Another Patent Reform Bill Filed in Senate

After Patrick J. Leahy of Vermont filed in April 2007 a bill entitled “Patent Reform Act of 2007,” Senate Minority Whip Jon Kyl of Arizona filed his own bill that he called “Patent Reform Act of 2008.” Kyl’s version seeks to overhaul the patent system, and grants sweeping powers to the U.S. Patent and Trademark Office (“PTO”), but does not grant the agency its biggest wish: mandatory applicant quality controls. Instead of requiring each application to be accompanied by a search report and analysis relevant to patentability, the bill makes that process voluntary and offers incentives for compliance.

Among the features of Kyle’s bill was the introduction of “applicant quality controls” (i.e., prior art search w/ analysis), which are not mandatory, however.  Rather, section 123 of the bill provides that “the Director may, by regulation, offer incentives to applicants who submit a search report, a patentability analysis, or other information relevant to patentability.”

The proposed legislation modifies the rule on inequitable conduct, i.e., if inequitable conduct is found during litigation, a court order must contain “findings of fact setting out with specificity the information relating to the conduct at issue not previously considered by the Director and upon which the court based its order.” The patentee then would have to file a reissue within 2 months thereafter, and take the matter up with the USPTO. If there is “probable cause” that inequitable conduct has occurred, the Director will be authorized to impose civil sanctions of up to $150,000 for each act of misconduct, or up to $1M for a “pattern of misconduct.”

Kyle’s patent bill also mandates economic analysis for determining damages. Subject to specific exemptions, “the amount of a reasonable royalty shall not be determined by the use of a standard or average ratio for the division of profits, an industry average rate for royalties, or other methods that are not based on the particular benefits or advantages of the use of the invention.”

On the other hand, Leahy’s bill provides for the creation of Patent Trial and Appeal Board (PTAB) in place of the existing Board of Patent Appeals, and would be constituted by the Director, Deputy Director, Commissioner for Patents, Commissioner for Trademarks, and the administrative patent judges. Inter alia, the PTAB is tasked to conduct post-grant proceedings, and review adverse decisions of examiners rendered in reexamination proceedings.  It is only the PTAB which has the authority to grant re-hearings.

Another major feature of Leahy’s bill was that experts in a specific field would be allowed for the first time to submit their views about patent applications before they were granted.  Likewise, it is provided that “a person who is not the patent owner may file with the PTAB a petition for cancellation seeking to institute a post-grant review proceeding to cancel as unpatentable any claim of a patent on any ground that could be raised under paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any claim).

For this purpose, procedures for such post-grant review under Leahy’s proposed legislation are laid down under the bill, including provisions seeking to prevent harassment by patent owners.  This post-grant review is an alternative to legal action. The Director of the PTAB is also vested with regulatory authority, i.e., “promulgate such rules, regulations, and orders that the Director determines appropriate to carry out the provisions of the statute or any other law applicable to the United States Patent and Trademark Office or that the Director determines necessary to govern the operation and organization of the Office.”

The Senate has referred Kyle’s bill to the Committee on Judiciary.  On the other hand, the House of Representative passed its own version of Leahy’s legislation on September 7, 2007 by a vote of 220 to 175. On September 10, 2007, the bill from the House was received by the Senate which undertook its first reading on the same day.  The next day, the bill underwent a second reading, and was placed on the Senate Legislative Calendar under General Orders.

Also See:

USPTO to Implement Inventor’s Oath or Declaration Provisions of the Leahy-Smith America Invents Act

U.S. Patent and Trademark Office Seeks Public Input on Proposed Fees

USPTO to Test New Post Final Rejection Option

USPTO Expands Patent Law School Clinic Certification Pilot Program

USPTO Launches Small Business Innovation Research Pilot Program