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The Patent Reform Act of 2010: A substitute S. 515
May 2010
by Stephen Albainy-Jenei  |  Email the author
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Here comes the Patent Reform Act of 2010 in the form of an amendment to S. 515. The amendment seems to meet the goal of establishing a simpler, objectively based, transparent patent system that can eliminate patents that should not have been issued and speed the processing of patents that should be issued. The new patent law includes a number of improvements to the patent laws, such as provisions to update and improve the patent marking statute.  
 
By eliminating the arcane and subjective rules associated with the current first-to-invent system, the amendment will make it easier and less costly to obtain patent protection in the United States, which will stimulate investment in new technologies. Moreover, while all inventors will continue to benefit from a one-year grace period in which to file a U.S. patent application after publicly disclosing their inventions, the incentive of the first-inventor-to-file system to file applications promptly will redound to their benefit in obtaining patents in our major trading partners. Inventors who delay filing their U.S. applications (on the tenuous assumption that they will be able to obtain a U.S. patent by proving that they were first to make the invention) run the risk of being second-to-file in the rest of the world where patents are awarded to the first inventor to file. Facilitating patent protection outside the United States for American technology will stimulate the export of American products produced by American workers.  
 
 The amendment will strengthen patents granted in the United States by allowing the public to participate in the patent granting process and by strengthening the administrative procedures in the U.S. Patent and Trademark Office (USPTO) for reviewing patents after grant. The bill will expand the opportunity for the public to submit information to patent examiners working on individual patent applications, together with concise descriptions of its relevance. This will help ensure that all relevant information will be considered during the examination process, allowing the USPTO to conduct a quality examination before a patent is granted, reducing the need to rely on post-grant clean-up procedures.  
 
The amendment will provide a robust, post-grant review that must be requested within nine months after patent grant and, if initiated, be completed within one year. Patents could be challenged on all issues of patentability. While both the initial post-grant review and the revised inter partes re-examination proceedings will contribute to ensuring that only valid patents will survive, both procedures also contain safeguards to prevent harassment of patent owners. Both procedures will be handled by a panel of administrative law judges. Importantly, patent owners who promptly file suit after patent grant will be assured that the court will not automatically stay its consideration of the patent owner's motion for a preliminary injunction on the basis that a petition requesting a post-grant review has been filed or that such a proceeding has been instituted.  
 
The amendment would address a number of litigation reforms, some initially recommended by the National Academies of Sciences (NAS), and others, some quite controversial, urged by various special interests. The amendment addresses the recommendation of the NAS to modify or remove the subjective elements of patent infringement litigation that depend on the assessment of a party's state of mind and increase the cost and decrease the predictability of such litigation. Under the bill, "failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable."  
 
Another of the subjective elements of patent infringement litigation that unnecessarily increases the costs for both obtaining patents and litigating them is the doctrine of "inequitable conduct"—whether an inventor or patent attorney intentionally misled the USPTO in prosecuting the original patent. While the amendment does not go as far as modifying or removing the doctrine as recommended by the NAS, it does provide a remedial avenue for patent owners to bring to the attention of the office information which might affect the scope of their patents. The bill allows patent owners to request, prior to the institution of litigation, "supplemental examination" to consider any information believed to be relevant to the patent. Any patent surviving such reexamination will not be held unenforceable on the basis that such information had not been considered or was incorrect in the initial examination process.
 
Importantly, supplemental reexamination would not allow a patent owner to avoid sanctions based upon violations of criminal or antitrust laws nor would it allow those responsible for any misconduct in proceedings before the office to avoid disciplinary sanctions.  
 
The amendment maintains the compromise reached in the Senate Judiciary Committee that fully responds to the allegations of inconsistency and unfairness in awards of reasonable royalty patent damages. It rejects the proposals calculated to reduce inventors' recoveries by narrowing claimed inventions through the use of definitional devices by limiting the claimed invention for damages purposes to "its inventive contribution," its "patentable features" or "the patent's specific contribution over the prior art." Instead, the bill sets forth a "gatekeeper" approach which ensures that courts or juries consider only those damages contentions that are cognizable at law and supported by substantial evidence. This approach ensures that patentees will receive appropriate compensatory damages for the unauthorized use of their patented inventions, while at the same time fully responding to the allegations of runaway jury awards.  
 
The third subjective element in patent litigation addressed by the NAS is "willful infringement," under which a court may increase damages up to three times if the court or jury determines that the accused infringer willfully infringed a patent. During the period when the NAS reviewed this doctrine, there was no effective threshold test for alleging willful infringement, therefore the required level of pre-filing investigation by the plaintiff was relatively modest and willfulness was asserted in most cases.  
 
In response to a growing number of patent infringement cases filed by patentees in perceived pro-plaintiff venues with little or no connection to the parties in the case or the locations of their operations, witnesses or documents, proposals were made to essentially restrict patent suits to the jurisdiction where the infringer had its principal operation. This draconian rule would have denied manufacturing patentees the opportunity of bringing suit against infringers in the district where the patentee was located and had its witnesses and evidence.  
 
The amendment to S. 515 provides a very measured and salutary approach to reigning in undesirable forum shopping. It requires the court to transfer a patent infringement action "upon a showing that the transferee venue is clearly more convenient than the venue in which the civil action is pending."

Stephen Albainy-Jenei is a patent attorney at Frost Brown Todd LLC, serving up chat at PatentBaristas.com. Further analysis of the amendment to S. 515 can be found on that Web site. Write albainy-Jenei with comments or questions at Stephen@patentbaristas.com.
 

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