Bipartisan Solons Push for Patent Reform Act of 2009

Leaders of the Senate and House Judiciary Committees have introduced a bipartisan, bicameral patent reform legislation after the previous session of Congress failed to pass the 2007 version of the bill.

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and Sen. Orrin Hatch (R-Utah), a senior member and former Chairman of the Committee, and House Judiciary Committee Chairman John Conyers (D-Mich.) and Ranking Member Lamar Smith (R-Texas), introduced the Patent Reform Act of 2009.

The Senate and House bills are similar to bipartisan legislation introduced in the 110th Congress.  The House of Representatives passed patent reform legislation (H.R. 1908) in the last Congress, and the Senate Judiciary Committee reported companion legislation in the Senate (S. 1145).

Among others, the features of this patent legislation are as follows:

—First to file rule. Section 1 of the bill converts the United States’ patent system into a first-inventor-to-file system, giving priority to the earlier-filed application for a claimed invention.  Interference proceedings are replaced with a derivation proceeding to determine whether the applicant of an earlier-filed application was not the proper applicant for the claimed invention – such a proceeding will be faster and less expensive than were interference proceedings.  This section also encourages the sharing of information by providing a grace period for publicly disclosing the subject matter of the claimed invention, without losing priority.

—Right of the inventor to obtain damages.  Section 4 of the bill preserves the current rule that mandates that a damages award shall not be less than a “reasonable royalty” for the infringed patent, and further requires the court to conduct an analysis to ensure that, when a “reasonable royalty” is the award, it reflects the economic value of the patent’s “specific contribution over the prior art”, i.e. the contribution the invention makes to promoting science and the useful arts per the requirement of Article I, Section 8 of the Constitution.

The court also is required 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.  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, which 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.  The bill also preserves the entire market value rule.

This section codifies the Federal Circuit’s recent In re Seagate decision, in which it reversed its 20-year old precedent regarding the standard to prove willfulness.  Courts will now require 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.

—Post-grant procedures and other quality enhancements. The section expands the evidence that a party may cite to the USPTO under § 301 to include written statements of the patent owner regarding the scope of the patent claims and evidence that the claimed invention was in public use or on sale in the United States more than one year prior to the application.  Requests for reexamination under § 302 can be based on either prior art or prior public use or sale, as can requests for inter partes reexamination.  Inter partes reexamination will now be heard by an administrative patent judge in accordance with procedures established by the USPTO Director.  Inter partes reexamination is further improved by permitting a third-party requester to file written comments.

This section also creates a new post-grant review procedure that can be instituted either within 12 months after the issuance of a patent or a reissue patent, or if the patent owner consents.  The post-grant review begins with a cancellation petition and moves forward only if the Director determines that there is a substantial new question of patentability.  The presumption of validity does not apply in this proceeding, but the burden of proof is on the party advancing a proposition.  The Director will prescribe rules governing the proceeding, including rules to sanction abuse.  This section prohibits successive filings or filings after a final decision in a civil action.

—Patent trial and appeal board. The Board of Patent Appeals and Interferences is replaced with the new Patent Trial and Appeal Board (“Board”) under section 6.  The Board is charged with (i) reviewing adverse decisions of examiners on applications and reexamination proceedings, (ii) conducting derivation proceedings, and (iii) conducting the post-grant review proceedings.

—Venue and jurisdiction. Under section 8 of the proposed legislation, civil actions for patent infringement, including declaratory judgment actions, may only be brought in a judicial district (1) where the defendant has its principal place of business or is incorporated or formed, or, for a foreign corporation with a U.S. subsidiary, where its primary United States subsidiary has its principal place of business or is incorporated or formed; (2) where the defendant has committed substantial acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the operations of the defendant; (3) where the primary plaintiff resides, if the primary plaintiff in the action is an institution of higher education or a nonprofit patent and licensing organization (as those terms are defined in this section); (4) where the plaintiff resides, if the sole plaintiff in the action is an individual inventor who qualifies as a “micro-entity” pursuant to section 123 of title 35.  A defendant may request the case be transferred where (1) any of the parties has substantial evidence or witnesses that otherwise would present considerable evidentiary burdens to the defendant if such transfer were not granted, (2) transfer would not cause undue hardship to the plaintiff, and (3) venue would be otherwise appropriate under section 1391 of title 28.

—Interlocutory appeals. The bill also amends subsection (b) – Interlocutory Appeals – Subsection (c)(2) of section 1292 of title 28,  to require the Federal Circuit to accept all interlocutory appeals of claim construction orders when certified by the district court.  A party wishing to appeal such an order shall file a motion with the district court within 10 days after entry of the order.  The district court shall have discretion whether to certify such appeals, and if so, whether to stay the district court proceedings during such appeal.

—Residency of Federal Circuit judges. Section 10 of the bill repeals the District of Columbia area residency requirement for Federal Circuit judges in section 44(c) of title 28.  Any judge of the Federal Circuit who does not reside within a 50-mile radius of Washington DC must use the chambers of an existing courthouse in the district where the judge resides.

The Leahy-Hatch Patent Reform Act is cosponsored by Senators Chuck Schumer (D-N.Y.), Mike Crapo (R-Idaho), Sheldon Whitehouse (D-R.I.), James Risch (R-Idaho), and Kirsten Gillibrand (D-N.Y).

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