New Patent Legislation Pending 2015

Congress, that is.  Several patent bills are pending, most of which will make it more risky and expensive to enforce a patent or defend against a patent infringement action in court.  These bills represent the second half of the America Invents Act, which changed the patent landscape in 2011.   The major House and Senate bills have substantial support in both parties and the President has stated that he will sign whatever patent bill Congress can pass.  The opposition is also organized this time, so there should be an actual debate.

Of course, the patent bills are not yet law and will not become law until passed by both the House and Senate and signed by the President.

The following are some of the major changes in the bills.

a.         The bills include ‘loser pays’ provisions that would substantially lower the standards for shifting attorney’s fees to the losing party in patent litigation.  Under the new bills, the loser would be liable for ALL of the winner’s attorney’s fees if the loser takes a litigation position or engages in conduct that is ‘not objectively reasonable.’  Under the bills, the stakes of patent litigation will become even higher.  The attorney’s fees provisions apparently apply to both infringement litigation and to declaratory judgment litigation by an infringer against a patent owner to determine whether a patent is valid.

Under current law, the loser in patent litigation can be tagged for the winning side’s attorney’s fees in ‘exceptional’ circumstances in the discretion of the trial judge when the loser engages in bad conduct or takes meritless litigation positions.  Recent Supreme Court decisions have made attorney’s fees in patent litigation more widely available; however, fee awards have been limited to the winner’s attorney’s fees caused by the loser’s bad behavior.  If the bills become law, the fees are not so limited and the risks of patent litigation are substantially increased.

b.         The bills would require heightened pleading standards to file a patent infringement lawsuit.  The pending bills would require that persons asserting patent rights identify specific patents, specific claims, specific product, and identify how the specific products infringe each of the elements of each claim.  This is a much higher pleading standard than is required in other litigation in the Federal courts.

For you lawyers, the bills would effectively change U.S. patent pleading in court from ‘notice pleading’ to ‘fact pleading.’

c.          Patent demand letters (‘cease and desist’ letters) will become effectively extinct if the bills become law.  The requirements for demand letters will be the same as for filing a lawsuit in Federal court.  Under one pending bill, failure to include all of the required information in a demand letter can invalidate the patent.  If the bills become law and you have a patent to enforce, the first things that you will do is to investigate the infringement and file a lawsuit in Federal court.  You will not breathe a word to the defendant before filing suit.  If you are infringing someone else’s patent, then the first notice that you will have is when the U.S. marshal knocks on your door and places a summons in your hand.

d.         The bills include a ‘customer stay.’  If the end user (the customer) uses an infringing product and is sued for patent infringement, the litigation against the customer can be stopped temporarily while other litigation against the manufacturer of the product continues, provided that both the customer and manufacturer agree.  Matters decided in the litigation against the manufacturer would then be binding on the customer.  Common issues (is the patent valid, does the product infringe the patent) need only be decided by a court once and not many times in separate lawsuits.

The ‘customer stay’ provisions have drawn a lot of sound and fury from commenters, arguing that the customer may be a tech giant and the manufacturer may be a mom-and-pop operation in China and outside the reach of the U.S. courts.  This author does not see the problem, since the tech giant customer can choose not to agree to a stay and because the stay can only occur if the manufacturer is available in U.S. court.

The bills include many other provisions, including provisions aimed specifically at companies that are in the business of owning and enforcing patents, commonly referred to as patent ‘trolls.’

In future newsletters we will take a closer look at the important parts of the new legislation as it moves through Congress.

— Robert Yarbrough, Esquire