Patent reform legislation that is to be voted on by the House of Representatives this week is being rushed and has a number of problems that would need to be fixed by further legislation, believes David Kappos (right), partner at Cravath and former director of the USPTO
Bob Goodlatte introduced the Innovation Act, HR 3309, on October 22. The bill will be on the House floor for debate tomorrow December 5, with a vote to follow maybe even as early as the same day.
The bill’s fast progress through the House has alarmed observers, even those that support the bill’s aim of tackling abusive patent litigation.
“It is extremely fast,” Kappos told Managing IP. “As I’ve said in testimony, I think it is being rushed; however, that does not mean it is not good legislation. There is an issue with abusive patent litigation. This bill is designed to address that issue, which is good.”
Other observers have also expressed concern about the bill. The Innovation Alliance on December 2 released a statement saying that it opposes the bill because many of the provisions would unfairly advantage large companies that incorporate patented technology in their products and services over the interests of innovators.
Also on December 2, six representatives in a letter asked for the bill to be kept from the House floor, saying that members needed more time to have a fair opportunity to examine the bill. The letter was written by three Democrats and three Republicans, including John Conyers, ranking member of the Judiciary Committee, and Mel Watt, ranking member of the Judiciary Subcommittee on Intellectual Property.
Kappos says the bill if enacted would have negative consequences.
“More time is needed, although not years, to further refine the legislation so it is fair and balanced,” he said. “On the high level it is good. But it would be a mistake to rush it through. If we do, we will quickly need other legislation to fix the unintended consequences in it.”
Kappos pointed to the last minute amendment to the America Invents Act that changed joinder regulations as an example of the damage that can be done when changes are made hastily. “That provision, which was not carefully considered, studied or debated, is now seen as the cause of increase in patent litigation,” he said. “It is ironic that this provision became the basis for the narrative – which is a false narrative – that patent litigation as a result of trolls is out of hand.”
Kappos has a number of concerns with the Goodlatte (right) bill. He says provisions in the bill governing discovery sequencing, discovery cost shifting, and heightened pleading requirements would force judges into a “one-size-fits-all approach in managing their dockets”. Kappos believes guidance to courts should be more flexible than it is under the bill.
“We are completely in agreement that the close management of patent cases is important but I do feel these litigation procedures are too rigid and amount to micromanagement of courts,” he said. “In many cases it will cause litigation to cost more, not less, and lead to more court time, not less. That is what happens when you implement a rigid system,” he said.
Another concern Kappos identifies with the Goodlatte bill is with its covered stay provisions. Critics say the provisions to tackle this in the bill are much too broad because they apply to all entities throughout the supply chain. There is, however, support for tackling innocent parties being subject to patent litigation by trolls. A frequent example given is that of coffee shops receiving demand letters for using wifi that it is claimed infringes a patent.
“We all understand that is hostage taking,” says Kappos. “But the way that provision is written allows any two or more parties in the product making chain to collude on what one of them will be best advantaged to handle litigation. What would happen is when someone says a patent has been infringed, parties can agree to stay out of this litigation, move it to the party that is most difficult to get at, and make it more difficult for a patentee to pursue a claim. So the provision goes far beyond where it should be.”
Kappos said this would affect millions of indemnity clauses in commercial agreements, decrease the value of patents and harm inventors: “It needs to be fixed. We are going to break down hundreds of years of practice.”
The Innovation Alliance shares Kappos’s concerns and raised other problems it has with the Goodlatte bill. It says the heightened pleading and transparency in ownership requirements are not supportable in their present form. The alliance said the way they are drafted would place an extraordinary burden on patent holders while providing defendants far more information than they need to reveal the identity of the entity accusing them of infringement and the actions that constitute an infringement.
“Some degree of additional disclosure is clearly desirable, but these provisions appear to be written with the mindset that all infringement actions are brought for the purposes of harassment and therefore must be deterred,” said the Innovation Alliance.
The Alliance also believes that a party invoking post-grant review procedures should not be permitted to pursue piecemeal actions to invalidate a patent. It opposes the repeal of the “could have raised estoppel” standard included in the Goodlatte bill for this reason.
“The Innovation Alliance believes a consensus on measures to target abusive behavior in patent litigation is achievable, but HR 3309 unfortunately falls far below that standard, and we must oppose it,” said the alliance.
If the bill is passed by the House, attention will then turn to the Senate where Patrick Leahy has introduced parallel patent reform . His Patent Transparency and Improvement Act of 2013 is less complicated and does not include some of the more controversial elements of the Goodlatte bill. A hearing on the Leahy bill is scheduled later this month.
