The Innovation Act (HR 3309) was introduced on October 23, 2013; was marked-up on November 20, 2013; and by a vote of 325-91, passed in the United States House of Representatives on Thursday, December 5, 2013. This fast-tracking of the Innovation Act was despite bipartisan concerns raised by Judiciary Committee Members who urged Congressman Goodlatte (R-VA), who is Chair of the House Judiciary Committee, to slow the bill down for additional consideration and hearings.

Despite efforts of many in the House, the Innovation Act as passed includes fee-shifting provisions, which provide that the loser of a patent infringement litigation would have to pay the attorneys’ fees of the winner unless the loser’s positions were objectively reasonable. One of the most watched amendments to the Innovation Act had been the amendment submitted by Congressman Mel Watt (D-NC), which would have stripped the fee-shifting provisions from the Act. The Watt amendment lost by a vote of 213-199. Those who opposed deviating from the American Rule and adopting the British Rule (i.e., loser pays) are hopeful that the closeness of the vote on the Watt amendment will cause the Senate to take a closer, more thoughtful look.

Another provision of the Innovation Act that received much discussion, in the limited window available at least, was the change to the estoppel provisions that apply to post-grant review and inter partes review. The America Invents Act (AIA) included estoppel provisions that would prevent those challenging patents, as well as those in privy with them, from raising serial challenges by saying that they could not challenge the same patent claims again based on any prior art that was raised or could have been raised. The Innovation Act removes the “or could have been raised,” which all but certainly suggests that serial patent challenges will become possible, if not likely.

Another hot-button issue was the so-called “customer suit exception.” Congressman Thomas Massie (R-KY) submitted an amendment that would strike the customer suit exception, which is a provision intended to defer patent litigation against end-users, retailers or wholesalers in cases where the manufacturer of the infringing product joins the litigation. The customer suit exception was widely popular in theory, although few if any actually took the time to look at or discuss the provisions specifically. For example, the Biotechnology Industry Organization (BIO), an entity that you might not suspect would have a dog in this fight, supported the Massie amendment. After the passage of the Innovation Act, in a blog post, BIO explained:

[I]n its current form, the [customer suit exception] provision is ambiguous, and applies not just to end-users or resellers. Even manufacturing businesses that are properly sued for patent infringement would be able to deflect lawsuits towards their parts suppliers and put off the question of their own liability until much later in the case.

In this way, the current provision would invite piecemeal adjudication and opportunities for systematic delays in cases where patent owners must defend their businesses against ongoing patent infringement. This provision, which is intended to simplify and streamline litigation, could end up doing the exact opposite.

One amendment that was approved was submitted by Congressman Dana Rohrabacher (R-CA), which preserved 35 U.S.C. 145, which allows a patent applicant to sue in the United States Federal District Court for the Eastern District of Virginia, in order to obtain a patent after a USPTO rejection. The Rohrabacher amendment passed by a vote of 260-156. Only two other amendments were approved prior to the final passage. One amendment was an Amendment offered by Congressman Jared Polis (D-CO), which strengthens the demand letter transparency language that was already included in the Innovation Act by mandating those claiming willful infringement to identify the ultimate parent entity in the demand letters they send to their targets. The final amendment that passed was one submitted by Congresswoman Sheila Jackson-Lee (D-TX). This amendment requires an economic impact study, which will study whether the provisions of the Innovation Act continue to provide individuals and small businesses owned by women, veterans and minorities an opportunity to protect their inventions.

Now, patent reform will head to the United States Senate, where Senator Patrick Leahy has submitted companion legislation. Given the closeness of the holiday recess and the fact that Congress has so much still left to do, it is virtually certain nothing will happen in the Senate until 2014.

Tags: Congress, Congressman Goodlatte, Congressman Massie, Congressman Polis, Congressman Rohrabacher, Congressman Watt, Congresswoman Jackson-Lee, estoppel, fee-shifting, Innovation Act, patent, Patent Reform, patents

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