As a new patent reform bill moves quickly on Capitol Hill, some legislators, patent lawyers and judges have warned it contains sweeping and sometimes unintended changes to the nation’s intellectual property landscape.
The 51-page legislation, called the Innovation Act, substantially expands the effort to stop patent litigation abuse by so-called “patent trolls.” The bill still contains broadly supported concepts to strengthen pleading requirements and limit costly discovery in patent infringement cases.
But some provisions delve into technicalities of the patent system and could make pharmaceutical and biotechnology patents more vulnerable to attack, or make some technology patents more difficult to enforce for larger companies such as 3M Co. or Microsoft Corp., intellectual property attorneys say.
Billions of dollars are at stake for some of the nation’s biggest companies. It could also change the playing field for small businesses and research universities, as well as judges handling the litigation.
“The scope of who is affected now reaches everybody, all patent owners, and anyone litigating in a patent suit,” said Andrew Baluch, a former legal advisor to the U.S. Patent and Trademark Office who is now special counsel to Foley & Lardner in Washington.
House Judiciary Committee Chairman Rep. Bob Goodlatte (R-Va.) has the political muscle to move his bill swiftly through the House legislative process. He held a committee hearing on the legislation on Oct. 29, just six days after he and a bipartisan group of congressmen introduced it and about two years after the overhaul of the patent system under the Leahy-Smith America Invents Act.
David Kappos, the former director of the U.S. Patent and Trademark Office, urged the committee to be careful with a bill that “writes on a page whose ink is barely dry.”
It takes many years between a new patent application and any court decision about its validity, Kappos told the committee at the hearing, and any overcorrection would pose a “major danger.”
“In such long-time constant situations, every engineering instinct and every leadership instinct tells me: Proceed with caution,” said Kappos, a partner in the New York office of Cravath, Swaine & Moore. “By the time an overcorrection is apparent, it will be years after the system is badly damaged.”
SEEKING END TO ‘FRIVOLOUS CLAIMS’
Goodlatte said his staff worked with both parties in the House and Senate, stakeholders in the business ­community, the Obama administration and the courts. He circulated two draft bills earlier this year. “The patent system was never intended to be a playground for litigation extortion and frivolous claims,” Goodlatte said at the hearing last week.
The bill has attracted attention from lobbyists, and is expected to have amendments before a full House vote, most likely next year. It would still have to win Senate approval.
The Electronic Frontier Foundation and large technology companies such as Yahoo! Inc. are supporting the reform effort. Yahoo’s deputy general counsel for intellectual property, Kevin Kramer, testified for the bill at the Oct. 29 hearing.
The Internet Association, lobbying on behalf of members that include eBay Inc. and Amazon.com Inc., says “nonpracticing entities” and “patent assertion entities” cost the U.S. economy $320 billion over the last four years.
Many patent litigators will support the bill, said Blair Jacobs, a McDermott Will & Emery partner in Washington who leads the local intellectual property litigation group. “I think the great majority of litigators want a more predictable, more clean system so they can give better advice to their clients about chances of success,” Jacobs said.
The bill would “go a long way toward more information, and more information allows people to better assess risk and that is very important to litigators,” Jacobs said.
Not everyone thinks the bill would work as intended. Judge Paul Michel, who retired from the U.S. Court of Appeals for the Federal Circuit in 2010, called for more narrowly tailored legislation and more input from judges. He criticized the fee-shifting provisions that call for the loser to pay for the high-cost patent fights, as well as the new rules about discovery and pleadings.
“Patent suits already have too many issues, too many motions, too much cost and delay,” Michel testified before the House Judiciary Committee. “The bill, as written, would further increase all these ills. And it would do so without actually helping those defendants wrongly accused of infringement.”
Democrats on the judiciary committee expressed concerns about some provisions and introduced their own bill. Rep. John Conyers (D-Mich.), lead Democrat on the committee, said he did not understand why Goodlatte’s legislation addresses fee-shifting now. The U.S. Supreme Court recently agreed to take up a case on that issue.
Conyers criticized what he called a special carve-out in the bill for the pharmaceutical industry. “The last thing we need to do is create two systems of patent law­­ — one for pharmaceuticals and one for everybody else,” he said.
There are other sleeper legal issues that could arise because of how the bill is worded. A university patent owner could potentially be responsible for having to pay the defendant’s legal fees under one provision, Baluch said. And another provision, he said, is written in a way that would make states immune from patent infringement suits.
“It could be intentional or might be a mistake,” Baluch said. “It begs the question, what other things are in here?”
Contact Todd Ruger at firstname.lastname@example.org.