Patent Reform Bill Introduced in Senate and House

Patent Reform Bill Introduced in Senate and House

3/24/2009
By: Michael L. Volkov The Patent Reform Act of 2009 was introduced recently in the United States Senate and House. The legislation, which is modeled on proposals made in the last Congress, proposes many changes to the patent laws. However, the aspect that is likely to create the most controversy is the proposed damages provision. The current damages statute provides that damages must be "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." 35 U.S.C. § 284. Additionally, the Court may "increase the damages up to three times the amount found or assessed." Id. This statute has allowed for a wide latitude in damages claims and awards. Opponents of the current damages statute contend that it provides little guidance and permits excessive damage awards. Therefore, one stated purpose of the proposed damages provision is to: (1) reduce the average damage award; (2) make damage awards more rational and predictable; and (3) make damages judgments more subject to appellate review. The proposed legislation is intended to create a "standard for calculating reasonable royalty" which requires a determination of the "specific contribution over the prior art" to determine damages. If passed, this damages provision will likely have the effect of reducing patent awards. The controversy resides in whether any changes to the damages statute are necessary. As supporters of the current statute point out, while there have been some large damage awards, the average damage award in patent infringement cases has remained relatively constant over the last couple of decades. Others contend that the proposed provision is unconstitutional. In addition to the damages provision, the Bill addresses the following issues: First to File: The Bill proposes abandoning the current first-to-invent system and moving to a first-to-file system that credits invention based on the filing date of the patent application rather than on the date of actual invention. The provision also eliminates the one-year grace period for most cases. Thus, any independent third-party publication prior to filing is considered prior art regardless of the date of invention. Likewise, secret prior art (102(e)) cannot be "sworn behind" based on prior invention. This is intended to harmonize the U.S. Patent System with the Patent Systems of Europe and most other countries. Expanded Reexamination Proceedings: Currently, reexaminations may be requested based only on published prior art (patents and printed publications). The proposed Bill would expand the scope of reexamination requests to include other prior art, such as evidence of prior public use or sale in the U.S., which cannot currently be considered. Further, inter parties reexamination proceedings would begin to look more like court cases and would be heard by administrative patent judges. The Bill would clarify that parties would be estopped from filing inter parties reexamination requests after a district court judgment. Additional Post Grant Review: The Bill also adds provisions to allow third parties more opportunity to challenge an issued patent in the Patent Office. Specifically, under this provision, within 12 months of issuance of a U.S. patent, a third party can file a cancellation petition based on any ground of invalidity (rather than simply prior art). The post grant reviews would also be conducted by the administrative patent judges. Pre-Issuance Submissions: Under another provision, third parties can submit prior art during examination of a patent application as well as a statement regarding the relevance of the art. The art should be submitted the latter of (1) six months after publication of the application or (2) before the first office action on the merits. Patent Litigation Venue: In an effort to address purported forum shopping, the Bill provides that "A party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court." This is intended to prevent a party from taking actions for the sole purpose of creating venue in a purportedly favorable forum. Interlocutory Appeals: Under the proposed Bill, the Federal Circuit Court of Appeals will have jurisdiction over interlocutory appeals of claim construction decisions when approved by the district court. Currently, the Federal Circuit does not have jurisdiction until a final decision on the merits has been entered, i.e. a grant of summary judgment. Administrative Patent Judges: If the proposed Bill passes, the Board of Patent Appeals and Interferences ("BPAI") would become the Patent Trial and Appeal Board ("PTAB"). Interferences would be gone as a result of moving to a first-to-file system. In their place would be derivation proceedings as well as reexamination and post-grant trials. Oath: Currently, inventors are required to sign the oath after reviewing the completed application. This can create issues for companies where inventors had their employment terminated and are either unavailable or uncooperative. The proposed Bill thus eases these rules to more easily allow rights-holders to file patent applications on behalf of the inventor by allowing for the filing of a substitute statement in lieu of the oath under certain circumstances. Currently, this Bill is being considered by the House and Senate. These provisions may change and/or other proposals may be made before anything is passed into law. Companies who are concerned with how these potential changes may effect their business are encouraged to call their Dickinson Wright attorney.
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