Rosenbaum IP is excited to be exhibiting once again at the Annual AUTM meeting in New Orleans from February 22-25, 2015. We look forward to meeting familiar faces, getting acquainted with new ones, and exploring new opportunities. Please stop by our exhibit to ask us any questions regarding Intellectual Property, as we will be in booth #214. We will have some fun giveaways and up-to-date literature on recent Intellectual Property developments. We hope to see you there!
On February 5, 2015, Rep. Goodlatte reintroduced the Innovation Act, which was previously passed in 2013 by the House of Representatives by an overwhelming vote of 325-91. While it initially appeared that the 2013 bill would easily pass through the Senate, the first Innovation Act had no such luck. Instead, Senator Patrick Leahy (D-VT), Chairman of the Committee, announced on May 21, 2014 that the bill was being taken off the Committee’s agenda due to stakeholder disagreement.
Despite the failure of the 2013 Innovation Act, bipartisan support for patent reform remains strong, and with the recent turnover in Congressional seats during the 2014 mid-term election, odds are in favor of the introduction of new legislation aimed at curbing abusive patent litigation. The Innovation Act has 19 co-sponsors, made up of 10 Democrats and 9 Republicans, making it a truly bipartisan bill. The new Innovation Act is identical to the 2013 Innovation Act and builds on the reforms that were made in the America Invents Act by addressing certain abusive practices taking place in our courts.
While the Innovation Act has garnered significant support from many interest groups, including startups and technology lobbyists, it still is likely to encounter the same opponents and criticisms that the old Innovation Act faced. Should the House vote to approve the act, it will then be up to the Senate to consider the act and resolve any potential issues or disagreements by way of committee. Overall, the Innovation Act would make patent litigation more burdensome for plaintiffs. Discussed below are some of the main provisions and reforms introduced by the act.
Disclosure of Ownership and Financial Interest:
If the Innovation Act passes plaintiffs would be required to disclose at the outset of the litigation all ownership information to the other parties, the court, and the USPTO. Included in this disclosure is the patent assignee, any person or entity with a financial interest in the patent, and any person or entity with a right to sublicense or enforce the patent.
Heightened Pleading Requirements:
The proposed Innovation Act also requires plaintiffs to disclose significantly more information in its initial pleadings than previously required. Patent-plaintiffs would be required to explain why they are suing a particular defendant in their court pleadings. The bill also requires courts to decide early on whether a patent is invalid to discourage plaintiffs from dragging out lawsuits in an attempt to obtain settlements.
The proposed bill also introduces a fee-shifting structure that departs from the traditional rule that each party bears the cost of its own attorney’s fees. Under the new provision, judges would be required to make parties who bring lawsuits that are not “reasonably justified in law and fact” to pay their opponents’ legal fees. This section is arguably the most controversial provision of the bill and the one responsible for Sen. Harry Reid refusing to bring the original Innovation Act to the Senate floor. The bill would create a presumption of awarding attorney fees to the prevailing party. Under this structure, a court would be required to award attorney fees and “other expenses” to the prevailing party “unless the court finds that the position and conduct of the non-prevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.” This provision serves as a drastic change from the current standard in patent cases where attorney fees are only awarded in “exceptional cases.” The bill also discourages a patentee from offering a covenant not to sue as a means to settle infringement litigation, making such an offer an admission that the patentee is the “non-prevailing party” and thus a risk for an award of fees and costs to the accused infringer (Sec. 3(b)(1)(c)).
The proposed act also introduces changes to the discovery requirements, including mandatory disclosure of standard setting organizations (SSOs) obligations. Under this provision, the Judicial Conference would consider “documents relating to any licensing term or pricing commitment to which the patent or patents may be subject through any agency or standard-setting body” to be part of the “core documentary evidence” and must be provided by the plaintiff to the defendants in every litigation.
On February 4, 2015, the United States Court of Appeal for the Federal Circuit issued its decision in the first appeal of a final decision by the Patent Trial and Appeal Board (“PTAB”) in an inter partes review (“IPR”) proceeding. In its decision, the Federal Circuit held that institution decisions rendered by the PTAB are never reviewable on appeal, and the PTAB is entitled to apply the “broadest reasonable interpretation” standard for claim constructions in IPR proceedings.
Cuozzo Speed Technologies, LLC (“Cuozzo”) owns the patent at issue, which relates to a vehicle navigation system “interface which displays a vehicle’s current speed as well as the speed limit.” On September 16, 2012 Garmin International, Inc. and Garmin USA, Inc. (collectively, “Garmin”) petitioned the USPTO for inter partes review of claims 10, 14, and 17 of the ’074 patent, and the USPTO granted Garmin’s Petition. The Board found that claims 10, 14, and 17 were invalid for obviousness in view of the prior art. The Board also denied Cuozzo’s motion to amend claims 10, 14, and 17 by replacing them with new claims 21, 22, and 23, respectively.
On appeal, the Federal Circuit began its analysis by stating that inter partes review proceedings occur in two phases: (1) the PTO determines whether to institute inter partes review and a (2) “the Board conducts the [inter partes review] proceeding and issues a final decision.” Cuozzo argued that during the first phase the Board erred in instituting inter partes review. The Federal Circuit disagreed, holding that 35 U.S.C. § 314(d) prohibits the review of a Board decision to institute inter partes review, “even after a final decision.”
Cuozzo also challenged the Board’s obviousness conclusions, arguing “that the Board should not have applied the broadest reasonable interpretation standard in claim construction.” In response, the Federal Circuit discussed the history of applying this standard and found “no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.” The Federal Circuit concluded that Congress implicitly adopted in the AIA the broadest reasonable interpretation standard for inter partes review proceedings. The Federal Circuit further mentioned that even if the Board went beyond the requirements outlined by the statute, the PTO was entitled to establish the standard under its rule-making authority and that deference would be given to the agency under a Chevron analysis.
The Federal Circuit applied the standard of review for claim construction recently set forth by the U.S. Supreme Court in Teva Pharmaceuticals U.S.A. v. Sandoz, Inc. In doing so, the Federal Circuit found no issue with the Board’s construction of the claims, its determination that the claims were obvious, or its determination that the patentee was not entitled to amend its claims.
Judge Newman dissented pointing out that the Board should be using the same standards for claim construction that district courts apply, and that the decision to institute should be reviewable on appeal of a final written decision. Ultimately, Judge Newman concluded that the USPTO is incapable of “serv[ing] as a surrogate for district court litigation if the PTAB does not apply the same law to the same evidence.”