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Opinion divided over US PATENT Act

The introduction of the PATENT Act in the Senate received praise, but pro-patent groups expressed concerns about some of its provisions and disappointment that it includes no changes to IPR proceedings. Michael Loney canvasses opinion ahead of a hearing on Thursday

Chuck GrassleySenate Judiciary Committee Chairman Chuck Grassley and Ranking Member Patrick Leahy introduced the PATENT Act on April 29. It is companion legislation to the Innovation Act introduced in the House of Representatives by Representative Bob Goodlatte in February.

The PATENT Act’s provisions include a clarification of pleading standards, protections for end uses, limits on early discovery, a process to recover fees, requirements that demand letters contain more information, and increases to the amount of information the USPTO to keep more information about patent ownership.

The fee shifting provision is less strict than the one in the Innovation Act. However, Goodlatte, who is House Judiciary Committee Chairman, said in a statement that he was encouraged by the introduction of the PATENT Act: “While differences remain between the Innovation Act, which I introduced in the House earlier this year, and the Senate bill, I look forward to working with my colleagues to enact strong, meaningful reforms to curb patent litigation abuses.”

A long list of companies and individuals have expressed support for the Innovation Act. But trade groups that are more pro-patent do not support it.

A Senate hearing is scheduled for Thursday for members to raise concerns about the PATENT Act. In the meantime, trade groups and companies have been giving their feedback.

Showing support

Thumbs upThe Electronic Frontier Foundation said it was “excited to see the Senate introduce legislation that touches many aspects of the broken patent system”.

Gary Shapiro, president and CEO, Consumer Electronics Association (CEA), said that the “bipartisan, common-sense bill will close legal loopholes used by those who abuse our patent system”. He urged the Senate to move forward with the PATENT Act as soon as possible.

“It will stop the legalised extortion of American innovators by patent trolls – individuals or companies that do not manufacture products or supply services, but exist solely to demand payments, threaten litigation and file frivolous lawsuits against those who do,” said Shapiro. “And it will make life easier for legitimate American businesses - especially small businesses, the most frequent targets of patent trolls.”

Some companies also welcomed the bill. Christopher Padilla, vice-president of IBM Government and Regulatory Affairs, in a statement urged the Senate Judiciary Committee “to swiftly move forward with this consensus, bi-partisan legislation”.

And Cisco general counsel Mark Chandler said in a blog post that the legislation was “a significant step forward”. He added: “It has strong fee-shifting provisions, makes important discovery reforms, and protects users of technologies from abusive demand letters.”

A substantial improvement

Others welcomed the bill but still had concerns. The Association of American Universities, a coalition of six universities, said the bill was a “substantial improvement” over the Innovation Act. It was encouraged by the non-presumptive fee shifting standard.

The National Venture Capital Association (NVCA) also welcomed the introduction of the PATENT Act. “While we remain concerned that the Innovation Act of 2015 introduced in the House could be harmful to the entrepreneurial ecosystem, the PATENT Act is an encouraging step in the right direction and we are eager to dig in and review the details with our membership,” said Bobby Franklin, president and CEO of NVCA, in a statement.

“The worst thing we could do would be to pass a bill that tips the balance of power in patent enforcement cases in favour of larger incumbents.”

He added: “The worst thing we could do would be to pass a bill that tips the balance of power in patent enforcement cases in favour of larger incumbents.”

Others also noted improvement but still were not sold. The Biotechnology Industry Organization (BIO) said in a statement the PATENT Act addresses some of the concerns that have been raised with respect to the Innovation Act.

“The PATENT Act is clearly a positive step towards building greater consensus among patent stakeholders on ways to target abusive litigation tactics,” said the organisation. “In particular, the Committee’s revisions with respect to pleading requirements, discovery stays, and mechanisms for fee recovery against shell companies reflect noticeable improvements over HR 9.”

BIO said it will continue to engage in a dialogue with the Committee and other stakeholders on these and other provisions to further improve this bill as it moves forward in the legislative process.

“We note with disappointment that the bill introduced today does not contain any of the critically needed reforms to prevent the continued exploitation and abuse of the PTO’s inter partes review (IPR) proceeding against patent owners … But any patent bill reported by the Senate Judiciary Committee that does not meaningfully reform the IPR system would lack a sense of balance and thus would be opposed by BIO.”

Strongly opposed

Thumbs downThe Innovation Alliance strongly opposed the PATENT Act. Its members include Qualcomm, InterDigital and Dolby Laboratories.

“While this bill incorporates some welcome improvements over earlier versions, we must oppose its adoption as introduced,” said Innovation Alliance Executive Director Brian Pomper in a statement. “Passage of this act would cripple the ability of legitimate US patent owners to protect their ideas from infringers, both in the United States and overseas.”

Pomper said the bill would make it harder to enforce US patents, and would embolden competitors in China and elsewhere.

“Unfortunately, the ‘customer stay’ language in the PATENT Act appears to be identical to the prior version circulated last year. While the Committee’s summary says that the ‘customer stay is available only to those at the end of the supply chain’ – a limitation we would wholeheartedly support – the language is actually far broader in scope. Congress must ensure that any ‘customer stay’ provision does not effectively immunize from liability large companies that use infringing technology and leave patent owners without redress for infringement by foreign manufacturers outside the jurisdiction of US courts.”

The Alliance said the bill also singles out companies for discriminatory treatment, as well as lacking any changes to IPR proceedings at the USPTO.

“While we strongly support targeted measures to stop abusive behaviors, we fear the provisions of the PATENT Act, taken together, would tilt the playing field against our country’s most innovative enterprises, including individual inventors, start-ups, universities, and research and development-based technology companies,” said Pomper.

He added that the STRONG Patents Act introduced in the Senate and the TROL Act being considered in the House Energy and Commerce Committee both offer targeted approaches to addressing abusive behavior and strengthening the patent system that the Innovation Alliance supports.

The Pharmaceutical Research and Manufacturers of America (PhRMA) also raised concerns with the PATENT Act.

“While the Senate legislation is an improvement over the House version, there continue to be issues of concern that intellectual property holders have raised, and we look forward to working with Senators to address those concerns,” said Robert Zirkelbach, senior vice-president at PhRMA in a statement.

“In addition, the legislation as introduced unfortunately contains no provisions to address significant shortcomings in the implementation of the post-grant proceedings at the Patent and Trademark Office (PTO), which have directly led to abusive practices. We appreciate the commitment the Senators have made to address this critical issue in the pending legislation and look forward to working with them to improve this process. The pro-challenger bias exhibited through these proceedings has come to be known as a ‘death squad’ for legitimate patents and patent holders. Ultimately, PhRMA would have to oppose patent legislation that does not include changes to more fairly balance post-grant proceedings at the PTO.”

PhRMA said it supports targeted efforts to curb abusive patent litigation.

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