On Thursday, June 11, 2015, the House Judiciary Committee held a hearing for the purpose of marking up “the Innovation Act.”
One of the issues that took up a significant amount of time during the first half of the hearing was an amendment submitted by Congressman Darrell Issa regarding a proposed extension of covered business method (“CBM”) review. Those familiar with the America Invents Act (AIA) will undoubtedly recall that CBM reviews were ushered in as one of the three new post grant proceedings that could be used to challenge issues U.S. patents. The program was conceived to be temporary, and is scheduled to sunset on September 16, 2020. Issa’s amendment would have postponed the termination date of the program until December 31, 2026.
Unlike inter partes review (“IPR”), a petition for a CBM may NOT be filed unless the real party-in-interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent. “Charged with infringement” means “a real and substantial controversy regarding infringement of a covered business method patent such that the petitioner would have standing to bring a declaratory judgment action in Federal court.” 37 CFR 42.302(a). Additionally, unlike with IPR, a CBM proceeding can raise issues surrounding both patent eligibility under 35 U.S.C. 101 and sufficiency of disclosure under 35 U.S.C. 112.
Issa stated during the hearing that, at the time Congress passed the AIA, the idea was to create CBM review for a trial period and the program would be extended if successful. Issa is mistaken. The complete name of the process even has the word “transitional” in the title. The entire purpose of CBM review was to allow for challenges to certain financial business method patents in a post grant proceeding that could raise patent eligibility and sufficiency of disclosure. Those issues are off the table in IPR. They can be raised in Post Grant Review (PGR), but PGR is only available to challenge patents that were examined under the first-to-file provisions of the AIA. Thus, Congress wanted to allow for a form of PGR for financial business method patents granted under pre-AIA first-to-invent rules. Thus, there is a time limit to the useful period of this special variety of post grant review.
“We should be ending [CBM] rather than extending it,” Congressman John Conyers (D-MI) stated in response.
Congressman Collins (R-GA) also explained that he cannot support extending CBM, saying that “a property right should be a property right.” Collins also expressed confusion regarding why this matter is pressing at the moment, saying: “I am confused as to why we are considering the extension of a program that is scheduled to sunset in 2020. Why are we debating this here today… do we really know how CBM will affect our economy… we should be having this debate in 2020.” Ultimately, Collins urged his colleagues to oppose this “premature amendment.”
Congresswoman Suzan DelBene (D-WA) echoed the comments of Collins, but also took issue with earlier comments of those in support of the amendment who said that there was no evidence that CBM has been inappropriately expanded beyond financial services patents. DelBene pointed out that there have, indeed, been instances where the Patent Trial and Appeal Board (PTAB) has been accused of expansively interpreting its own jurisdiction beyond what Congress envisioned when the AIA was passed.
The amendment to extend CBM was defeated by a vote of 18-13. At least for now, it is not in the House bill. If and when the bill gets considered on the floor of the House, extension of CBM could resurface in one way or another.
After a three-hour hearing held by the U.S. Senate Committee on the Judiciary, S.1137, the proposed legislation known as the PATENT Act, was approved to move to the floor of the United States Senate by a 16-4 vote of the Senate committee.
Ahead of the committee’s consideration of the bipartisan Act, Senate Judiciary Committee Chairman Chuck Grassley, Ranking Member Patrick Leahy, and Judiciary Committee members John Cornyn, Chuck Schumer, Orrin Hatch, Mike Lee and Amy Klobuchar released a managers’ amendment, which was approved by the Committee. The managers’ amendment includes technical changes, as well as provisions to address concerns regarding post grant review proceedings.
The Innovation Act (H.R. 9) has gotten the most publicity in the House of Representatives, but there are several other pending bills in the House, including the TROL Act, which has already been voted out of Committee.
What follows is a summary of the other patent reform bills pending in the House.
The TROL Act
The Targeting Rogue and Opaque Letters Act, more commonly referred to as the TROL Act, was introduced during the 113th Congress and passed the House Commerce Subcommittee with bipartisan support. The TROL Act addresses sending bad faith patent demand letters, clarifying that such activity may violate the Federal Trade Commission Act. The Act defines bad faith as either false or misleading statements or omissions, whether knowingly false, made with reckless indifference to the truth, or made with an awareness of a high probability that the statements or omissions would deceive the sender intentionally. The TROL Act also further authorizes the FTC and state attorneys general to bring actions to stop the abusive behavior, but also provides a good faith affirmative defense. The Act would further preempt any state law or regulation expressly relating to the transmission or contents of communications relating to the assertion of patent rights.
It wasn’t so long ago that President Obama signed the America Invents Act (AIA) into law, on September 16, 2011. As with many complex pieces of legislation that will substantially revise an area of law, the AIA did not become immediately effective. The most dramatic changes became effective in two waves, one on September 16, 2012, and the other on March 16, 2013. The Patent Trial and Appeal Board (PTAB), along with the new post grant administrative proceedings to challenge patents, came into being in September 2012, and the U.S. changed from “first to invent” to “first to file” in March 2013.
Here we are, just over two years from the most significant change to U.S. patent law since at least the 1952 Patent Act, and there are more proposals for patent reform pending in Congress. There are four legislative proposals that are deemed “serious,” and a handful of marginal proposals, which make great sense, but which largely have no chance to be enacted.
On March 10, 2015, 40 economists and law professors signed a letter explaining to Congress that the data that keeps being cited to justify HR 9, otherwise known as “the Innovation Act,” is “flawed, unreliable and incomplete.” The professors suggest Congress proceed cautiously, particularly given the numerous misleading and flawed studies that make “highly exaggerated claims regarding patent trolls.”
As the letter explains, one of the “studies” that is often cited as proof that patent trolls cost U.S. businesses $29 billion a year is pure fiction, has been debunked, and the authors of the study have retreated significantly from their clearly erroneous conclusions. I have explained this issue in detail, as have others.