On April 2, 2009, the Senate Judiciary Committee approved patent reform legislation (S. 515 ) aimed at both improving the quality of patents issued by the United States Patent & Trademark Office ("PTO") and increasing certainty among parties in patent litigation. After more than 50 years without significant reform to the patent system, Senator Patrick Leahy (D-Vt.) emphasized the importance of updating patent legislation in light of 21st century realities. In introducing the 2009 Patent Reform Bill, Senator Leahy stated earlier today, "[n]o longer is the economy defined only by assembly lines and brick-and-mortar production. We are living in the Information Age, and the products and processes that are being patented are changing as quickly as the times themselves." A precursor to today's legislation, the Patent Reform Act of 2007, passed in the U.S. House of Representatives, only to die in the Senate due to disagreements over damages and other provisions.
The 2009 Patent Reform Bill includes numerous changes relating to PTO procedure (priority, oaths and publication), invalidity (best mode), venue (forum shopping), claim construction (interlocutory appeals), damages, willful infringement, and reexamination. With respect to changes in legislation affecting PTO practice, the bill conforms with practices in all other patent-issuing countries by giving priority to the first true inventor to file an application with the PTO rather than the first to invent (the system currently in place in the United States). This reform will eliminate interference proceedings needed to determine priority, which are fact-specific and costly, and will replace them with a faster and less expensive derivation proceeding. The bill also makes it easier for patent owners to file a patent application, allowing an applicant to submit a substitute statement instead of an inventor's oath in certain circumstances and also allowing an assignee to file a patent application. The bill also strikes the 18-month publication requirement after small inventors not seeking overseas protection raised concerns that their inventions would be used without compensation.
With respect to invalidity, the bill maintains the best mode requirement of Section 112. However, no longer will a patent be invalidated merely for failing to disclose the "best mode" (a term reflecting the idea that the inventor must disclose his preferred embodiment or way to practice his invention), potentially removing this Section 112 argument in future patent litigation.
With respect to venue, the bill essentially codifies In re TS Tech USA Corp., amending the current patent venue statute, 28 U.S.C. § 1400(b). With this amendment, venue in all patent infringement cases will be proper only where either the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Under current venue statutes, patent infringement plaintiffs are able to more liberally pick and choose the state and location where they will file suit.
Typically, appeals of decisions in cases must wait for a final verdict. However, the bill that passed the Senate provides for interlocutory appeals in patent litigation cases, due to the importance of settling claim term disputes (what the patent actually covers). The new bill requires the Federal Circuit Court of Appeals, which hears all patent cases, to accept all interlocutory, i.e., non-final appeals of claims construction, (the so-called "Markman" rulings, which occur preliminary to the actual patent litigation trial) when so certified by the district court.
The newly proposed damages legislation addresses situations in which a patent holder seeks a "reasonable royalty" as damages. The bill maintains that a damages award shall not be less than a "reasonable royalty," as opposed to the earlier proposed "total market value," but requires much more input from the court. For example, the court must conduct an analysis to make sure the royalty amount is appropriate when considering the value of the patent over the prior art. In doing so, the court must identify and properly record the factors considered.
With respect to willful infringement, the bill codifies the Federal Circuit's recent In re Seagate decision, reversing the previous standard to prove willfulness, requiring defendants in patent litigation to prove willful infringement with the higher clear and convincing evidence standard. The aim of requiring the higher standard is to reduce unwarranted claims of willfulness and related discovery.
The bill adopts the House's approach to the current inter partes reexamination procedures by improving current administrative reexamination procedures rather than creating a new second window post-grant review. The bill expands the evidence that can be cited to the PTO to include written statements of the patent owner regarding the scope of the claims and also evidence that the claimed invention was in public use or on sale in the United States for more than one year prior to the application. Additionally, in an inter partes reexamination, the requester is now permitted to file written comments, and is also stopped from asserting the invalidity of any claim determined to be valid on any ground raised during reexamination.
The new bill also strikes various provisions previously proposed by Congress, including codifying the inequitable conduct doctrine; changing the marking requirement from six to two years; giving the PTO authority to waive applicant deadlines (late filings provision); immunizing companies practicing the industry standard established as a result of the Check 21 Act of 2003 from patent infringement suit; requiring applicants to submit their own search data, rather than have PTO examiners perform the search; and creating a revolving fund that permits the PTO to retain automatically the fees it collects (fee diversions).
Below you will find a brief summary of the most significant reforms found in the bill:
- Damages ("Gatekeeper Provision"): Requires the court to identify the factors that will be considered in determining a reasonable royalty, ensuring that the record is clear on what considerations the judge or jury assessed in awarding damages. Second, the court must also consider any non-exclusive marketplace licensing of the invention, if there is such a history, in determining a reasonable royalty. Finally, the court is instructed to consider any other relevant factor that is included to ensure that the significant body of judge-made law on the topic of damages awards in infringement cases is preserved to the extent not affected by the provision.
- First-to-Invent: Changes priority to the first-inventor-to-file system, as opposed to the current first-to-invent system, giving priority to the earlier-filed application for a claimed invention.
- Inventor's Oath: Permits a substitute statement in lieu of the inventor's oath or declaration in certain circumstances, including if the inventor is (i) unable to do so, or (ii) unwilling to do so and is under an obligation to assign the invention.
- Best Mode: Maintains the best mode requirement, but eliminates invalidation of a patent for failing to disclose best mode.
- Publication: Removes the requirement that all patent applications be published 18 months after filing.
- Venue: Essentially codifies In re TS Tech USA Corp. and inserts language preventing forum shopping by forbidding the manufacture of venue through assignment, incorporation or other acts invoking venue.
- Claim Construction: Amends jurisdiction provision to require the Federal Circuit to accept all interlocutory appeals of claim construction, i.e., Markman orders when certified by the district court.
- Willful Infringement: Codifies the Federal Circuit's recent In re Seagate decision, requiring a plaintiff to demonstrate with clear and convincing evidence that the infringer acted in a manner that was objectively reckless, which is also subject to a good faith defense.
- Reexamination: Expands inter partes reexamination, adds prior "public use or sale in the United States" as a basis for challenging a patent and ensures that ex parte reexamination proceedings are maintained.
For more information on this alert, please contact Harley Blosser (314.259.5806 or hblosser@sonnenschein.com), Yar Chaikovsky (650.798.0330 or ychaikovsky@sonnenschein.com) or Mark Nelson (214.259.0901 or mcnelson@sonnenschein.com).
Client alert material compiled and written by Jennifer Bennett
These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from this document without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so.
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