Permit Practice Test - Guide to Current Patent Reform Legislation
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Legislation that would dramatically overhaul U.S. Patent law appears to be on a fast track in Congress, with Senators Patrick Leahy (D-Vermont) and Orrin Hatch (R-Utah) foremost the charge.
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But legal and business groups are looking themselves at odds over the legislation, with some saying it would reduce patent litigation costs and improve patent capability while others say it would do just the opposite. Everyone, it seems, can find parts of the measure to love and others to hate.
In April, selfsame bills were filed in the Senate and House, each titled the Patent Reform Act of 2007. In the Senate, Leahy and Hatch introduced S. 1145, while in the House Representatives Howard Berman (D-California) and Lamar Smith (R-Texas) introduced H.R. 1908.
On May 16th, a House subcommittee beloved the bill for supplementary review by the full Judiciary Committee, which held hearings on it in June. The committee released a revised version of the bill June 21st.
In an exertion to help make sense of this legislation, we offer this guide to its key provisions, together with summaries of the arguments being raised for and against.
Convert U.S. To First-To-File
What it would do: In what would be a basic shift in U.S. Patent law, the bill would bring the United States into conformity with the rest of the world by converting it from a first-to-invent to a first-inventor-to-file system.
Arguments for: Proponents assert this would simplify the patent process, reduce legal costs, improve fairness, and improve the occasion to make strengthen toward a more harmonized international patent system. A first-to-file system, they say, provides a fixed and easy-to-determine date of priority of invention. This, in turn, would effect in greater legal certainty within innovative industries.
Proponents also believe that this convert would decrease the complexity, length, and charge related with current Uspto interference proceedings. Rather than tie up inventors in lengthy proceedings seeking to prove dates of inventive performance that may have occurred many years earlier, inventors could continue to focus on inventing.
Finally, because this convert would bring the U.S. Into harmony with the patent laws of other countries, it would enable U.S. Associates to construct and manage their portfolios in a consistent manner.
Proponents include: Biotechnology industry.
Arguments against: Opponents argue that adoption of a first-to-file ideas could promote a rush to the Uspto with premature and hastily prepared disclosure information, resulting in a decline in quality. Also, because many independent inventors and small entities lack sufficient resources and expertise, they would be unlikely to prevail in a "race to the patent office" against large, well-endowed entities.
Opponents include: The Uspto opposes immediate conversion to a first-to-file system, in part because this remains a bargaining point in its ongoing harmonization discussions with foreign patent offices. Inventors also oppose this.
Apportionment Of Damages
What it would do: The bill would significantly convert the apportionment of damages in patent cases. Under current law, a patentee is entitled to damages sufficient to compensate for infringement but in no event less than a cheap royalty. Section 5(a) of the bill would require a court to ensure that a cheap royalty is applied only to the economic value attributed to the patented invention, as considerable from the economic value attributable to other features added by the infringer.
The bill also provides that in order for the entire-market rule to apply, the patentee must construct that the patent's exact revising is the notable basis for shop demand.
Arguments for: Proponents say this measure is significant to limit inordinate royalty awards and bring them back in line with historical patent law and economic reality. By requiring the court to resolve as a initial matter the "economic value properly attributable to the patent's exact contribution over the prior art," the bill would ensure that only the infringer's gain attributable to the claimed invention's contribution over the prior art will be field to a cheap royalty. The measure of that gain due to the patent possessor in the form of a cheap royalty can then be determined by reference to other relevant factors.
Complex products, the proponents contend, often rely on a number of features or processes, many of which may be unpatented. Even where the patented component is insignificant as compared to unpatented features, patentees base their damage calculations on the value of an whole end product. This standard defies tasteless sense, distorts incentives, and encourages frivolous litigation.
Further, courts in modern years have applied the entire-market-value rule in entirely different situations, leaving the likely measure of damages applicable in any given case open to anyone's guess.
Proponents include: Large technology Associates and the financial services industry.
Arguments against: Opponents argue that Congress should not exertion to codify or prioritize the factors that a court may apply when determining cheap royalty rates. The so-called Georgia-Pacific factors contribute courts with sufficient advice to resolve cheap royalty rates. The number of a cheap royalty should turn on the facts of each particular case.
Although intended to guard against allegedly inflated damage awards, this mandatory apportionment test would laid out a dramatic departure from the market-based ideas that currently govern damages calculations, opponents say. Even worse, it would effect in unpredictable and artificially low damages awards for the majority of patents, no matter how inherently significant they might be.
Opponents supplementary argue that this convert would undermine existing licenses and encourage an increase in litigation. Existing and potential licensees would see dinky downside to "rolling the dice" in court before taking a license. Once in court, this measure would lengthen the damages phase of trials, supplementary adding to the expected cost of patent litigation and delays in the judicial system.
Opponents include: The Uspto, Federal Circuit Court of Appeals Chief Judge Paul Michel, the biotechnology industry, smaller technology companies, patent-holding companies, medical gismo manufacturers, university technology managers, the NanoBusiness Alliance and the pro Inventors Alliance.
Willful Infringement
What it would do: Section 5(a) of the bill would limit a court's authority to award enhanced damages for willful infringement. It would statutorily limit increased damages to instances of willful infringement, require a showing that the infringer intentionally copied the patented invention, require observation of infringement to be sufficiently exact so as to reduce the use of form letters, construct a good faith confidence defense, require that determinations of willfulness be made after a looking of infringement, and require that determinations of willfulness be made by the judge, not the jury.
Arguments for: Proponents say that willfulness claims are raised too often in patent litigation - practically as a matter of course, given their relative ease of proof and potential for windfall damages. For defendants, this raises the cost of litigation and their potential exposure.
A codified standard with fair and meaningful observation provisions would restore balance to the system, proponents say, reserving the treble penalty to those who were truly intentional in their willfulness and ending unfair windfalls for mere knowledge of a patent.
Further, tightening the requirements for looking willful infringement would encourage innovative review of existing patents, something the current standard discourages for fear of helping to construct willfulness.
Proponents include: Large technology companies, the financial services industry, and the biotechnology industry.
Arguments against: Opponents argue that willfulness is already difficult to construct under existing law. The supplementary requirements, limitations, and conditions set forth in the bill would significantly reduce the capability of a patentee to collect treble damages when willful conduct beyond doubt occurs. The possibility of treble damages under current law is an foremost inhibitive to patent infringement that should be retained as is.
Opponents include: The Uspto, the pro Inventors Alliance.
Interlocutory Appeals
What it would do: Section 10(b) of the bill would permit an interlocutory motion to the Federal Circuit Court of Appeals after a Markman hearing on claim construction, rather than waiting for a final judgment from the district court.
Arguments for: Proponents say these appeals would reduce the length and cost of litigation. Claim construction, they argue, is a basic predicate that goes to the heart of any patent infringement case. Until a claim is construed, it is impossible to construct whether infringement occurred and whether the patent is invalid. This process also serves to narrow discovery and motion custom and related expenses.
Proponents assert that an interlocutory motion would help to mitigate the judicial inefficiency that occurs when a full trial is conducted based on an incorrect interpretation of the patent, only to be reversed on motion and sent back for a second trial. More than a third of all Markman rulings are overturned on appeal, meaning that many litigants end up paying the attorney fees and expenses for two trials.
Proponents include: Large technology Associates and the financial services industry.
Arguments against: Opponents say interlocutory appeals from Markman hearings would increase litigation and court congestion and offer "another bite at the apple" because the reversal rate for claim construction is fairly high. The net result, they say, will be to significantly delay final judgments from the lower court, significantly delay potential settlements, and significantly increase litigations costs.
Opponents argue that the Federal Circuit would not be able to cope expeditiously the large numbers of Markman appeals, meaning that resolution of the basic district court cases would be delayed for years.
If this provision is enacted, opponents say, it would effect in an interlocutory motion in virtually every patent infringement case as soon as a Markman order is issued. One study estimates this would double the number of appeals each year.
Opponents include: The Uspto, Federal Circuit Chief Judge Michel, the biotechnology industry, smaller technology companies, and smaller patent-holding companies.
Post-Grant Review
What it would do: The bill would strengthen the capability of third parties to challenge a patent after its issuance. In particular, it would allow any man to oppose a patent within 12 months after it is granted. More controversially, it would allow a challenge at any time if the petitioner "establishes a substantial intuit to believe that the prolonged existence of the challenged claim in the motion causes or is likely to cause the petitioner significant economic harm."
A newly designated Patent Trial and motion Board would be responsible for conducting the post-grant reviews. The presumption of validity that applies to patents while litigation would not apply to these post-grant review proceedings. Instead, a "preponderance of the evidence" standard would apply.
Arguments for: Proponents say these post-grant review procedures would be an revising over existing reexamination procedures because they would allow observation of evidence gleaned through depositions and interrogatories as well as from patents and other documents. Also, proceedings would be overseen by an menagerial law judge rather than a patent examiner. These changes would allow for more meaningful review and that, in turn, would lead to best patent capability overall.
The so-called second window - the capability to challenge at any time - is necessary, proponents say, to allow for a meaningful and broadly available reevaluation of intuit patent claims before a firm is forced into prolonged and high-priced litigation.
Proponents include: Large technology Associates and the financial services industry.
Arguments against: While reexamination is an foremost component of the patent system, it must be structured in a manner that preserves the value and enforceability of the majority of patents, opponents say. This convert would originate an essentially limitless occasion to challenge a patent at any time while its life. This would be a dramatic departure from the norm and cast a cloud of uncertainty over issued patents. If a patent can beyond doubt be challenged at any time under a low standard of proof, patents will have much less value and speculation predicated upon them will inevitably be diminished. This, in turn, will likely effect in less innovation.
Additionally, the resulting surge in complex, post-grant review proceedings would supplementary strain an already overburdened and under-funded Uspto, thereby jeopardizing the agency's capability to improve pre-grant patent quality.
Opponents include: The Uspto, the biotechnology industry, smaller technology companies, patent-holding companies, medical gismo manufacturers, university technology managers, the NanoBusiness Alliance and the pro Inventors Alliance.
Prior User Defense
What it would do: Section 5(b) of the bill expands the prior-use defense, which presently applies only to business-methods patents, to cover all patents.
Arguments for: Proponents argue that this expansion is cheap in a competing cheaper and strikes a balance in the middle of trade hidden and patent protection. They also say it goes hand-in-hand with U.S. Adoption of a first-to-file rule. Prior-user possession advantage smaller businesses, which often lack the resources or know-how to pursue patent protection, proponents say. This measure would allow them to commercialize their inventions when they used the field matter of the invention prior to the patent's filing date, even when they did not pursue patent rights.
Some foreign countries presently allow prior-user rights, together with Germany and Japan. This measure would help level the playing field for U.S. Associates by putting them in the same competing position as their overseas counterparts.
Proponents include: The financial services commerce and the biotechnology industry.
Arguments against: Opponents assert that prior-user possession undermine the purpose of a patent ideas by creating a strong incentive to protect innovations as trade secrets. Under a prior-use defense regime, if inventors are able to protect their innovations as trade secrets, they are able to use them indefinitely, even if man else obtains a patent on the invention.
Opponents also argue that this convert would advantage larger corporations at the charge of smaller ones. They also assert that prior-user possession would reduce the value of patents and therefore make innovation less desirable.
Opponents include: The Uspto, the pro Inventors Alliance.
Venue
What it would do: Section 10(a) of the bill limits the places where corporations may be sued in patent cases by amending 28 U.S.C. § 1400(b) to contribute that a corporation "resides" only where it has its significant place of business or in the state in which the corporation is incorporated. Current law presumes a corporation to reside wherever it is field to personal jurisdiction. This convert would not apply to declaratory judgment actions brought by alleged infringers.
Arguments for: Proponents argue that this convert would discourage forum shopping. As the law now stands, any business whose products are sold nationwide is field to patent litigation in any jurisdiction in the country. As a result, determined jurisdictions have come to be magnets for patent cases because of the disproportionately high number of cases they resolve in favor of patentees.
This forum shopping imposes a costly burden on businesses which must collect evidence and witnesses and travel to remote jurisdictions to try involved patent cases over a period of weeks or months.
Proponents include: Large technology companies, the financial services industry, and the biotechnology industry.
Arguments against: Opponents argue that this convert would be a substantial departure from established custom and may not effect in the most standard and convenient venue for litigation. determined district courts attract patent cases not because of favoritism, they say, but because of their expertise and timeliness. They also argue that the impact of forum shopping is minimized by the existence of a particular appellate court for patent cases, the Federal Circuit.
Opponents include: Smaller patent-holding companies, smaller technology companies.
Uspto Regulatory Authority
What it would do: The bill would authorize the Uspto to promulgate substantive - as opposed to procedural - rules and regulations for the first time in its history.
Arguments for: Proponents argue that giving the Uspto substantive rulemaking authority would be useful to the patent ideas and would help ensure an productive and quality-based patent examination process.
Proponents include: The Uspto.
Arguments against: Opponents note that the U.S. Constitution expressly gives Congress the power to protect intellectual property and that delegating that authority to an menagerial branch would be an ill-considered abdication of that Constitutional authority. Further, this grant of authority would originate instability in the patent system, because the Uspto could make multiple changes to the law while the life of a patent. The job of defining substantive patent law is best left to Congress and the courts.
Opponents include: The biotechnology industry, smaller technology companies, patent-holding companies, university technology managers, medical gismo manufacturers, and the NanoBusiness Alliance.
Inventor'S Oath
What it would do: The bill would convert the current custom of requiring the originator to sign an application. It would allow the assignee of an invention to file a patent application in its own name. It would also allow substitutes for the inventor's oath where the originator is unable or unwilling to sign.
Arguments for: Proponents say this convert would reduce unnecessary formalities in the patent application and simplify and streamline the process. They also say this convert would go hand-in-hand with a U.S. Shift to a first-to-file system.
Proponents include: The Uspto.
Arguments against: Opponents say that patent applications filed by assignees may lack the actual inventor's personal guarantee that the application was properly prepared. In addition, assignee filing might derogate the right of natural persons to their inventions.
Opponents include: The pro Inventors Alliance.
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