. Sen. Leahy’s office worked with Rep. Goodlatte’s office, so many of the provisions are similar to provisions in the Innovation Act.

The end-user protections are not quite the same as in the Innovation Act, but Rep. Goodlatte has committed to amend his bill to use Sen. Leahy’s provision verbatim.

The transparency provisions are similar to those in the Innovation Act, although we’re still digging in to identify the differences in language.

Sen. Leahy’s bill also adds a provision to deal with demand letters that are sent in bad faith, giving the FTC the power to take action against patent trolls who send them.

This bill was co-sponsored by Sens. Lee (R-UT), Whitehouse (D-RI), and Klobuchar (D-MN).

NB: The Senate process has been quite different than in the House. Sen. Leahy never intended to introduce one comprehensive bill; the plan was to divide up reform, with different Senators taking different pieces. So the fact that this bill doesn’t make Covered Business Method review more widely available or address specific litigation abuses is no surprise.

Senator Leahy pulled patent reform from the Judiciary Committee agenda, so this bill is no longer being considered.

Patent Quality Improvement Act (S. 866)

Senator Schumer (D-NY) introduced this bill at the beginning of May. It would make the Covered Business Method review program available to all industries, and make the program permanent. I’ve written about the importance of CBM review before.

Senator Leahy pulled patent reform from the Judiciary Committee agenda, so this bill is no longer being considered.

Patent Abuse Reduction Act (S. 1013)

Sen. Cornyn (R-TX) introduced this bill towards the end of May. The bill contains a number of provisions to deal with patent troll litigation. It raises the pleading requirements for the complaint in patent infringement cases. The complaint is supposed to tell the defendant what it is accused of, but there’s a quirk that allows patent infringement complaints to be quite vague. The Patent Abuse Reduction Act requires the identification of patent claims asserted, with details about the accused methods or acts, the principal business of the party alleging infringement, and the real parties of interest.  S. 1013 also makes it possible to add any real party in interest to the litigation.  This would matter in the case where a patent troll technically owns the patent, but a large percentage of the income goes to a larger company; the larger company could be brought into the suit under Sen. Cornyn’s bill.

The bill also addresses the cost of discovery in patent cases, which run into the millions of dollars.  The bill defines “core documentary evidence,” which the producing party pays for. For any other discovery, if you request it, you pay for it. The bill would also put discovery mostly on hold until claim construction is complete.

Finally, the bill includes a cost and fee-shifting provision. Unlike the SHIELD Act, this fee-shifting can go either way, and no bond is required. There are exceptions if the loser’s positions were “objectively reasonable and substantially justified” or if it would be unjust to award fees.

Negotiations are continuing to incorporate features of this bill into the Patent Transparency and Improvements Act.

Sen. Grassley (R-IA) has co-sponsored this bill.

Senator Leahy pulled patent reform from the Judiciary Committee agenda, so this bill is no longer being considered.

Patent Litigation Integrity Act (S. 1612)

Sen. Hatch (R-UT) introduced this bill on October 30, 2013. The bill is a variation of the fee-shifting provision that appears in the Patent Abuse Reduction Act; unlike the PARA, the Patent Litigation Integrity Act requires the patent owner to post a bond against fees (with exceptions, including for companies that develop products for the patent or license the patent to a company that develops products).

Senator Leahy pulled patent reform from the Judiciary Committee agenda, so this bill is no longer being considered.

Transparency in Assertion of Patents Act (S. 2049)

Sens. McCaskill (D-MO) and Rockefeller (D-WV) introduced this bill on Feb. 26, 2014. This bill sets minimum requirements for a notice of patent infringement and authorizes the Federal Trade Commission to enforce those requirements. Because this bill is in the Senate Commerce Committee, not the Judiciary Committee, this bill may be considered separately from the other patent reform bills.

Patent Fee Integrity Act (S. 2146)

Sen. Feinstein (D-CA) introduced this bill on March 13, 2014. This bill would allow the USPTO to keep all of the fees it collects for its own use.

Trade Protection Not Troll Protection Act (H.R. 4763)

Reps. Cardenas (D-CA) and Farenthold (R-TX) introduced this bill on May 28, 2014. This bill would modify the rules at the International Trade Commission to make it more difficult for patent trolls to use the ITC. Licensing could no longer be used to establish a “domestic industry” unless it “leads to the adoption and development of articles” that use the patent. Also, if a complainant relies on licensing for its domestic industry, the ITC can’t initiate an investigation (this is the ITC’s term for starting a lawsuit) until it examines the potential domestic industry. The ITC would also be required to considered whether the patent owner or its licensees could meet the consumer demand for any excluded articles.

The bill is currently being considered by the House Ways and Means Committee.

Demand Letter Transparency Act (H.R. 3540)

Rep. Polis (D-CO) introduced this bill on November 19, 2013. The bill creates a national database of demand letters that patent trolls must submit their letters to (assuming they send more than 20) and also creates minimum content requirements for a demand letter.

The Demand Letter Transparency Act was originally co-sponsored by Reps. Marino (R-PA) and Deutch (D-FL).

Innovation Protection Act (H.R. 3349)

Rep. Conyers (D-MI) introduced this bill on October 28, 2013. It’s basic purpose is to end fee diversion from the US Patent & Trademark Office. The USPTO collects more than enough in fees to cover its expenses, but Congress takes some of those fees for other uses. The Innovation Protection Act would essentially end that practice.

The Innovation Protection Act was originally co-sponsored by Reps. Watt (D-NC) and Collins (R-GA). The other co-sponsors are Reps. Issa (R-CA), Deutch (D-FL), DelBene (D-WA), Franks (R-AZ), Marino (R-PA), Polis (D-CO), Chabot (R-OH), Jeffries (D-NY), Richmond (D-LA), and Jackson Lee (D-TX).

This bill is unlikely to move this Congress.

Patent Litigation and Innovation Act (H.R. 2639)

Reps. Farenthold (R-TX) and Jeffries (D-NY) introduced this bill at the beginning of July. Like the Patent Abuse Reduction Act, it contains provisions to address abusive patent troll litigation.

The bill has similar pleading, joinder, and discovery provisions to the Patent Abuse Reduction Act.

The Patent Litigation and Innovation Act also adds protections for end users. The intent of the bill is to allow a manufacturer to step in and essentially take over the case. The end user’s case would be completely on hold until the case against the manufacturer is resolved.

Instead of fee-shifting, H.R. 2639 increases the possibility of sanctions in patent suits. At the end of the case, the judge would review the conduct of both sides to determine if they complied with their obligations to file documents with the court that are not frivolous.

Many of the provisions in this bill were incorporated into the Innovation Act, and Rep. Farenthold was an original co-sponsor of the Innovation Act. This bill is not currently being considered by the House Judiciary Committee.

SHIELD Act (H.R. 845)

The Saving High-Tech Innovators From Egregious Legal Disputes (SHIELD) Act was the first bill introduced. It was introduced by Reps. DeFazio (D-OR) and Chaffetz (R-UT) in 2012 and then reintroduced in a modified form in the new Congress in February of this year. The bill focuses on litigation. Specifically, it would force patent trolls to post a bond to cover defendants’ legal fees and costs. The idea is to change the risk formula so that patent trolls are putting more on the line when they sue.

The SHIELD Act has several co-sponsors: Reps. Bentivolio (R-MI), Walberg (R-MI), and Welch (D-VT).

The original co-sponsors, Reps. DeFazio and Chaffetz, were also original co-sponsors of the Innovation Act, so this bill is not currently being considered by the House Judiciary Committee.

This bill is no longer being considered.

Stopping the Offensive Use of Patents Act (STOP Act) (H.R. 2766)

Reps. Issa (R-CA) and Chu (D-CA) introduced this bill in the middle of July. The main provision of the STOP Act is nearly identical to the Patent Quality Improvement Act, and makes the Covered Business Method review program available to all industries. Like the PQIA, the STOP Act also makes the CBM program permanent.

This bill is no longer being considered.

End Anonymous Patents Act (H.R. 2024)

Rep. Deutch (D-FL) introduced this bill in the middle of May. The bill focuses on transparency, and would force patent owners, as well as other real parties in interest, to reveal themselves. These transparency provisions were partly incorporated into the Innovation Act. This bill is not currently being considered by the House Judiciary Committee.