Patent Litigation Reform Legislation in the
114th Congress
Brian T. Yeh
Legislative Attorney
Emily M. Lanza
Legislative Attorney
July 29, 2015
Congressional Research Service
7-5700
www.crs.gov
R43979
Patent Litigation Reform Legislation in the 114th Congress
Summary
This report describes how current patent litigation reform legislation would change existing
patent law to address the perceived problems caused by entities that engage in patent litigation
tactics that have been criticized as abusive or deceptive. The bills introduced in the 114th
Congress include the Innovation Act (H.R. 9), Protecting American Talent and Entrepreneurship
Act (PATENT) Act (S. 1137), Demand Letter Transparency Act of 2015 (H.R. 1896), Targeting
Rogue and Opaque Letters (TROL) Act (H.R. 2045), and the Support Technology and Research
for Our Nation’s Growth (STRONG) Patents Act of 2015 (S. 632). The legislation includes the
following changes to the patent system:
Heightened Pleading Requirements: The Innovation Act and the PATENT Act would require
parties alleging patent infringement in a civil action to include in the court pleadings specified
details concerning each claim of each patent infringed, and the acts of the alleged infringer.
Limits on Discovery: The Innovation Act (as reported by the House Judiciary Committee) and
the PATENT Act propose limitations on discovery pending the resolution of certain motions,
including motions to dismiss, transfer venue, and drop parties.
Transparency of Patent Ownership: The Innovation Act and the PATENT Act would require
plaintiffs in patent cases to disclose to the United States Patent and Trademark Office (USPTO),
the court, and all adverse parties information relating to entities that own or have a financial
interest in the patent.
Customer-Suit Exception: The Innovation Act and the PATENT Act would allow a court to stay
litigation against a customer of a product that contains allegedly infringing technologies, if the
manufacturer of the product is a party to the same or other action on the same patent and other
requirements are satisfied.
Shifting of Attorney Fees: The Innovation Act would require a district court to award attorney
fees to a prevailing party in patent cases, unless the court finds that the nonprevailing party’s
position and conduct “were reasonably justified in law and fact or that special circumstances ...
make an award unjust.” The PATENT Act would require the prevailing party to make a motion to
the court to determine whether the nonprevailing party’s position and conduct were “objectively
reasonable”; if they were not, then the court must award reasonable attorney fees to the prevailing
party unless there are special circumstances that would make an award unjust.
Fee Recovery: The Innovation Act and the PATENT Act contain provisions that address the
situation when the nonprevailing party alleging infringement is unable to pay the fee award and
other expenses. The Innovation Act (as reported) and the PATENT Act would allow a defendant
to submit a statement early in the litigation claiming that the plaintiff’s primary business is the
assertion and enforcement of patents; the plaintiff would then need to certify that it has sufficient
funds to satisfy any potential award of attorney fees that may be assessed, and to identify (and
provide notice to) any “interested parties” that could be held accountable for the award if the
plaintiffs are unable to pay it.
Demand Letters: Several bills propose various approaches to address demand letters. The
STRONG Patents Act and the TROL Act would impose specific enforcement and content
requirements for demand letters. The Innovation Act expresses the sense of Congress that
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Patent Litigation Reform Legislation in the 114th Congress
purposely evasive demand letters are abusing the patent system in a manner contrary to public
policy. The Demand Letter Transparency Act proposes both disclosure and content requirements
directed towards “abusive” demand letter practices, and the PATENT Act focuses on pre-suit
notifications.
Post-Grant Review Reforms: The Innovation Act, PATENT Act (as reported by the Senate
Judiciary Committee), and the STRONG Patents Act would mandate that the Patent Trial and
Appeal Board (PTAB), in inter partes review (IPR) and post-grant review (PGR) proceedings,
follow the same claim construction standard used by district courts. The Innovation Act and the
PATENT Act (as reported) would require the PTAB to consider prior claim construction by a
court in a civil action in which the patent owner was a party. In addition, the Innovation Act and
the PATENT Act would narrow the estoppel effect arising from a PGR. The Innovation Act (as
reported) and the STRONG Patents Act would heighten the standing requirements for persons
wanting to initiate a PGR or IPR. The STRONG Patents Act would also require the IPR/PGR
petitioner to prove unpatentability of a patent claim by “clear and convincing evidence.”
Elimination of USPTO Fee Diversion: The STRONG Patents Act would permit the USPTO to
spend all fee revenue that it collects without further appropriation action or fiscal year limitation.
Venue: The Innovation Act (as reported) would impose limitations on the judicial districts in
which a civil action may be brought for patent infringement or for a declaratory judgment that a
patent is invalid or not infringed.
Assistance for Small Businesses: The Innovation Act, STRONG Patents Act, and the PATENT
Act contain provisions designed to help small businesses that participate in the patent system
either as patent owners or as defendants.
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Patent Litigation Reform Legislation in the 114th Congress
Contents
Introduction ...................................................................................................................................... 1
Background ...................................................................................................................................... 2
Patent Law Fundamentals .......................................................................................................... 2
Patent Assertion Entities ............................................................................................................ 5
Legislation in the 114th Congress ..................................................................................................... 6
Heightened Pleading Requirements ........................................................................................... 6
Limits on Discovery and Cost-Shifting ..................................................................................... 9
Transparency of Patent Ownership .......................................................................................... 10
Stays of Litigation Brought Against Infringing Customers ..................................................... 13
Shifting of Attorney Fees ......................................................................................................... 16
Recovery of Fee Awards from Interested Parties .............................................................. 19
Demand Letters ....................................................................................................................... 23
Reforms of Patent Trial and Appeal Board’s Proceedings (IPR and PGR) ............................. 27
Ending Diversion of USPTO Fees ........................................................................................... 33
Venue ....................................................................................................................................... 34
Provisions Concerning Small Businesses ................................................................................ 35
Tables
Table 1. Patent Litigation Reform Legislation in the 114th Congress ............................................ 37
Contacts
Author Contact Information........................................................................................................... 48
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Patent Litigation Reform Legislation in the 114th Congress
Introduction1
Congress has shown significant interest in altering the current patent system in response to
concerns about entities that engage in patent litigation tactics that have been criticized as abusive
or deceptive. Many congressional hearings on the topic of patent litigation abuse have been held
in the 114th and 113th Congresses,2 and several legislative proposals have been introduced;3 one
bill in the 113th Congress, H.R. 3309, the Innovation Act, was passed by the House in December
2013. In June 2015, the House Judiciary Committee approved the Innovation Act (H.R. 9) by a
vote of 24 to 8, and the Senate Judiciary Committee passed the PATENT Act (S. 1137) by a vote
of 16 to 4; both bills are awaiting floor action. This report describes how the major provisions of
current patent litigation reform legislation, with a particular focus on these two bills that have
seen the most legislative activity, would change existing patent law to address the perceived
problems in the patent litigation system.
1 Portions of this report have been borrowed and adapted from CRS Report R42668, An Overview of the “Patent
Trolls” Debate, by Brian T. Yeh and CRS Report R43321, Patent Infringement Pleadings: An Analysis of Recent
Proposals for Patent Reform, by Emily M. Lanza.
2 H.R. 9, the Innovation Act: Hearing Before the House Judiciary Comm., 114th Cong., 1st Sess. (2015); S. 1137, the
“PATENT ACT” – Finding Effective Solutions to Address Abusive Patent Practices: Hearing Before the Senate
Judiciary Comm., 114th Cong. 1st Sess. (2015); H.R. __, the Targeting Rogue and Opaque Letters Act (TROL Act):
Hearing Before the House Energy & Commerce Comm., Subcomm. on Commerce, Manufacturing, and Trade, 114th
Cong. 1st Sess. (2015); Patent Reform: Protecting American Innovators and Job Creators from Abusive Patent
Litigation: Hearing Before the House Judiciary Comm., Subcomm. on Courts, Intellectual Property and Internet, 114th
Cong. 1st Sess. (2015); The Impact of Abusive Patent Litigation Practices on the American Economy: Hearing Before
the Senate Judiciary Comm., 114th Cong. 1st Sess. (2015); Patent Reform: Protecting Innovation and Entrepreneurship:
Hearing Before the Senate Comm. on Small Business & Entrepreneurship, 114th Cong. 1st Sess. (2015); Trolling for a
Solution: Ending Abusive Patent Demand Letters: Hearing Before the House Energy & Commerce Comm., Subcomm.
on Commerce, Manufacturing, and Trade, 113th Cong. 2d Sess. (2014); H.R. 3309, the “Innovation Act:” Hearing
Before the House Judiciary Comm., 113th Cong., 1st Sess. (2013); Protecting Small Businesses and Promoting
Innovation by Limiting Patent Troll Abuse: Hearing Before the Senate Judiciary Comm., 113th Cong., 1st Sess.(2013);
The Impact of Patent Assertion Entities on Innovation and the Economy: Hearing Before the House Energy and
Commerce Comm., Subcomm. on Oversight and Investigations, 113th Cong., 1st Sess. (2013); Demand Letters and
Consumer Protection: Examining Deceptive Practices by Patent Assertion Entities: Hearing Before the Senate
Commerce, Science, & Transportation Comm., Subcomm. on Consumer Protection, Product Safety, and Insurance,
113th Cong., 1st Sess. (2013); Abusive Patent Litigation: The Issues Impacting American Competitiveness and Job
Creation at the International Trade Commission and Beyond: Hearing Before the House Judiciary Comm., Subcomm.
on Courts, Intellectual Property, and the Internet, 113th Cong., 1st Sess. (2013); Abusive Patent Litigation: The Impact
on American Innovation & Jobs, and Potential Solutions: Hearing Before the House Judiciary Comm., Subcomm. on
Courts, Intellectual Property, and the Internet, 113th Cong., 1st Sess. (2013).
3 In the 114th Congress, introduced legislation includes the Innovation Act (H.R. 9), Protecting American Talent and
Entrepreneurship Act (PATENT) Act (S. 1137), Demand Letter Transparency Act of 2015 (H.R. 1896), Targeting
Rogue and Opaque Letters (TROL) Act (H.R. 2045), and the Support Technology and Research for Our Nation’s
Growth (STRONG) Patents Act of 2015 (S. 632). In the 113th Congress, legislation that was introduced but not enacted
included the following: the Innovation Act (H.R. 3309), Transparency in Assertion of Patents Act (S. 2049), the Patent
Transparency and Improvements Act of 2013 (S. 1720), the Patent Abuse Reduction Act of 2013 (S. 1013), the Patent
Litigation Integrity Act of 2013 (S. 1612), the Demand Letter Transparency Act of 2013 (H.R. 3540), Patent Litigation
and Innovation Act of 2013 (H.R. 2639), End of Anonymous Patents Act (H.R. 2024), and the Saving High-Tech
Innovators from Egregious Legal Disputes (SHIELD) Act of 2013 (H.R. 845).
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Background
Patent Law Fundamentals
According to Section 101 of the Patent Act, one who “invents or discovers any new and useful
process, machine, manufacture, or any composition of matter, or any new and useful
improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of
this title.”4 Thus, in order for an invention to qualify for patent protection, it must fall within one
of the four statutory categories of patent-eligible subject matter: processes, machines,
manufactures, and compositions of matter. However, the U.S. Supreme Court has articulated
certain limits to Section 101 of the Patent Act, stating that “laws of nature, natural phenomena,
and abstract ideas” may not be patented.5
The U.S. Patent and Trademark Office (USPTO) issues a patent to an inventor after USPTO
examiners approve the submitted patent application for an allegedly new invention.6 An
application for a patent consists of two primary parts: (1) a “specification,” which is a written
description of the invention enabling those skilled in the art to practice the invention, and (2) one
or more claims that define the scope of the subject matter which the applicant regards as his
invention.7 Therefore, these claims define the scope of the patentee’s rights under the patent.8
Before a patent may be granted, the USPTO examiners must find that the new invention satisfies
several substantive requirements that are set forth in the Patent Act.9 For example, one of the
statutory requirements for patentability of an invention is “novelty.”10 For an invention to be
considered “novel,” the subject matter must be different than, and not be wholly “anticipated” by,
the so-called “prior art,” or public domain materials such as publications and other patents.
Another statutory requirement is that the subject matter of an alleged invention must be
“nonobvious” at the time of its creation. A patent claim is invalid if “the differences between the
subject matter sought to be patented and the prior art11 are such that the subject matter as a whole
would have been obvious at the time the invention was made to a person having ordinary skill in
the art to which said subject matter pertains.”12 Finally, the invention must also be “useful,”
which means that the invention provides a “significant and presently available,” “well-defined
and particular benefit to the public.”13
4 35 U.S.C. § 101.
5 Diamond v. Diehr, 450 U.S. 175, 185 (1981).
6 35 U.S.C. § 131.
7 Id. § 112.
8 3-8 DONALD S. CHISUM, CHISUM ON PATENTS § 8.01 (2006).
9 35 U.S.C. §§ 102, 103(a).
10 Id. § 102.
11 “Prior art” is a legal term of art that refers to the materials (usually called “references” in patent law) that comprise
the available knowledge regarding the subject matter of the invention sought to be patented, such as other issued
patents, publications, and evidence of actual uses or sales of the technology. ROGER SCHECHTER & JOHN THOMAS,
PRINCIPLES OF PATENT LAW 4-1 (2d ed. 2004).
12 35 U.S.C. § 103(a).
13 In re Fischer, 421 F.3d 1365, 1371 (Fed. Cir. 2005).
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The Patent Act grants patent holders the exclusive right to exclude others from making, using,
offering for sale, or selling their patented invention throughout the United States, or importing the
invention into the United States.14 Whoever performs any one of these five acts during the term of
the invention’s patent, without the patent holder’s authorization, is liable for infringement.15 A
patent holder may file a civil action against an alleged infringer in order to enjoin him from
further infringing acts (by securing an injunction, also referred to as injunctive relief).16 The
patent statute also provides federal courts with discretion to award damages to the patent holder
that are “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.”17 The usual term of patent protection
is 20 years from the date the patent application is filed.18 At the end of that period, others may use
the invention without regard to the expired patent.
Because the Patent Act expressly provides that “patents shall have the attributes of personal
property,”19 patent holders may sell their patent rights in a legal transfer called an “assignment.”20
Alternatively, patent holders may grant others a “license” to exercise one of the five statutory
patent rights.21 A license is not a transfer of ownership of the patent, but rather is the patent
holder’s permission to another entity to use the invention in a limited way, typically in exchange
for periodic royalty payments during the term of the patent.22 A patent holder may grant to a
licensee the right to practice the invention through a contract (typically known as a patent
licensing agreement). The terms of the licensing agreement, however, may include conditions
upon the grant of rights—for example, restricting the licensee from making the invention but
allowing that party to sell it.23 A licensee that performs an act that exceeds the scope of the license
(through a violation of the limitations and conditions of the grant of rights) or refuses to comply
with the terms of the license agreement (such as by refusing to pay the required royalties) is
potentially liable to the patent holder for breach of contract as well as for patent infringement.24
The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) is a specialized tribunal
established by Congress that has exclusive appellate jurisdiction in patent cases.25 Parties
dissatisfied with the Federal Circuit’s rulings may petition the U.S. Supreme Court to review the
appellate court’s decision. However, the Supreme Court is not required to entertain the appeal; it
has discretion to decide whether to grant certiorari to review the case.26
14 35 U.S.C. §§ 154(a)(1), 271(a).
15 Id. § 271(a).
16 Id. § 283.
17 Id. § 284.
18 Id. §154(a)(2).
19 Id. § 261.
20 ROGER SCHECHTER & JOHN THOMAS, PRINCIPLES OF PATENT LAW § 11-1 (2d ed. 2004).
21 A patent holder has the right to exclude others from making, using, offering for sale, or selling the invention
throughout the United States, or importing the protected invention into the United States. 35 U.S.C. § 154(a)(1).
22 SCHECHTER & THOMAS, supra footnote 20, § 11-1.
23 United States v. General Electric Co., 272 U.S. 476, 490 (1926).
24 JOHN R. THOMAS, PHARMACEUTICAL PATENT LAW 427 (BNA Books 2005).
25 28 U.S.C. § 1295(a)(1).
26 Id. § 1254(1).
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Besides seeking legal relief for infringement in the federal courts, U.S. patent holders may also
obtain an order from the U.S. International Trade Commission (ITC or Commission) preventing
the importation of foreign goods that infringe their rights. The ITC is an independent,
nonpartisan, quasi-judicial federal government agency responsible for investigating and
arbitrating complaints of violations of Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337),
which prohibits unfair methods of competition or other unfair acts in the importation of products
into the United States. Section 337 also prohibits the importation of articles that infringe valid
U.S. patents, copyrights, processes, trademarks, or protected design rights. (The majority of
unfair competition acts asserted under Section 337 involve allegations of patent infringement.)27
The ITC has the power to order several forms of prospective injunctive relief, including ordering
the U.S. Customs and Border Protection (CBP) to stop imports from entering U.S. borders (an
exclusion order), or issuing cease and desist orders that prohibit parties from distributing or
selling infringing articles from existing U.S. inventory. However, unlike the federal courts, the
ITC lacks the statutory authority to award monetary damages for patent infringement (past or
future).
Although issued patents are presumed to be valid, accused infringers may assert in court that a
patent is invalid or unenforceable on a number of grounds.28 The accused infringer could raise
this argument as an affirmative defense or counterclaim when sued for patent infringement. A
party could also preemptively file a “declaratory judgment action”29 against a patent owner to
challenge a patent’s validity, if there is a case or controversy between them.30
However, the constitutionally based “case or controversy” requirement for federal judicial
proceedings significantly limits the ability of members of the public to challenge the USPTO’s
decision to grant a patent. Unless the patent holder becomes involved in an actual, continuing
controversy with another person, that person cannot successfully request that a court determine
whether the patent is valid or not. To address this perceived deficiency, Congress established
several administrative procedures that are conducted by the USPTO’s Patent Trial and Appeal
Board, or PTAB,31 through which any interested person may challenge the validity of an issued
patent. Three trial proceedings comprise the current system of administrative patent challenges:
inter partes review (IPR), post-grant review (PGR), and the transitional post-grant review for
covered business method patents (CBM). The three proceedings have different rules, timing, and
eligibility requirements.32 The proceedings may result in the confirmation of patentability of the
27 Colleen V. Chien, Patently Protectionist, 50 WILLIAM & MARY L. REV. 63, 70 (2008) (patent cases comprise 85% of
the ITC’s Section 337 docket). For more information about Section 337 proceedings, see CRS Report RS22880,
Intellectual Property Rights Protection and Enforcement: Section 337 of the Tariff Act of 1930, by Shayerah Ilias
Akhtar.
28 35 U.S.C. § 282.
29 For more on declaratory judgment actions in patent cases, see CRS Report RL34156, A Nonrepudiating Patent
Licensee’s Right To Seek Declaratory Judgment of Invalidity or Noninfringement of the Licensed Patent: MedImmune
v. Genentech, by Brian T. Yeh.
30 The requirement that an immediate, concrete dispute between the patent owner and another individual arises because
the U.S. Constitution vests the federal courts with jurisdiction only where a “case or controversy” exists. U.S. CONST.,
Art. III, Sec. 2, cl. 1. A charge of patent infringement typically satisfies the “case or controversy” requirement. See
Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329 (Fed. Cir. 2008).
31 The PTAB’s membership consists of the USPTO director, deputy director, the Commissioner for Patents, the
Commissioner for Trademarks, and the administrative patent judges. 35 U.S.C. § 6(a).
32 The USPTO provides a helpful chart that compares the major differences between the three administrative trials, in
terms of (1) who may file a petition with the USPTO to institute the review; (2) when such a petition is allowed; (3) the
estoppel provisions applicable to the review (to prevent individuals from making repetitive arguments during later
(continued...)
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original claims, an amended patent with narrower claims, or a declaration of patent invalidity.33 A
party dissatisfied with the PTAB’s final written decision in an IPR, PGR, or CBM review may
appeal directly to the Federal Circuit.
Patent Assertion Entities34
“Patent assertion entities” are people or companies that do not develop, manufacture, or sell any
product covered by the patents they own. The business model of a patent assertion entity (PAE)
instead focuses on buying and asserting patents against companies that have already begun using
and developing the patent, often without knowledge of the PAE’s ownership of the patent.35 PAEs
emerged alongside the burgeoning tech industry around the turn of the 21st century and gained
notoriety with lawsuits claiming exclusive ownership of such ubiquitous technologies as wireless
email, digital video streaming, and the interactive web.36 The vast majority of lawsuits brought by
PAEs end in settlements because litigation is risky, costly, and disruptive for defendants, and
PAEs often offer to settle for amounts well below litigation costs to make the business decision to
settle an obvious one.37 PAEs are frequently referred to as “patent trolls,” after the villains of
folklore known to lie in wait under bridges they did not build, then emerge from the smog to
demand tolls from unsuspecting travelers.38 The term “troll” is controversial because it is both
pejorative and ambiguous, often used imprecisely for any opportunistic or unpopular patent
holder.39
Critics of PAEs argue that they extort the patent system through litigation by extracting licensing
fees or damage awards from companies that cannot afford the cost of litigation. Critics also argue
that “patent trolling” deters innovation and discourages companies from seeking patents, and thus
delivering new products to the market.40 However, defenders of PAEs argue that they actually
(...continued)
proceedings—either in federal court, the ITC, or in a USPTO administrative proceeding); (4) standards to trigger the
review; (5) the standard to prove invalidity; (6) time limits for completing the review; and (7) the basis for challenging
validity of the patent, available at http://beta.uspto.gov/sites/default/files/ip/boards/bpai/
aia_trial_comparison_chart.pptx.
33 35 U.S.C. §§ 318(b); 328(b).
34 For comprehensive background information on these entities, see CRS Report R42668, An Overview of the “Patent
Trolls” Debate, by Brian T. Yeh.
35 FEDERAL TRADE COMMISSION, THE EVOLVING IP MARKETPLACE: ALIGNING PATENT NOTICE AND REMEDIES WITH
COMPETITION 67-68 (2011).
36 See Gerard N. Magliocca, Blackberries and Barnyards: Patent Trolls and the Perils of Innovation, 82 NOTRE DAME
L. REV. 1809 (2007).
37 John R. Allison, Mark A. Lemley & Joshua Walker, Patent Quality and Settlement Among Repeat Patent Litigants,
99 GEO. L.J. 677, 694 (2011).
38 The term was coined at Intel in 2001 as a pithy label for litigants asserting patents that they owned but did not
practice and which they typically acquired. An Intel Corporation vice president had been sued after referring to such
litigants as “patent extortionists.” See Joff Wild, The Real Inventors of the Term “Patent Troll” Revealed, IAM
MAGAZINE, August 22, 2008, http://iam-magazine.com/blog/detail.aspx?g=cff2afd3-c24e-42e5-aa68-a4b4e7524177.
39 See, e.g., Ronald S. Katz et al., Patent Trolls: A Selective Etymology, IP LAW 360, March 20, 2008,
http://manatt.com/uploadedFiles/News_and_Events/Articles_By_Us/patentroll.pdf; see also Jenna Greene, Trolls?
Patent Director Says the Term Isn’t Helpful, NAT’L LAW JOURNAL, Jan. 22, 2015 (quoting USPTO Director Michelle
Lee: “I don’t find the term [patent troll] helpful. It means different things to different people. We need to focus on
behavior.”).
40 See, e.g., James Bessen et al., The Private and Social Costs of Patent Trolls, REGULATION 26, 31-35 (2006).
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promote invention by increasing the liquidity and managing the risk of investments in applied
research and invention, as well as by compensating small inventors.41 PAEs’ strongest allies
include universities and other nonpracticing entities that benefit from having PAEs as buyers for
their patents and are not as vulnerable to lawsuits because they ordinarily do not make or sell
anything that could be infringing.42
Legislation in the 114th Congress
The remainder of this report discusses and analyzes the key provisions of legislative proposals
that have been introduced in the 114th Congress related to patent litigation abuse. The subject
matter of the patent law reforms is presented below in no particular order.
Heightened Pleading Requirements
According to the Federal Rules of Civil Procedure, a complaint for patent infringement43 must
include four statements that assert jurisdiction, patent ownership, patent infringement by the
defendant, and a demand for relief.44 Plaintiffs typically rely upon the Federal Rules of Civil
Procedure’s Form 18 to structure their patent infringement complaint. Generally, the Federal
Circuit has applied the “notice pleading standard” to patent infringement pleadings for the
purpose of a motion to dismiss for failure to state a claim (a typical method by which a defendant
may attempt to have a case dismissed at the beginning of the case). Under this standard, a court
finds that the patent pleading statements contain sufficient particularity to survive a motion to
dismiss for failure to state a claim if they notify parties of the general issues of the case. In K-
Tech Telecommunications v. Time Warner Cable, the Federal Circuit held that the information
required by the Federal Rules of Civil Procedure’s Form 18 is sufficient for pleading a patent
infringement claim as the form states a plausible claim and places the alleged infringer on
notice.45 Additionally, the Federal Circuit in McZeal v. Sprint Nextel Corporation found that a
party does not need to describe the relationship between each element of the claim and the
infringing device in a patent infringement complaint.46 According to the court, specific
information such as this “is something to be determined through discovery.”47
The Innovation Act, H.R. 9, proposes additional heightened initial pleading requirements for an
infringement claim, as compared to the current requirements under the Federal Rules of Civil
Procedure’s Form 18. Under these new requirements, a party alleging infringement in a complaint
must include specific details regarding the following:
41 See, e.g., Ron Epstein, Debunking the ‘Patent Troll’ Myth, BLOOMBERG BUSINESSWEEK, August 15, 2011, available
at http://www.businessweek.com/stories/2010-02-01/debunking-the-patent-troll-mythbusinessweek-business-news-
stock-market-and-financial-advice.
42 See Mark A. Lemley, Are Universities Patent Trolls?, 18 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 611, 618
(2008).
43 As previously discussed, patent infringement is the unauthorized making, using, offering for sale, selling, and
importing of a patented invention. 35 U.S.C. § 271.
44 Fed. R. Civ. P. Form 18.
45 K-Tech Telecommunications v. Time Warner Cable, 714 F.3d 1278 (Fed. Cir. 2013).
46 McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1358 (Fed. Cir. 2007).
47 Id.
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• each patent allegedly infringed;
• all claims necessary to produce the identification of each process, machine,
manufacture, or composition of matter (“accused instrumentality”) that is alleged
to infringe any claim of each patent identified above;48
• for each accused instrumentality alleged to infringe a claim, an identification
with particularity (if known) of the name or model number of each accused
instrumentality or a description of each accused instrumentality;
• for each accused instrumentality, a clear and concise statement of how it
infringes each claim of each patent;
• for each claim of indirect infringement, the acts of the alleged indirect infringer
that contribute to, or are inducing, a direct infringement;
• the authority of the party alleging infringement to assert each patent and the
grounds for the court’s jurisdiction; and
• each complaint filed that asserts any of the same patents49
Like the Innovation Act, the Senate’s PATENT Act also proposes heightened pleading
requirements, including such details as
• the identification of each patent allegedly infringed;
• the identification of each claim of each patent that is allegedly infringed;
• the identification (including the name, model number, or description) of the
accused instrumentality that has allegedly infringed the patent;
• a description of how the accused instrumentality is allegedly infringing specific
elements of the claim; and
• a description of the acts of the alleged infringer that allegedly contributed to or
induced the direct infringement, for claims of indirect infringement.50
The PATENT Act would not require such details in the initial pleading as the authority of the
party alleging infringement to assert each patent and the principal business of the party alleging
infringement, as outlined in the House’s Innovation Act. Instead, the Senate bill would require the
patentee to disclose specific information to the court and each adverse party no later than 14 days
after the filing of the pleading.51 These disclosure requirements would cover the identity of the
patent assignee(s), the right to enforce the patent at issue, any ultimate parent entity, and entities
48 As originally introduced, H.R. 9 would have required “[a]n identification of each claim of each patent ... that is
allegedly infringed” (which is also the same information required by the PATENT Act). However, the Manager’s
Amendment to the Innovation Act that was approved by the House Judiciary Committee on June 11, 2015, replaces that
language with the text described above, thereby lowering the standard of this particular pleading requirement.
49 H.R. 9, § 3, adding new 35 U.S.C. § 281A.
50 S. 1137, § 3, adding new 35 U.S.C. §281A.
51 Id., adding new 35 U.S.C. § 281B.
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that would have a particular financial interest in the patent at issue.52 The PATENT Act would
also explicitly eliminate the Federal Rules of Civil Procedure’s Form 18.53
Both the PATENT Act and the Innovation Act provide that if the information is not readily
accessible, then the party may generally describe the information with an explanation of why
such undisclosed information was not readily accessible.54 Similarly, both bills also exempt from
the proposed heightened pleading requirements any civil action that includes a claim for relief
arising under Section 271(e)(2) of the current Patent Act relating to certain drug claims.55
Commentators have linked “patent trolls” together with the current patent pleading requirements
for a patent infringement claim.56 They have argued that the minimal information required in a
patent infringement complaint encourages PAEs to initiate “frivolous” lawsuits that otherwise
would not survive the initial pleading state under a more stringent standard. Proponents of these
pleadings changes state that such heightened pleading requirements would force a plaintiff to
consider the alleged infringement instrumentality more carefully and decide whether infringement
has occurred before filing the suit.57 Supporters of heightened pleading requirements also argue
that “not providing the necessary information at the beginning of a case in the complaint slows
down the litigation and makes it inefficient and expensive for both parties.”58 Additionally, these
proponents assert that heightened pleadings standards would not impose a greater burden on the
plaintiff, who would develop a good-faith case, and providing such information at the early stages
of litigation would improve efficiency and costs.59 However, some commentators believe that the
heightened pleading requirements would render patent enforcement impractical. According to
these opponents, the plaintiff may not have the information available at this stage of litigation, as
the discovery process typically reveals the information necessary to build a successful
infringement claim.60
52 Id.
53 S. 1137, § 3. Note that the U.S. Supreme Court in April 2015 issued an order that would abolish Form 18; this
change will go into effect on December 1, 2015, unless Congress blocks or modifies the order. For more details on this
order, see CRS Legal SidebarWSLG1304, Bye-bye Bare-Bones Patent Complaints - Supreme Court Eliminates Form
18, by Emily M. Lanza.
54 H.R. 9, § 3, adding new 35 U.S.C. § 281A; S. 1137, § 3, adding new 35 U.S.C. § 281A.
55 The Innovation Act and the PATENT Act provide an exception to this disclosure requirement for civil actions that
include a specific cause of action for patent infringement involving pharmaceutical drugs. The particular cause of
action, established by the Hatch-Waxman Act and codified in 35 U.S.C. § 271(e)(2), allows a brand-name drug
company to enforce its patents against a potential generic competitor at such time that the generic firm files an
application (a so-called Abbreviated New Drug Application (ANDA)) with the Food and Drug Administration, seeking
marketing approval. For more information on this provision, see CRS Report R42354, Patent Infringement and
Experimental Use Under the Hatch-Waxman Act: Current Issues, by John R. Thomas.
56 See, e.g., Patent Progress, Common Sense Solutions to the Patent Control Problem, at http://www.patentprogress.org/
patent-troll-reform/common-sense-solutions-to-the-patent-troll-problem/.
57 H.Rept. 113-279, at 23.
58 Id.
59 Id.
60 See Edward R. Ergenzinger and Andrew R. Shores, “Here We Go Again: The Next Round of Legislative Patent Law
Reform,” at http://www.wardandsmith.com/articles/the-next-round-of-legislative-patent-law-reform.
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Limits on Discovery and Cost-Shifting
The Federal Rules of Civil Procedure permit discovery61 into any unprivileged matter that is
relevant to the claim or defense of any party.62 This broad definition leads to costly discovery in
patent litigation.63 During the discovery process, the court may decide to hold a “Markman
hearing,”64 during which a judge examines evidence concerning the parties’ disputes over the
meaning and language of a patent claim that defines the boundaries of the invention. (Also
referred to as “claim construction,” or the interpretation of a patent’s claims, this process largely
determines the scope of the patent owner’s proprietary rights.) For these hearings, courts must
consider volumes of evidence produced during discovery relating to many different aspects of
claim construction including evidence regarding the definition, meaning, scope, and pertinent art
of the claim.65
The Innovation Act (as reported) would postpone discovery if the defendant makes a motion to
(1) sever a claim or drop a party for misjoinder; (2) transfer the action to another venue; or (3)
dismiss the action.66 Such motion must be filed within 90 days after service of the complaint and
must include a declaration or other evidence in support of the motion. There are four exceptions
to this stay of discovery provision:
1. the court may allow such discovery that the court deems is necessary to decide
the motion to sever, drop a party, dismiss, or transfer the action;
2. the provision does not apply to an action in which the patent holder seeks a
preliminary injunction to prevent harm arising from the manufacture, use, sale, or
importation of an allegedly infringing product that competes with a product made
or sold by the patent holder;
3. parties may consent to voluntary exclusion from these proposed limitations on
discovery; and
4. the provision does not apply to any civil action that includes a claim for relief
arising under 35 U.S.C. § 271(e)(2) relating to certain drug claims.67
Like the Innovation Act (as reported), the Senate’s PATENT Act would require a court to stay
discovery pending the resolution of preliminary motions (which must be filed prior to the first
responsive pleading), including the motion to dismiss, the motion to transfer venue, and the
61 Discovery is the process to gather information in preparation for trial.
62 See Fed. R. Civ. P. 26.
63 See Chief Judge Randall R. Rader, The State of Patent Litigation, Eastern District of Texas Bar Association Judicial
Conference, Sept. 27, 2011.
64 This type of hearing developed as the result of the U.S. Supreme Court decision in Markman v. Westview
Instruments, Inc., 517 U.S. 370 (1996).
65 See Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005).
66 H.R. 9 (as reported), § 3(d), adding new 35 U.S.C. § 281B(a). As introduced, the Innovation Act would have
required that hearings relating to patent claim construction occur prior to significant fact discovery, as the bill would
have limited discovery “to information necessary for the court to determine the meaning of the terms used in the patent
claim.” H.R. 9 (as introduced), § 3, adding new 35 U.S.C. § 299A. In addition, the Innovation Act (as introduced)
would have granted courts with the discretion to permit discovery “in special circumstances” to prevent manifest
injustice. Id.
67 H.R. 9 (as reported), § 3(d), adding new 35 U.S.C. § 281B(d).
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motion to sever accused infringers.68 The bill would provide a court with the discretion to allow
limited discovery to resolve these motions or a motion for a preliminary injunction or to preserve
evidence or otherwise prevent specific prejudice to a party, if the court would find that additional
discovery is necessary.69 Similar to the Innovation Act, the PATENT Act would also grant parties
with the opportunity to exclude themselves voluntarily from these proposed limitations.
Supporters of these proposed limitations on discovery note that the technical nature and
complexity of patent litigation inherently leads to the extensive document discovery, and
correspondingly encourages frequent settlements to avoid this high cost.70 These supporters have
stated that the propensity towards settlements in patent litigation encourages PAEs to file
infringement suits. Critics of these discovery limitations have raised concerns that the discovery
limitation provision may cause “patent litigation in the overwhelming majority of patent cases
[to] incur significant across-the-board delays and increased expense for all parties.”71 Others have
argued that the discovery stay provision could be subject to abuse; for example, a “defendant
could ... invoke a stay of discovery by moving to transfer venue or to sever, even though the
merits of a venue or severance motion have no bearing whatsoever on whether or not the plaintiff
will ultimately be allowed discovery.”72
Transparency of Patent Ownership73
Under current law, within a month after the filing of a civil action involving a patent, the clerks of
the federal courts must provide written notice of the action to the USPTO director that describes
the names and addresses of the parties, the name of the inventor, and the number of the patent
upon which the action is based.74 The USPTO director is then required to enter this information in
the file of that patent.
Section 4 of the Innovation Act would amend this section of the Patent Act to impose specific
disclosure requirements upon plaintiffs upon the filing of an initial complaint for patent
infringement. (Similar to the exemption for the new pleading requirements, the Innovation Act’s
patent ownership disclosure requirement would not apply to any civil action that includes a cause
of action for patent infringement under 35 U.S.C. § 271(e)(2).) 75 Upon the filing of an initial
complaint for patent infringement, plaintiffs would be required to disclose to the USPTO, the
court, and all adverse parties the following information relating to entities that own or have a
financial interest in the patent:
1. the assignee(s) of the patent(s) involved in the case;
68 S. 1137, § 4, adding new 35 U.S.C. § 299B.
69 Id.
70 H.Rept. 113-279, at 9.
71 The Impact of Abusive Patent Litigation Practices on the American Economy: Hearing Before the Senate Judiciary
Comm., 114th Cong., 1st Sess. (2015) (Statement of Hans Sauer, Deputy General Counsel for Intellectual Property,
Biotechnology Industry Organization).
72 Innovation Alliance Priority Positions on S. 1137, the Senate Protecting American Talent and Entrepreneurship
(PATENT) Act, May 6, 2015, at http://innovationalliance.net/from-the-alliance/innovation-alliance-priority-positions-s-
1137-senate-protecting-american-talent-entrepreneurship-patent-act/.
73 This topic is often referred to as the disclosure of the “real party-in-interest.”
74 35 U.S.C. § 290.
75 H.R. 9, § 4(a)(3), adding new 35 U.S.C. § 290(b)(2).
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2. any entity with a right to sublicense or enforce the patent(s) at issue;
3. any entity, other than the plaintiff, that the plaintiff knows to have a financial
interest76 in the patent(s) at issue or in the plaintiff;
4. the ultimate parent entity77 of any assignee, or the entities identified in #2 and #3
above;
5. a clear and concise description of the principal business, if any, of the party
alleging infringement;78
6. a list of each complaint filed, of which the party alleging infringement has
knowledge, that asserts or asserted any of the patents identified above;79
7. for each patent identified, a statement as to whether the patent is subject to
certain licensing requirements (imposed by the federal government, a foreign
government, or by a standards development organization).80
Section 4 of the Innovation Act would require the plaintiff to notify the USPTO of any changes in
the identity of the assignee of the patent or the entities described above, within 90 days of such
change.81 Failure to comply with this ongoing duty of disclosure would result in the plaintiff
being barred from recovering either enhanced damages or reasonable fees and other expenses
incurred in connection with the infringement lawsuit (with respect to infringing activities
occurring during the period of noncompliance), “unless the denial of such damages or fees would
be manifestly unjust.”82 In addition, the Innovation Act directs a court to award to a prevailing
party accused of infringement any reasonable fees and other expenses that the party incurred to
uncover the updated information about the assignee or entities, “unless such sanctions would be
unjust.”83
Section 4 of the Innovation Act grants the USPTO director the power to issue regulations to
establish a registration fee in order to recover the cost of administering the “disclosure of
interests” requirement, which includes the costs to facilitate collection and maintenance of the
information submitted by plaintiffs and “to ensure the timely disclosure of such information to the
public.”84
76 The Innovation Act defines “financial interest” to mean (1) with regard to a patent, the right of a person to receive
proceeds related to the assertion of the patent(s), and (2) with regard to the plaintiff, direct or indirect ownership or
control by a person of more than 5% of such plaintiff. H.R. 9, § 4(a)(3), adding new 35 U.S.C. § 290(e)(1). However,
the definition expressly excludes anyone who owns shares or other interests in a mutual or common investment fund
(unless the person participates in the management of such fund) and also excludes the proprietary interest of a
policyholder in a mutual insurance company or of a depositor in a mutual savings association, unless the outcome of
the civil action could substantially affect the value of that proprietary interest.
77 The Innovation Act defines “ultimate parent entity” by reference to 16 C.F.R. § 801.1(a)(3), which provides that the
term “means an entity which is not controlled by any other entity.” H.R. 9, § 4(a)(3), adding new 35 U.S.C. § 290(e)(3).
78 Additional required information added by the Manager’s Amendment to the Innovation Act, which was approved by
the House Judiciary Committee. See H.R. 9 (as reported), § 4(a)(3), adding new 35 U.S.C. § 290(b)(1)(E).
79 Id., adding new 35 U.S.C. § 290(b)(1)(F).
80 Id., adding new 35 U.S.C. § 290(b)(1)(G).
81 H.R. 9, § 4(a)(3), adding new 35 U.S.C. § 290(d)(1).
82 Id., adding new 35 U.S.C. § 290(d)(2)(A).
83 Id., adding new 35 U.S.C. § 290(d)(2)(B).
84 Id. § 4(c).
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According to the sponsors of the Innovation Act, the amendments made by Section 4 “will ensure
that patent trolls cannot hide behind a web of shell companies to avoid accountability for bringing
frivolous litigation.”85 However, a critic of this provision argued that it would be “needlessly
burdensome” and that the required disclosure “could lead to the revelation of confidential
financial and licensing agreements”;86 furthermore, he noted that if such information is relevant to
the litigation, “it is readily discoverable under current rules, with appropriate protective orders to
maintain needed confidentiality.”87
The PATENT Act would require similar initial disclosures by a patentee in a patent infringement
lawsuit as the Innovation Act.88 Within 14 days of the patentee filing the pleading, the patentee
would be required to notify the court and each adverse party of the following information:
1. The identity of each:
a. assignee of the patent(s) at issue, and any “ultimate parent entity”89 thereof;
b. entity with a right to sublicense to unaffiliated entities or to enforce the
patent(s) at issue, and any ultimate parent entity thereof;
c. any other entity that the patentee knows to have a financial interest90 in the
patent(s) at issue, or in the patentee (and any ultimate parent entity thereof);
and
2. For each patent that the patentee alleges to be infringed:
a. a list of other complaints filed by the patentee in the three years before the
filing of the action, as well as any other complaints filed in the United States
(not by the patentee but that the patentee was aware of) that asserted the
patent during the same three-year period;
b. a statement as to whether the patent is subject to certain licensing
requirements (imposed by the federal government or by a standards
development organization).91
The PATENT Act would allow the patentee to file such information under seal if the patentee
considers the information to be confidential (such as the home addresses of any individuals);92 the
Innovation Act does not contain a similar provision.
85 Press Release: Goodlatte, Defazio, Issa, Nadler, Smith, Lofgren, Eshoo Introduce Patent Litigation Reform Bill, Feb.
5, 2015, available at http://judiciary.house.gov/index.cfm/2015/2/goodlatte-defazio-issa-nadler-smith-lofgren-eshoo-
introduce-patent-litigation-reform-bill.
86 Howard Klein, Patent Law Reform—Proceed with Caution, Law360.com, Mar. 9, 2015, at http://www.law360.com/
articles/626618/patent-law-reform-proceed-with-caution.
87 Id.
88 S. 1137, § 3(b)(1), adding new 35 U.S.C. § 281B(b). However, unlike the Innovation Act, the PATENT Act would
NOT create an exception to the patent ownership disclosure requirement for a civil action that includes a cause of
action for patent infringement under 35 U.S.C. § 271(e)(2).).
89 The PATENT Act uses the same definition for “ultimate parent entity” as the Innovation Act.
90 The PATENT Act defines the term “financial interest” in a similar fashion to the Innovation Act, except that S. 1137
would, with regard to the patentee, apply the term to persons who have “direct or indirect ownership or control” of
more than 20% of the patentee (compared to the Innovation Act’s 5%).
91 For more information about the promise of members of standard-setting organizations to license certain patented
inventions to others on “fair, reasonable, and nondiscriminatory (FRAND) terms,” see CRS Report R42705,
Availability of Injunctive Relief for Standard-Essential Patent Holders, by Brian T. Yeh.
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Within a month of the disclosure of the information listed above, the patentee would be required
to file the information described in #1 above with the USPTO.93 However, unlike the Innovation
Act, the PATENT Act does not appear to place upon the patentee an ongoing duty of disclosure of
such information to the USPTO.
In addition, Section 10 of the PATENT Act would require that an assignment of all substantial
rights in any issued patent (and the name of the assignee and the ultimate parent entity of the
assignee) be recorded in the USPTO within the following time periods:
1. no later than the date on which the patent is issued; and
2. when any subsequent assignment is made that results in a change to the ultimate
parent entity
a. no later than three months after such assignment is made; or,
b. in the case of an assignment made as part of a corporate acquisition, not later
than six months after the closing date of such acquisition.94
The PATENT Act provides similar consequences as the Innovation Act for failure to comply with
the duty to disclose this information to the USPTO: that is, the party asserting infringement of a
patent would be denied the right to receive either enhanced damages or reasonable fees and other
expenses incurred in connection with the infringement lawsuit (with respect to infringing
activities occurring during the period of noncompliance).95 Like the Innovation Act, the PATENT
Act would also require a court to award to a prevailing accused infringer reasonable attorney fees
and expenses incurred to discover the identity of any undisclosed entity that was required to be
disclosed.96 Under the PATENT Act, the USPTO Director would be given the same authority
granted by the Innovation Act to establish fees to administer the process of collecting and
maintaining the submitted assignment information.97
Stays of Litigation Brought Against Infringing Customers
Under the Patent Act, anyone who “makes, uses, offers to sell, or sells any patented invention”98
is potentially liable for patent infringement if such actions occur without the authority of the
patent holder. Thus, the patent holder has the right to bring a lawsuit against not only the
manufacturer or seller of products that incorporate allegedly infringing components, but also the
customers who purchase and use those products.99 Over the past few years, businesses (including
restaurants, retailers, and grocery stores) and individuals increasingly have faced charges of
patent infringement for their use of certain equipment that contain technologies such as Wi-Fi,
(...continued)
92 Id., adding new 35 U.S.C. § 281B(e).
93 Id. § 3(b)(1), adding new 35 U.S.C. § 281B(d).
94 Id. § 10(a), adding new 35 U.S.C. § 261(A)(b), (c).
95 Id., adding new 35 U.S.C. § 261(A)(d).
96 Id.
97 Id. § 10(b).
98 35 U.S.C. § 271(a) (emphasis added).
99 See Aro Mfg. Co., Inc. v. Convertible Top Replacement Co., Inc., 377 U.S. 476, 484 (1964) (explaining that “it has
often and clearly been held that unauthorized use, without more, constitutes infringement.”).
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PDF scanning, email, and vehicle tracking.100 A witness at a congressional hearing in 2013
described the situation as follows:
Another patent litigation practice that has been sharply criticized is the institution of suits
against large numbers of assemblers, distributors or retailers rather than the original
manufacturer or provider of the component or product alleged to infringe. This tactic takes
advantage of the fact that such suits threaten defendants with the disruption of aspects of
their businesses that are at best tangentially related to the invention which is the subject of
the patent, and that each individual defendant has less motivation to litigate the issue to final
conclusion than the manufacturer of the product at issue. The result can be to collect
enormous sums as the result of a very large number of small settlements whose cumulative
value far exceeds the amount that could have been recovered from the original
manufacturer.101
The judicially created response to such customer lawsuits is the so-called “customer suit
exception” doctrine, which allows courts to prioritize litigation against or brought by the
manufacturer of infringing goods over a lawsuit by the patent owner against customers of the
manufacturer in the interest of efficiency and judicial economy.102 The doctrine permits a court to
stay an earlier-filed action against a customer involving an infringement product pending the
outcome of a later-filed declaratory judgment action brought by the manufacturer of the accused
product. As explained by the First Circuit Court of Appeals (prior to the creation of the Federal
Circuit), “At the root of the preference for a manufacturer’s declaratory judgment action is the
recognition that, in reality, the manufacturer is the true defendant in the customer suit.... [I]t is a
simple fact of life that a manufacturer must protect its customers, either as a matter of contract, or
good business, or in order to avoid the damaging impact of an adverse ruling against its
products.”103 However, the doctrine “has long existed in a state of relative disuse” and the Federal
Circuit has affirmed its application in only one case in the last three decades.104
Section 5 of the Innovation Act would codify a modified version of the customer suit exception
by amending the Patent Act105 to require a court to suspend or postpone litigation against a
customer of a product or process that contains allegedly infringing technologies, if several
requirements are satisfied:106
100 See Colleen V. Chien & Edward Reines, Why Technology Customers Are Being Sued en Masse for Patent
Infringement & What Can Be Done (Santa Clara Univ. Sch. of L. Legal Studies Research Papers Series, Working Paper
No. 20-13, 2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2318666.
101 Abusive Patent Litigation: The Impact on American Innovation & Jobs, and Potential Solutions: Hearing Before the
House Judiciary Comm., Subcomm. on Courts, Intellectual Property, and the Internet, 113th Cong., 1st Sess. (2013)
(Statement of Philip S. Johnson, Chief Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st Century
Coalition for Patent Reform), at 7, available at http://judiciary.house.gov/_files/hearings/113th/03142013_2/
Johnson%2003142013.pdf.
102 Spread Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011).
103 Codex Corp. v. Milgo Electronic Corp., 553 F.2d 735 (1st Cir.), cert. denied, 434 U.S. 860 (1977).
104 Brian J. Love and James C. Yoon, Expanding Patent Law’s Customer Suit Exception, 93 B.U. L. REV. 1605, 1614
(Oct. 2013), citing Katz v. Lear Siegler, Inc., 909 F.2d 1459 (Fed. Cir. 1990).
105 H.R. 9, § 5(a), replacing existing 35 U.S.C. § 296 that contains an unrelated provision that attempted to make state
governments and state institutions liable for monetary damages in a patent infringement lawsuit. This provision that
sought to abrogate a state’s Eleventh Amendment sovereign immunity has been invalidated by the Supreme Court in a
1999 decision, Florida Prepaid v. College Savings Bank, 527 U.S. 627 (1999). For more information on this issue, see
CRS Report RL34593, Infringement of Intellectual Property Rights and State Sovereign Immunity, by Brian T. Yeh.
106 H.R. 9 (as reported), § 5(a), adding revised 35 U.S.C. § 296(b)(1)-(3). As originally introduced, the Innovation Act
(continued...)
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1. the manufacturer is a party to the civil action or a separate action involving the
same patent(s);
2. the customer agrees to be bound by the decisions of the court in the action
involving the manufacturer, with respect to any issues that the customer and
manufacturer have in common; and
3. the customer requests the court to stay the action no later than the later of (a) 120
days after the date on which the first pleading in the action is served (if such
pleading specifically identifies the product or process that is the source of the
customer’s alleged infringement of the patent, and the pleading specifically
explains how the product or process is alleged to infringe the patent), or (b) the
date on which the first scheduling order in the case is entered.
The Innovation Act provides two limited exceptions to the manufacturer and customer’s
entitlement to a stay: (1) if the action involving the manufacturer will not resolve a major issue in
the suit against the customer; or (2) if the stay unreasonably prejudices and would be manifestly
unjust to the party seeking to lift the stay.107 In addition, like the exemption for the new pleading
and patent ownership disclosure requirements, the Innovation Act exempts from the customer suit
stay provision any action that includes a cause of action for patent infringement under 35 U.S.C.
§ 271(e)(2).108
Though the stay provision would only postpone, and not terminate, a cause of action against the
customer, supporters of the stay provision assert that “in the vast majority of cases, a suit
involving the manufacturer will eliminate all potential infringement liability of the customer.”109
The Innovation Act (as reported) contains definitions of “covered customer,” “retailer,” and “end
user” that limit the applicable scope of the customer stay provision, as follows:
1. A “covered customer” is a retailer or end user who is accused of patent
infringement based on sale or use of a product/process alleged to infringe a
patent, if the retailer or end user did not materially modify such product/process
for their own purposes.
2. An “end user” is a user of a product/process alleged to infringe a patent and also
an affiliate of such an end user, but does not include an entity that manufactures
(or causes the manufacture of) the product/process.
3. A “retailer” is an entity that generates its revenues mostly through sale of
consumer goods or services, or an affiliate of such an entity, but does not include
an entity that manufactures (or causes the manufacture of) the product/process
alleged to infringe a patent.
The PATENT Act includes a customer stay provision similar to that of the Innovation Act (as
reported).110
(...continued)
would have required both the manufacturer of the product and the customer to consent to the stay of the action in
writing. H.R. 9 (as introduced), adding revised 35 U.S.C. § 296(a)(1).
107 Id., adding revised 35 U.S.C. § 296(c).
108 Id., adding revised 35 U.S.C. § 296(d).
109 H.Rept. 113-279, p. 30.
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Both the Innovation Act (as reported) and the PATENT Act would require the written consent of
the manufacturer to obtain a stay of an action against a customer only if the manufacturer had
been made a party to the action on motion by the customer.111 The PATENT Act contains the same
provisions as the Innovation Act pertaining to situations in which a stay may be lifted: if the
action involving the manufacturer will not resolve major issues in the suit against the customer, or
the stay unreasonably prejudices or is manifestly unjust to the party seeking to lift the stay.112
Also like the Innovation Act, the PATENT Act would exempt from the customer suit stay
provision any action that includes a cause of action for patent infringement under 35 U.S.C. §
271(e)(2).113
Shifting of Attorney Fees
For many years, patent cases were subject to the “American Rule,” under which “[e]ach litigant
pays his own attorney fees, win or lose.”114 Then in 1947, Congress enacted a fee-shifting
provision that gave district courts the power to award attorney fees to the prevailing party in
patent suits. The 1952 revision of the patent laws codified this provision at 35 U.S.C. § 285. This
section of the Patent Act provides a court with the discretion to award “reasonable” attorney fees
to the prevailing party (plaintiff or defendant) only “in exceptional cases.”
However, the Federal Circuit in its 2005 opinion, Brooks Furniture Manufacturing, Inc. v.
Dutailier International, Inc.,115 established that courts may find an “exceptional case” under
Section 285 in only two limited circumstances: (A) “when there has been some material
inappropriate conduct” (during the litigation or in obtaining the patent from the USPTO) or (B)
when the litigation is both (1) brought in subjective bad faith and (2) objectively baseless. In
addition, Brooks Furniture held that the prevailing party must prove its entitlement to attorney
fees by “clear and convincing evidence.”116 In part due to this strict standard, federal judges have
rarely award these fees.117
In April 2014, the Supreme Court in Octane Fitness v. Icon Health & Fitness unanimously
overruled the Federal Circuit’s Brooks Furniture standard because the two-prong test “is unduly
rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”118
Instead, the Court adopted a more lenient standard, holding “that an ‘exceptional’ case is simply
one that stands out from others with respect to the substantive strength of a party’s litigating
(...continued)
110 S. 1137, § 4, adding new 35 U.S.C. § 299A.
111 H.R. 9 (as reported), § 5, adding revised 35 U.S.C. § 296(b)(4); S. 1137, § 4, adding new 35 U.S.C. § 299A(c).
112 S. 1137, § 4, adding new 35 U.S.C. § 299A(d).
113 Id., adding new 35 U.S.C. § 299A(b).
114 Marx v. General Revenue Corp., 133 S. Ct. 1166, 1175 (2013); see also Alyeska Pipeline Service Co. v. Wilderness
Society, 421 U.S. 240, 247-53 (1975) (explaining that “[i]n the United States, the prevailing litigant is ordinarily not
entitled to collect a reasonable attorneys’ fee from the loser.”).
115 Brooks Furniture Mfg., Inc. v. Dutailier Intern., Inc., 393 F.3d 1378 (Fed. Cir. 2005) (overruled by Octane Fitness,
LLC v. ICON Health & Fitness, Inc., No. 12-1184, slip op. (2014)).
116 Id. at 1382.
117 See Randall R. Rader et al., Make Patent Trolls Pay in Court, N.Y. TIMES, June 4, 2013, available at
http://www.nytimes.com/2013/06/05/opinion/make-patent-trolls-pay-in-court.html?_r=0 (noting that “fees were shifted
under Section 285 in only 20 out of nearly 3,000 patent cases filed in 2011.”).
118 Octane Fitness, LLC v. ICON Health & Fitness, Inc., No. 12-1184, slip op. at 1 (2014).
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position (considering both the governing law and the facts of the case) or the unreasonable
manner in which the case was litigated.”119 The Court explained that district courts must make the
Section 285 determination by considering the “totality of the circumstances.”120 The Court also
rejected the Federal Circuit’s requirement that prevailing parties establish their entitlement to
legal fees by “clear and convincing evidence” and instead embraced a “preponderance of the
evidence” standard.121 In a companion case decided the same day as Octane Fitness, the Supreme
Court in Highmark v. Allcare Health Management122 rejected the Federal Circuit’s position that a
district court’s “exceptional case” determination is to be reviewed on appeal “de novo” and
“without deference.” Instead, the Court held that the district court’s Section 285 determination
must be reviewed on appeal under an abuse-of-discretion standard.123
By overruling the Federal Circuit’s restrictive interpretation of Section 285, Octane Fitness and
Highmark provide district courts with greater discretion in deciding whether to award fees, thus
likely increasing the number of patent cases in which attorney fees are shifted. Thus, in
evaluating whether to award attorney fees, a court must first assess whether the case is
“exceptional” in accordance with the standard announced in Octane Fitness, and if so, the court
may (or may not) choose to award the fees. It is unclear the extent to which these recent Supreme
Court decisions will impact the filing of patent infringement lawsuits by patent assertion entities,
yet supporters of patent litigation reform express hope that the increased prospect of paying the
other party’s litigation expenses could be a significant financial disincentive to PAEs’ litigation
tactics.124 However, some observers predict that Octane Fitness and Highmark will not have a
significant impact on PAEs because fee-shifting will remain limited:
[R]ecent Supreme Court cases ... make clear that a case is exceptional only if it is unusually
weak. Moreover, because district courts now have substantial discretion to decide whether to
award fees, district courts that signal a reluctance to shift fees will invariably attract greater
proportions of future patent lawsuits from plaintiffs eager to avoid any risk of fee-shifting.
Finally, even when a court does shift fees to a plaintiff, the shell-corporation structure of
many abusive litigants precludes any meaningful recovery for the defendant. So long as the
entity that owns the patent rights holds no other assets, patent plaintiffs can effectively
render themselves judgment proof.125
Section 3(b) of the Innovation Act would amend Section 285 to require a court, in any patent
case, to award attorney fees to a prevailing party (plaintiff or defendant), unless the court finds
that either
119 Id. at 7.
120 Id. at 8.
121 Id. at 11.
122 Highmark Inc. v. Allcare Health Mgmt.Sys., No. 12-1163, slip. op. (2014).
123 Id. at 5.
124 Daniel Fisher, Patent Trolls Face Higher Risks As Supreme Court Loosens Fee-Shifting Rule, Forbes, April 29,
2014, at http://www.forbes.com/sites/danielfisher/2014/04/29/patent-trolls-face-higher-risks-as-supreme-court-loosens-
fee-shifting-rule/.
125 Examining Recent Supreme Court Cases in the Patent Area: Hearing Before the House Judiciary Comm., Subcomm.
on Courts, Intellectual Property, and the Internet, 114th Cong., 1st Sess. (2015) (Statement of Andrew J. Pincus,
Partner, Mayer Brown LLP), at 3, available at http://judiciary.house.gov/_cache/files/43c13fd8-8287-4a3f-b172-
67a0b37d236f/02.12.15-pincus-testimony.pdf.
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1. the nonprevailing party’s position and conduct are “reasonably justified in law
and fact”126 or
2. there are “special circumstances (such as severe economic hardship to a named
inventor) [that] make an award unjust.”127
Although not explicitly stated by the legislation, the nonprevailing party would appear to have the
burden of demonstrating the existence of either of these exceptions in order to rebut the
presumption of an award of attorney fees. Supporters of the Innovation Act’s fee-shifting
provision believe that “allowing more liberal shifting of attorney fees against losing parties would
reduce the frequency of such nuisance settlements, and would allow more defendants to challenge
patents that are invalid or that have been asserted beyond what their claims reasonably allow.”128
On the other hand, those wary of fee-shifting provisions are concerned that they may benefit
wealthy corporate parties to the disadvantage of individual inventors. They assert that “[a] ‘loser
pays’ provision will deter patent holders from pursuing meritorious patent infringement claims
and protects institutional defendants with enormous resources who can use the risk of fee-shifting
to force inventors into accepting unfair settlements or dismissing their legitimate claims.”129
The Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act of 2015
(S. 632) does not include a fee-shifting provision; instead, Section 101 of S. 632 (the “findings”
section) asserts that the Supreme Court’s Octane Fitness and Highmark rulings “significantly
reduced the burden on an alleged infringer to recover attorney fees from the patent owner, and
increased the incidence of fees shifted to the losing party.”130
Section 7(a) of the PATENT Act expresses a “sense of Congress that, in patent cases, reasonable
attorney fees should be paid by a nonprevailing party whose litigation position or conduct is not
objectively reasonable.”131 Unlike the Innovation Act’s creation of what appears to be a
presumption of an award of attorney fees, Section 7(b) of the PATENT Act would require the
prevailing party to first make a motion for the fees, after which the court must determine whether
the position of the nonprevailing party was “objectively reasonable in law and fact, and whether
the conduct of the nonprevailing party was objectively reasonable.” If the court finds that the
nonprevailing party’s position and conduct does not satisfy these standards, the court must award
reasonable attorney fees to the prevailing party, unless special circumstances would make an
award unjust.132 On June 4, 2015, the Senate Judiciary Committee approved two additions to the
PATENT Act’s fee-shifting provision:133
1. An explicit statement that “[t]he prevailing party shall bear the burden of
demonstrating that the prevailing party is entitled to an award.”
2. Examples of what constitutes a “special circumstance()... that would make an
award unjust:” such as undue economic hardship to either—
126 H.R. 9, § 3(b), adding revised 35 U.S.C. § 285(a).
127 Id.
128 H.Rept. 113-279, at 21.
129 Id. at 107 (quoting a letter from the American Association for Justice).
130 S. 632, § 101(12).
131 S. 1137, § 7(a).
132 S. 1137, § 7(b), adding revised 35 U.S.C. § 285(a).
133 S. 1137 (as reported), § 7(b), adding revised 35 U.S.C. § 285(a).
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a. a named inventor (the same party cited by the Innovation Act) or
b. an institution of higher education (as defined in section 101(a) of the Higher
Education Act of 1965 (20 U.S.C. § 1001(a)) (a party not listed in the
Innovation Act’s comparable fee-shifting provision)
Some practitioners believe that the Innovation Act’s fee-shifting provision “would likely require
fee awards in more cases than” the PATENT Act’s comparable provision.134
Unlike the Innovation Act, the PATENT Act would exempt from the fee-shifting provision any
action that includes a cause of action for patent infringement under 35 U.S.C. § 271(e)(2).135
Recovery of Fee Awards from Interested Parties
The Federal Rules of Civil Procedure outline when a person must and may join as a party in
litigation. Under Rule 19, a person must join as a party if, in the person’s absence, the court
would be unable to accord complete relief among existing parties, the person is unable to protect
an interest, or a present party would be subject to a substantial risk of incurring multiple
obligations.136 Under Rule 20, a person may join as a plaintiff if all the plaintiffs could claim a
right to relief for injuries arising from the same occurrence or transaction.137 Likewise, persons
may be joined as defendants if any right to relief is asserted against them jointly, severally, or in
the alternative with respect to or arising out of the same transaction or occurrence.138 The Patent
Act outlines mores specific joinder requirements for a patent civil action. Under the Patent Act, a
party may join a patent civil action as a defendant (accused infringer) only if any right to relief is
asserted against the parties jointly and severally,139 or arises out of the same transaction relating to
the making, using, importing into the United States, offering for sale, or selling of the same
accused product/process.140 All defendants in the action must share the same questions of fact for
joinder to occur.141 Joinder cannot occur if “based solely on allegations that they each have
infringed the patent or patents in suit.”142
Section 3(c) of the Innovation Act would establish mandatory joinder rules when the
nonprevailing party alleging infringement is unable to pay the fee award ordered by the court and
other expenses. Thus, this provision would require a court presiding over a patent case to grant a
defendant’s motion to join an “interested party,” “if such defending party shows that the plaintiff
134 Ryan Davis, 4 Differences in the House and Senate Patent Troll Bills, Law360.com, April 30, 2015 (citing the views
of several patent litigators).
135 S. 1137, § 7(b), adding revised 35 U.S.C. § 285(d)(1). However, the PATENT Act would permit a court, in
exceptional cases, to award reasonable attorney fees to the prevailing party in a civil action that includes a claim for
relief arising under Section 271(e). Id., adding revised 35 U.S.C. § 285(d)(2).
136 Fed. R. Civ. P. 19.
137 Fed. R. Civ. P. 20.
138 Id.
139 Joint and several liability occurs when two or more people are found liable, and the plaintiff may collect the entire
judgment from any one of the parties or from any and all of the parties in various amounts until the judgment is paid in
full. See Black’s Law Dictionary, 2d. ed.
140 35 U.S.C. § 299(a).
141 Id.
142 Id. § 299(b).
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has no substantial interest143 in the patent or patents at issue other than asserting such patent claim
in litigation.”144 An “interested party” subject to this joinder provision would include a party that
is a patent assignee, has a right to enforce or sublicense the patent, or has a direct financial
interest in the patent, such as the right to any part of a damage award or licensing revenue.145 The
bill would exclude from the definition of an “interested party”
1. the plaintiff’s employees;146
2. legal counsel retained on a contingency fee basis; or
3. an individual “whose sole financial interest in the patent or patents at issue is
ownership of an equity interest in the party alleging infringement, unless such
person also has the right or ability to direct or control the civil action.”
(“[M]embership on the board of directors alone is not sufficient to demonstrate
such right or ability.”)147
The Innovation Act (as reported) would create a statutory exception to the applicability of the
joinder of interested parties provision for technology transfer organizations whose primary
purpose is to facilitate the commercialization of technologies developed by one or more
institutions of higher education, if such technology transfer organization is alleging infringement
on behalf of an entity that is exempted from the joinder provision.148
In order for the joinder provision to apply to a patent infringement action, the Innovation Act (as
reported) would require the defendant to file an initial statement (no later than 14 days before a
scheduling conference is to be held or a scheduling order is due) expressing the good faith belief
that the party alleging infringement has no substantial interest in the subject matter at issue other
than asserting the patent in litigation.149 Within 45 days of being served with such an initial
statement, the plaintiff would then be required to file a certification that
1. the party will have sufficient funds to pay for any potential award of reasonable
attorney fees;
2. the party has substantial interest in the subject matter at issue other than asserting
the patent in litigation; or
3. there are no other interested parties.150
143 The Manager’s Amendment to the Innovation Act provided a definition of “substantial interest” to include an
interest in the subject matter of a patent at issue if the party: (A) invented the subject matter, or (B) commercially
practices or implements or is engaged in research and development in technology in the field of the subject matter. H.R.
9 (as reported), § 3(c), adding new 35 U.S.C. § 299(d)(7).
144 H.R. 9, § 3(c), adding new 35 U.S.C. § 299(d)(1).
145 H.R. 9 (as reported), § 3(c), adding new 35 U.S.C. § 299(d)(6)(A)-(C).
146 This additional exclusion to the “interested party” definition was added by the Manager’s Amendment to the
Innovation Act. See H.R. 9 (as reported), § 3(c), adding new 35 U.S.C. § 299(d)(6)(C)(i).
147 This clarification to the “right or ability to direct or control the civil action” was added by the Manager’s
Amendment to the Innovation Act. See H.R. 9 (as reported), § 3(c), adding new 35 U.S.C. § 299(d)(6)(C)(iii).
148 H.R. 9 (as reported), § 3(c), adding new 35 U.S.C. § 299(d)(5).
149 Id., § 3(c), adding new 35 U.S.C. § 299(d)(4)(A).
150 Id., § 3(c), adding new 35 U.S.C. § 299(d)(4)(B). The Manager’s Amendment to the Innovation Act states that the
joinder provision “shall not apply to an action” if the plaintiff files this certification.
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The Innovation Act would grant the court with the discretion to deny a motion to join if the
interested party is not subject to service of process, or if the joinder would deprive the court of
subject matter jurisdiction or render the venue improper.151 The Innovation Act would require a
court to deny a motion to join an interested party if the party did not receive “timely notice” of
being identified as an interested party.152 (The Innovation Act defines “timely notice” to mean
actual notice, provided within 30 days after the expiration of when the plaintiff’s certification
(described above) is required to be filed, that the party has been identified in the plaintiff’s initial
disclosure regarding entities that have financial interests in the patent and which may be liable for
paying an award of fees if the plaintiff is unable to pay it.153)
A court would also be required to deny a motion to join an interested party if the interested party,
within 30 days after receiving the notice described above, renounces in writing and with notice to
the court and parties to the action, any ownership, right, or direct financial interest in the patent at
issue.154
The Innovation Act would provide a court with discretionary authority to make an “interested
party” who was joined under Section 3(c) of the act liable for any part of the award of attorney
fees that the nonprevailing party is unable to pay.155
Mandatory joinder provisions, including that proposed by the Innovation Act, respond to the
alleged lack of transparency regarding PAEs or the absence of financial resources held by some
PAEs and their corresponding inability to pay fees to a prevailing defendant. Proponents of this
proposed provision state that mandatory joinder would encourage greater transparency by
granting patent defendants with further knowledge regarding all the parties who may have an
interest in the litigation beyond the PAE “shell company.”156 Proponents of the joinder provision
also argue that such a change would allow prevailing defendants to seek a greater financial award
against PAEs, who may not have extensive financial resources, by permitting the defendants to
seek financial recovery against additional parties.157 Opponents of this provision argue that the
mandatory joinder of third parties is “one-sided” and may restrict the ability of patent owners to
enforce their patents.158 Some have stated that joinder provisions such as the one proposed by the
Innovation Act may harm business relationships that arise through licensing by forcing parties to
join in order to pay damages and other fees.159 Opponents also contend that joinder in this context
for the purposes of fee-shifting raises constitutional concerns as the provision would create
151 H.R. 9, adding new 35 U.S.C. § 299(d)(2)(A).
152 Id., adding new 35 U.S.C. § 299(d)(2)(B)(i).
153 H.R. 9 (as reported), adding new 35 U.S.C. § 299(d)(3).
154 H.R. 9, adding new 35 U.S.C. § 299(d)(2)(B)(ii).
155 H.R. 9, § 3(b), adding revised 35 U.S.C. § 285(b).
156 Hearing on H.R. 3309 Innovation Act Before the House Committee on the Judiciary, Subcommittee on Courts,
Intellectual Property, and the Internet, 113th Cong., 1st Sess., (2013) (Statement of Kevin T. Kramer, Vice President
and Deputy General Counsel for Intellectual Property, on behalf of Yahoo! Inc.).
157 Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse: Hearing Before the Senate
Judiciary Comm., 113th Cong., 1st Sess. (2013) (Statement of Philip S. Johnson, Chief Intellectual Property Counsel,
Johnson & Johnson).
158 The Impact of Abusive Patent Litigation Practices on the American Economy: Hearing Before the Senate Judiciary
Comm., 114th Cong. 1st Sess. (2015) (Statement of Hans Sauer, Ph.D., Deputy General Counsel for Intellectual
Property, on behalf of Biotechnology Industry Organization).
159 Id.
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standing for parties that would otherwise not have standing.160 Specifically, the opponents point to
the scenario where “a defendant may join [as] a third-party at the end of the case for the purposes
of fee-shifting, but the third-party had no standing to assert or defend themselves during the
course of the legal proceedings.”161
The PATENT Act contains a mechanism for recovering fee awards from interested parties that is
similar to the Innovation Act (as reported). First, the PATENT Act’s recovery of award provision
would allow the defendant to file (no later than 14 days before a scheduling conference is to be
held or a scheduling order is due) an initial statement expressing the good faith belief that the
primary business of the plaintiff is the assertion and enforcement of patents (or the licensing that
results from it).162 Within 45 days of being served with such an initial statement, the plaintiff
would then be required to file a certification that163
1. the party will have sufficient funds to pay for any potential award of reasonable
attorney fees;
2. the party’s primary business is not the assertion and enforcement of patents (or
the licensing that results from it);
3. the identity of “interested parties,” if any; or
4. it has no such interested parties.
The PATENT Act defines “interested party” for purposes of this section concerning the recovery
of fees, to mean a person who has a substantial financial interest related to the proceeds from any
settlement, license, or damages award resulting from the enforcement of the patent in the
action.164 However, the term does NOT include any of the following:165
1. an attorney or law firm providing legal representation in the action if the sole
basis for its financial interest in the action arises from compensation related to
the provision of legal representation;
2. a person who has assigned all right, title, and interest in a patent, except for
passive receipt of income to an institution of higher education or a nonprofit
technology transfer organization affiliated with the institution;
3. a person who would otherwise meet the definition of an interested party but
whose financial interest is based solely on an equity or security interest that had
been initially established when the party alleging infringement’s primary
business was not the assertion and enforcement of patents (or the licensing
resulting from it); and
4. an insured depository institution whose sole basis for the financial interest arises
from a loan or other debt obligation.166
160 H.Rept. 113-279, p. 109.
161 Id.
162 S. 1137, § 7(b), adding revised 35 U.S.C. § 285(c)(1)(A).
163 Id., adding revised 35 U.S.C. § 285(c)(1)(B).
164 Id., adding revised 35 U.S.C. § 285(c)(2)(A),
165 Id., adding revised 35 U.S.C. § 285(c)(2)(B), (C), and (D).
166 This additional exclusion to the “interested party” definition was added by the Manager’s Amendment to the
PATENT Act, which was approved by the Senate Judiciary Committee. See S. 1137 (as reported), § 7(b), adding
(continued...)
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The PATENT Act would place an ongoing duty on the plaintiff to update its certification within
30 days after a material change to any of the information provided within it.167Prior to filing the
certification, the plaintiff must provide each identified interested party “actual notice in writing
by service of notice in any district where the interested party may be found,” in order to establish
jurisdiction over the interested party for the sole purpose of enforcing an award of attorney fees,
“consistent with the Constitution of the United States.”168 The notice must identify the action, the
parties, the patents at issue, and the interest qualifying the party to be an interested party. The
notice must also inform the recipient that the recipient may be held accountable for any award of
attorney fees (or a portion thereof) resulting from the action in the event the plaintiff cannot
satisfy the full amount of such award, unless the recipient submits a statement to the court and
parties in the action, within 120 days of receiving the notice, that renounces its interest related to
the enforcement of the patent.169 The PATENT Act would make any interested parties who are
timely served with this notice potentially liable to pay any attorney fees, or portion thereof,
awarded by the court, in the event that the party alleging infringement cannot satisfy the full
amount of the award.170 However, interested parties would not be accountable if “a true and
correct certification” is filed with the court that the plaintiff will have sufficient funds to pay for
any potential award of reasonable attorney fees, or that the party’s primary business is not the
assertion and enforcement of patents (or the licensing that results from it).171
The PATENT Act grants an interested party the right to intervene in the action for purposes of
contesting its identification as an interested party or its liability for attorney fees.172 A court may,
in the interest of justice, exempt from award recovery any party identified as an interested party.
Finally, the PATENT Act would create a statutory exception to the applicability of the award
recovery provision for any institution of higher education (as defined in 20 U.S.C. § 1001(a), or
under equivalent laws in foreign jurisdictions), or a non-profit technology transfer organization
whose primary purpose is to facilitate the commercialization of technologies developed by one or
more institutions of higher education.173 These entities must file with the court a certification that
they qualify for this exception and provide notice to the parties in the action.
Demand Letters
A patent demand letter is a letter sent by a patent-holder to a company or an individual accusing
the recipient of patent infringement. The letters tend to demand that the alleged infringer take a
specific action such as ceasing the infringing action or agreeing to a licensing arrangement. A
patentee may use demand letters to prove willfulness in a patent infringement lawsuit, a high bar
after recent court decisions. In the 2007 case, In re Seagate Technology, the Federal Circuit
established a two-pronged test for willful infringement in a patent case. First, the patentee must
show, by clear and convincing evidence, “that the infringer acted despite an objectively high
(...continued)
revised 35 U.S.C. § 285(c)(2)(E).
167 Id., adding revised 35 U.S.C. § 285(c)(1)(B).
168 Id., adding revised 35 U.S.C. § 285(c)(1)(C).
169 Id.
170 Id., adding revised 35 U.S.C. § 285(c)(1)(D).
171 Id.
172 Id., adding revised 35 U.S.C. § 285(c)(1)(G).
173 Id., adding revised 35 U.S.C. § 285(c)(1)(F).
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likelihood that its actions constituted infringement of a valid patent.”174 Then the patentee must
prove “subjective recklessness,” which means that the accused infringer knew or should have
known the risk of infringement.175 A detailed demand letter, including a summary of the alleged
patent infringement, helps to establish that the recipient/alleged infringer has the high degree of
knowledge to meet this standard. Current law, however, does not dictate any specific content
requirements or level of detail for demand letters.
The Innovation Act states that it is the “sense of Congress” that “it is an abuse of the patent
system and against public policy for a party to send out purposely evasive demand letters to end
users alleging patent infringement.”176 H.R. 9 also states that any claimant asserting willful
infringement may not rely on demand letters as notification of infringement unless the letter
identifies with particularity the asserted patent, the product or process accused, and the ultimate
parent entity of the claimant, and explains how the product or process infringes to the extent
possible.177
H.R. 1896, the “Demand Letter Transparency Act of 2015,” outlines both content and disclosure
requirements for demand letters. The bill would require any entity that sends 20 or more demand
letters during any 365-day period to submit to the USPTO a disclosure identifying
• the patent, including a confirmation that the entity that sent the letter is the owner
of the patent and is the last recorded entity in USPTO records for purposes of
assignment, grant, or conveyance;
• the entity that has the right to license the patent or the name of the exclusive
licensee;
• each entity asserting a claim with regard to the patent;
• each obligation to license the patent and the financial terms at which such patent
has been licensed;
• the ultimate parent entity of such entity;
• the number of recipients of the letter;
• any case that has been filed by such entity relating to such patent; and
• any ex parte review or inter partes review of such patent.178
In order to enforce these proposed disclosure requirements, H.R. 1896 would permit a court in a
patent infringement or validity action brought by an entity that does not meet such USPTO
disclosure requirements to sanction such entity for an amount to be awarded to the adverse party
to cover any costs incurred as a result of such violation.179 The bill would exempt from these
disclosure requirements original or joint inventors, institutions of higher education, and
174 In re Seagate Technology, 497 F.3d 1360, 1371 (Fed. Cir. 2007).
175 Id. at 1371-72.
176 H.R. 9, § 3.
177 Id.
178 H.R. 1896, § 2, adding new 35 U.S.C. § 263.
179 Id.
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technology transfer organizations facilitating the commercialization of technology developed by
institutions of higher education.180
In addition to the disclosure requirements, the Demand Letter Transparency Act of 2015 would
require any demand letter sent to another entity to include specified information concerning
• each claim of each patent allegedly infringed, including each accused
instrumentality;
• each party alleging infringement;
• the direct infringement for each claim alleged to have been infringed indirectly;
• the principal business of the party alleging infringement;
• each complaint filed that asserts or asserted any of the same patents, each case
filed by such entity, and any ex parte or inter partes review for each patent;
• whether the patent is subject to any licensing term or pricing commitments;
• owners, co-owners, assignees, or exclusive licensees of the patent;
• any person who has a legal right to enforce the patent;
• any person with a direct financial interest in the outcome of the action; and
• how the recipient can access the USPTO demand letter database.181
Under the House’s TROL Act182 and the Senate’s STRONG Patents Act,183 a demand letter would
qualify as an “unfair or deceptive act or practice” under the Federal Trade Commission Act184 if
the sender states or represents wrongly and in bad faith that
• the sender is a person with the right to license and enforce the patent;
• a civil action asserting a claim of infringement has been filed against the
recipient;
• a civil action asserting a claim of infringement has been filed against other
persons;
• legal action for infringement of the patent will be taken against the recipient;
• the sender is the exclusive licensee of the patent;
• persons other than the recipient purchased a license for the patent asserted in the
letter;
• persons other than the recipient purchased an unrelated license and it is not
identified as such;
180 Id.
181 H.R. 1896, § 3, adding new 35 U.S.C. § 264. H.R. 1896, § 2 also would require the USPTO to establish a demand
letter database that is publicly accessible and searchable.
182 H.R. 2014.
183 S. 632.
184 15 U.S.C. § 45(a)(1).
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• an investigation of the recipient’s infringement occurred.185
The TROL Act and the STRONG Patents Act also would consider demand letters as unfair
practices if the sender in bad faith seeks compensation for
• a patent that is held to be unenforceable or invalid in a final determination;
• activities taken by the recipient after expiration of the asserted patent;
• activity of the recipient that the sender knew was authorized by a person with the
right to license the patent.186
Demand letters would also qualify as unfair practices under the TROL Act and the STRONG
Patents Act if the sender fails to include
• the identity of the person including the name of the parent entity unless such
person is a public company and the name of the public company is identified;
• an identification of at least one patent allegedly infringed;
• an identification of at least one product or service of the recipient infringing the
identified patent;
• a name and contact information of a person the recipient may contact about the
assertions or claims.187
Under both the TROL Act and the STRONG Patents Act, the Federal Trade Commission would
enforce any violations of the provisions above.188 This provision would also preempt any state
law “expressly relating to the transmission or contents of communications relating to the assertion
of patent rights.”189
The Senate’s PATENT Act addresses both abusive demand letters and demand letters sent as pre-
suit notification. Section 9 of the Senate’s PATENT Act would impose civil penalties on a person
who has engaged in widespread abusive demand letter practices and has committed an unfair or
deceptive act within the meaning of Section 5 of the Federal Trade Commission Act.190 This bill
outlines abusive demand letter practices as communications that falsely represent judicial relief or
threaten litigation, and contain assertions that lack a reasonable basis in law or fact because the
person does not have the right to assert the patent, the patent has expired, the patent is
unenforceable, or the person has falsely represented that an infringement has occurred.191 Similar
to the enforcement provision outlined in the Senate’s STRONG Patents Act, the Federal Trade
Commission would enforce any violations of this particular provision. The Senate’s PATENT Act
would also require pre-suit notice letters that accuse a party of infringement to identify each
patent believed to be infringed, to identify the allegedly infringing product, to describe why the
plaintiff believes each patent identified is infringed, and to identify the person who can rightfully
185 S. 632, § 202.
186 Id.
187 Id.
188 Id. § 203.
189 Id. § 204.
190 S. 1137, § 9, adding new 35 U.S.C. § 299D.
191 Id.
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enforce the patent, as well as additional information.192 The bill also states that if the plaintiff is
seeking to establish willful infringement, then he may not rely on evidence of pre-suit notification
of infringement unless that evidence includes this information.
On June 4, 2015, the Senate Judiciary Committee approved several amendments to the PATENT
Act relating to demand letters, the most substantial of which would prohibit the pre-suit notice
letter to contain (1) a request for, demand for, or offer to accept a specific monetary amount in
exchange for a license, settlement, or similar agreement to resolve allegations of patent
infringement; or (2) a specific monetary amount demanded based on the cost of legal defense in a
lawsuit concerning any asserted claim.193
Commentators often associate vague demand letters with PAEs using these letters for the sole
purpose of extracting financial concessions.194 Supporters of more stringent requirements for
demand letters point to vague demand letters as impediments of innovation due to the financial
costs relating to litigation or settlement that ultimately arise from receiving these types of
communications and the resulting impact on small businesses that cannot afford such costs.195
Supporters also claim that placing more content-based requirements on demand letters would
encourage patent owners to target specific infringers more carefully and likewise, would allow
alleged infringers to have a clearer understanding of the infringement claims.196 Critics of patent
legislation have argued, however, that the legislation itself is not sufficiently tailored towards
letters sent by PAEs, and additional requirements for patent letters may make “it more difficult for
patent owners to communicate with potential licensees and alleged infringers even when those
communications are in good faith.”197
Reforms of Patent Trial and Appeal Board’s Proceedings (IPR and
PGR)
The Leahy-Smith America Invents Act (AIA)198 established a new administrative proceeding
conducted by the USPTO’s Patent Trial and Appeal Board (PTAB) called a “post grant review”
(PGR). In this proceeding, petitioners may challenge the validity of an issued patent based on any
ground of patentability (such as unpatentable subject matter, or failure to meet the statutory
standards of novelty and nonobviousness).199 A petition to initiate a PGR must be filed within
nine months of the date of patent grant.200 To initiate a PGR, the petitioner must present
192 Id. § 8, adding new 35 U.S.C. § 299C.
193 S. 1137 (as reported), § 8, adding new 35 U.S.C. § 299C(b)(3).
194 See, e.g., Brian Fung, “Patent reform advocates are launching a ‘super-coalition’ to whack patent trolls,”
Washington Post, Jan.14, 2015.
195 Trolling for a Solution: Ending Abusive Patent Demand Letters: Hearing Before the House Energy & Commerce
Comm., Subcomm. on Commerce, Manufacturing, and Trade, 113th Cong. 2d Sess. (2014) (Statement of Mark
Chandler, Senior Vice President and Chief Compliance Officer, on behalf of Cisco Systems Incorporated).
196 Id.
197 Gene Quinn & Steve Brachmann, “Demand Letter Legislation Must be Narrowly Tailored,” March 4, 2015,
available at http://www.ipwatchdog.com/2015/03/04/demand-letter-legislation-must-be-narrowly-tailored/id=55365/.
198 P.L. 112-29. For more information on this law, see CRS Report R42014, The Leahy-Smith America Invents Act:
Innovation Issues, by John R. Thomas.
199 35 U.S.C. § 321(b).
200 Id. § 321(c).
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information that, if not rebutted, would demonstrate that it is “more likely than not that at least
one of the claims” is unpatentable.201 A PGR must be completed within a year of its
commencement, with an extension of six months possible for good cause shown.202
The AIA also created a new patent revocation proceeding called an “inter partes review” (IPR). A
person who is not the patent owner may file a petition requesting inter partes review nine months
after a patent issues or reissues, or the conclusion of any post-grant review, whichever occurs
later.203 In an IPR proceeding, petitioners may challenge the validity of an issued patent only on
the basis of prior art consisting of patents or printed publications. As a result, patent challenges
under IPR are limited to the patentability issues of novelty and nonobviousness.204
To initiate an IPR, the petitioner must demonstrate that there is a “reasonable likelihood” that he
or she would prevail with respect to at least one claim.205 An accused infringer may not petition
for an IPR if he or she has already filed a declaratory judgment action in federal court challenging
the patent, or more than a year has passed since the date the accused infringer was served with a
complaint alleging infringement of that patent.206 Should the patent survive the IPR proceeding,
the individual who commenced the proceeding, along with his privies, are barred in the future
from raising issues that were “raised or reasonably could have been raised.”207
An IPR must be completed within a year of its commencement, with an extension of six months
possible for good cause shown.208The timing and scope of the two USPTO patent revocation
proceedings described above are as follows:
1. A patent may be challenged at the USPTO on any basis of any patentability issue
within nine months from the date the patent issued (by filing a petition for a PGR
proceeding).
2. Thereafter, and throughout its entire term, a patent may be challenged at the
USPTO only on the grounds of novelty and nonobviousness (via an IPR).
Unlike most of the provisions in the patent litigation reform bills discussed above, which
generally are to the benefit of defendants in patent infringement lawsuits, the reforms described in
this section appear to favor patent holders who may have their patents challenged in an IPR or
PGR; these changes have been championed by patent holders who, in particular, depend on
patents to protect their business’s revenue, such as brand-name pharmaceutical companies.
However, because some of these changes would arguably make it more difficult to invalidate a
patent in an IPR or PGR proceeding, patent assertion entities may also benefit from these
amendments. Thus, the changes described below have been criticized as being “at odds” with the
goal of addressing abusive patent litigation.209 Nevertheless, such arguably conflicting reforms to
201 Id. § 324(a).
202 Id. § 326(a)(11).
203 Id. § 311(c).
204 Id. § 311(b).
205 Id. § 314(a).
206 Id. § 315.
207 Id. § 315(e).
208 Id. § 316(a)(11).
209 Ryan Davis, Senate Bill Tips Scales for Patent Owners in AIA Reviews, Law360.com, June 5, 2015 (describing the
surprise of one practitioner that the legislation contains “such substantial changes to AIA reviews that favor patent
(continued...)
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the patent system appear to reflect the compromises that lawmakers believe are necessary to make
in order to garner support for the legislation and help secure its passage.
Claim Construction Standard
The AIA is silent on what claim construction standard is appropriate in the IPR and PGR
proceedings conducted by the PTAB. Pursuant to authority granted by the AIA, the USPTO
promulgated a regulation in August 2012210 that provided the following standard for claim
construction in an IPR: “[a] claim in an unexpired patent shall be given its broadest reasonable
construction in light of the specification of the patent in which it appears.”211 In a case issued in
February 2015 involving a challenge to the USPTO’s rulemaking authority to promulgate this
regulation, a divided panel of the Federal Circuit upheld the PTAB’s use of the “broadest
reasonable interpretation” (BRI) standard in claim construction.212 The appellate court noted that
the USPTO has long applied the BRI standard in a variety of proceedings, including initial
examinations, interferences, and reissue and reexamination proceedings.213 The Federal Circuit
explained that by applying the BRI standard, the USPTO “reduce[s] the possibility that, after the
patent is granted, the claims may be interpreted as giving broader coverage than is justified.”214
The appellate court stated that “Congress is presumed to legislate against the background of
existing law where Congress in enacting legislation is aware of the prevailing rule,”215 and
concluded that “Congress implicitly adopted the broadest reasonable interpretation standard in
enacting the AIA.”216
Section 9 of the Innovation Act and Section 11 of the PATENT Act (as reported) would
legislatively overrule the Federal Circuit’s recent decision regarding the use of the BRI standard
in patent revocation proceedings. Instead, the Innovation Act and PATENT Act (as reported)
would require that the PTAB, in IPR and PGR proceedings, use the same claim construction
standard that is applied by federal courts; that is, the PTAB would need to construe a patent claim
“in accordance with the ordinary and customary meaning of such claim as understood by one of
ordinary skill in the art and the prosecution history pertaining to the patent.”217
The Innovation Act and the PATENT Act (as reported) would also require the PTAB to consider
prior claim construction by a court in a civil action in which the patent owner was a party.218
(...continued)
owners – which will benefit trolls when their patents are challenged – when the rest of the bill appears aimed at aiding
infringement defendants.”).
210 USPTO, Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional
Program for Covered Business Method, 77 Fed. Reg. 48680 (Aug. 14, 2012) (final rule).
211 37 C.F.R. § 42.100(b).
212 In re Cuozzo Speed Technologies LLC, 778 F.3d 1271 (Fed. Cir. 2015).
213 Id. at *16.
214 Id. at *17 (quoting In re Prater, 415 F.2d 1393, 1396 (CCPA 1981).
215 Id. at *17.
216 Id. at *21.
217 H.R. 9, § 9, adding new 35 U.S.C. § 316(a)(14)(A); S. 1137 (as reported), § 11(a)(4)(A)(vii).
218 Id., adding new 35 U.S.C. § 316(a)(14)(B).
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Sections 102 and 103 of the STRONG Patents Act contain similar amendments regarding the
claim construction standard to be used in IPR and PGR proceedings. The PATENT Act does not
include a provision that would alter the existing claim construction standard.
Former USPTO Director David Kappos has observed that currently, “the speed mandated for
post-grant procedures is leading to greater interaction between court interpretations and USPTO
interpretations of the same patent claims, and having the USPTO apply a different standard than
the courts [for claim construction] is leading, and will continue to lead, to conflicting
decisions.”219 However, he notes that there are valid arguments for retaining the broader standard
for post-grant proceedings, such as that the BRI standard “requires patentees to define their
claims clearly over the prior art during proceedings” before the USPTO.220
Others have asserted that changing the claim construction standard in IPR and PGR from BRI to
“ordinary and customary meaning” would be a positive benefit to patent owners who feel that the
BRI standard makes it easier to invalidate their patents in the AIA-established post-grant reviews
than in federal courts.221
However, some groups oppose the inclusion of these changes to the IPR/PGR claim construction
standard in the patent litigation reform bills, arguing that they “will undermine post grant review
procedures that have proven to be an effective and useful tool in weeding out the weak patents
that are often asserted in the most abusive of patent cases.”222 Technology companies have
explained their opposition to the IPR/PGR amendments as follows:
[T]he changes to the claim construction standard in IPR proceedings ... would eliminate a
necessary and significant difference between the court system and USPTO standards for
claim construction. In district court, the purpose is to determine liability for patent
infringement; whereas the purpose of an IPR proceeding is for the USPTO to ensure its
decision to issue a patent was, in fact, correct. The IPR process was amended in the AIA to
provide a more streamlined, cost-effective method to challenge patent validity outside the
court system. The proposed changes to this process endanger the meaningful progress
Congress has made in reducing the burden invalid patents pose to our industry and will only
make the process more costly and complex.223
Estoppel Effect of Unsuccessful Challenges in PGR Proceedings
An individual who commences a PGR proceeding, along with anyone who has a legal interest in
the patent, are barred from raising in a later civil action issues that they raised in the
219 H.R. 3309, the “Innovation Act:” Hearing Before the House Judiciary Comm., 113th Cong., 1st Sess. (2013)
(Statement of David J. Kappos, Former Under Secretary of Commerce for Intellectual Property and Director of the
United States Patent and Trademark Office), at 8.
220 Id.
221 Ryan Davis, Innovation Act Would Revamp AIA Reviews to Shield Patents, Law360.com, Feb. 10, 2015 (explaining
that “[c]onstruing the claims of a patent in an AIA review broadly means that significantly more prior art can be used to
invalidate the patent than would be available in district court. A majority of AIA final decisions to date have
invalidated at least some claims of the patent.”).
222 Business Software Alliance (BSA) Letter to Speaker Boehner and Minority Leader Pelosi, July 9, 2015, available at
ihttp://www.bsa.org/~/media/Files/Policy/SoftwareInnovation/Letters/07092015InnovationActLetter.pdf, at 1.
223 Information Technology Industry Council Letter to Senate Judiciary Committee Chairman Grassley and Ranking
Member Leahy, June 3, 2015.
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administrative review of the validity of a patent claim—as well as any issue that “reasonably
could have been raised” during the PGR.224 Section 9 of the Innovation Act and Section 14(a) of
the PATENT Act would narrow the estoppel effect arising from a PGR by removing the phrase
“or reasonably could have raised” in the statute.225 Thus, this provision would effectively permit
parties to later assert in a civil action that a patent claim is invalid on any ground that the party
“reasonably could have raised” during the PGR. The purpose of this change is apparently to
correct an “inadvertent scrivener’s error” made in drafting the AIA.226
Presumption of Validity and Burdens of Proof
The AIA provided that in an IPR or PGR proceeding, “the petitioner shall have the burden of
proving a proposition of unpatentability by a preponderance of the evidence.”227 Sections 102(c)
and 103(c) of the STRONG Patents Act would amend existing law to provide a presumption of
validity to a previously issued claim that is challenged during an IPR or PGR proceeding.228
These sections of the legislation would also heighten the evidentiary standard for proving
unpatentability of a previously issued claim, requiring that the IPR or PGR petitioner prove such
unpatentability “by clear and convincing evidence.”229
The PATENT Act (as reported) would amend the statutory provisions governing evidentiary
standards for IPR and PGR to provide that “the challenged patent shall be presumed to be
valid.”230 However, the PATENT Act (as reported) does not change the evidentiary standard for
proving unpatentability, as the STRONG Patents Act would. One observer has argued that “[a]
presumption of validity combined with a preponderance of the evidence standard appears
contradictory and creates an illogical process.”231
Standing
On June 11, 2015, the House Judiciary Committee approved amendments to the Innovation Act
that would prohibit the institution of an IPR or a PGR unless the petitioner certifies that the
petitioner and the real parties in interest of the petitioner232
224 35 U.S.C. § 325(e).
225 H.R. 9, § 9(a), amending 35 U.S.C. § 325(e)(2); S. 1137, § 14(a).
226 See Colleen Chien and Eric Goldman, In its Rush to Fix Patent Reform, Congress Didn’t Fix Its Biggest Error,
Forbes.com, Jan. 2, 2013; see also 158 Cong.Rec. S8517 (daily ed. Dec. 28, 2012) (statement of Senator Leahy)
(“Regrettably, the legislation passed today does not include one technical correction that would improve the law by
restoring Congress’s intent for the post-grant estoppel provision of the America Invents Act. Chairman Smith recently
described certain language contained in that provision as an ‘inadvertent scrivener’s error.’ As written, it
unintentionally creates a higher threshold of estoppel than was in the legislation that passed the Senate 95-5, or that was
intended by the House, according to Chairman Smith’s statement. I hope we will soon address this issue so that the law
accurately reflects Congress’s intent.”).
227 35 U.S.C. §§ 316(e), 326(e).
228 S. 632, § 102(c), adding revised 35 U.S.C. § 316(e)(1); S. 632, § 103(c), adding revised 35 U.S.C. § 326(e)(1).
229 Id. § 102(c), adding revised 35 U.S.C. § 316(e)(2); S. 632, § 103(c), adding revised 35 U.S.C. § 326(e)(2).
230 S. 1137 (as reported), § 11(a)(4)(C)(ii), amending 35 U.S.C. § 316(e) (for IPR proceedings); S. 1137 (as reported), §
11(b)(4)(C)(ii), amending 35 U.S.C. § 326(e) (for PGR proceedings).
231 Information Technology Industry Council Letter to Senate Judiciary Committee Chairman Grassley and Ranking
Member Leahy, June 3, 2015.
232 H.R. 9 (as reported), § 9(b)(1), adding new 35 U.S.C. § 316(a)(15) (regarding IPR); H.R. 9 (as reported), § 9(b)(1),
(continued...)
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• do not own and will not acquire a financial instrument that is designed to hedge
or offset any decrease in the market value of an equity security of the patent
owner or an affiliate of the patent owner; and
• have not demanded payment (monetary or otherwise) from the patent owner or
an affiliate of the patent owner in exchange for a commitment not to file a
petition for IPR with respect to the owner’s patent, unless the petitioner has been
sued for or charged with infringement of the patent.
These changes are apparently in response to complaints made by pharmaceutical companies about
so-called “reverse trolling” abuses of the PTAB proceedings, such as parties that threaten to
challenge patents in IPR proceedings unless patent holders make substantial payments to them, or
parties that have strategically used IPR to influence the stock prices of drug companies.233
Sections 102(d) and 103(d) of the STRONG Patents Act would provide even more stringent
standing requirements for persons wanting to initiate a PGR or IPR. The legislation provides that
in order to have standing to file a petition with the USPTO to institute an IPR,234 a person, or a
real party in interest or privy of the person, must show a reasonable possibility of being sued for,
or charged with,235 infringement of the patent. The STRONG Patents Act adjusts the standing
requirement slightly for instituting a PGR:236 a person, or a real party in interest or privy of the
person, must demonstrate
• a reasonable possibility of being sued for, or charged with, infringement of the
patent; or
• a competitive harm related to the validity of the patent.
Institution of an IPR/PGR Proceeding
The PATENT Act (as reported) would permit the USPTO Director to refuse to institute an IPR or
PGR proceeding “if the Director determines that institution would not serve the interest of
justice.”237 The Director would be required to consider several factors in making such
determination, including
(...continued)
adding new 35 U.S.C. § 326(a)(14) (regarding PGR).
233 See H.R. 9, the Innovation Act: Hearing Before the House Judiciary Comm., 114th Cong., 1st Sess. (2015) (statement
of Mr. Hans Sauer, Deputy General Counsel, Biotechnology Industry Organization) (arguing that “the statistically
disproportionate ‘kill rates’ of IPR proceedings invite unintended abuses and predatory practices by those seeking to
attack patents for illegitimate reasons, including for their own financial gain...”); see also Joseph Walker & Rob
Copeland, New Hedge Fund Strategy: Dispute the Patent, Short the Stock, WALL ST. JOURNAL, April 7, 2015
(describing a recent strategy employed by a hedge fund manager, Kyle Bass, in which he files IPR petitions to
challenge the validity of patents protecting drugs offered by certain pharmaceutical companies; after filing the IPR, he
either shorts the stock of those drug companies (whose stock prices likely fall due to news of the IPR being initiated) or
buys shares in other companies that would benefit from the patent being held invalid).
234 S. 632, §102(d), adding new 35 U.S.C. § 311(d)(2).
235 The STRONG Patents Act defines the term “charged with infringement,” for purposes of this standing provision, to
mean “a real and substantial controversy regarding infringement of a patent exists such that the petitioner would have
standing to bring a declaratory judgment action in Federal court.” S. 632, § 102(d), adding new 35 U.S.C. § 311(d)(1).
236 S. 632, §103(d), adding new 35 U.S.C. § 321(d)(2).
237 S. 1137 (as reported), § 11(a)(2), adding new 35 U.S.C. § 314(a)(2) (regarding IPR); S. 1137 (as reported), § 11(b),
adding new 35 U.S.C. § 324(a)(2) (regarding PGR).
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• whether the grounds of unpatentability are the same as those considered and
decided in prior judicial or USPTO proceedings, and
• whether there is another proceeding or matter involving the same patent that is
pending before the USPTO.
In addition, the PATENT Act (as reported) would require the USPTO Director to issue regulations
governing the composition of panels convened to adjudicate a PGR or IPR, “to ensure that the
panel adjudicating such proceeding consists of not more than 1 individual, if any, who
participated in the decision to institute such proceeding.”238
Ending Diversion of USPTO Fees
The USPTO is funded entirely by fees it charges to patent and trademark applicants, as well as
other entities that interact with the agency.239 However, the amounts received as fees by the
USPTO must still be appropriated by Congress in order for the funds to be available to the agency
for obligation or expenditure.240 Yet over the past 25 years, Congress has often not allocated all of
the fees that the USPTO has collected towards the operation of that agency. It has been estimated
that, since 1999, over $1 billion in USPTO fee revenue has been withheld from the USPTO and
directed towards unrelated government programs and operations.241
The America Invents Act (AIA) that was enacted in 2011 made several changes to the handling of
fees collected by the USPTO. Under the AIA, the use of fees generated is still subject to the
appropriations process, whereby Congress provides the budget authority for the USPTO to spend
these fees. To address the issue of fees withheld from the office in the past, the AIA created within
the Treasury a “Patent and Trademark Fee Reserve Fund” into which fee collections above that
“appropriated by the Office for that fiscal year” are to be placed.242 These funds are to be
available to the USPTO “to the extent and in the amounts provided in appropriations Acts” and
may only be used for the work of the USPTO.243 However, the USPTO must still obtain
congressional authority to use these “excess” funds.
Some argue that USPTO fee diversion is the “single most important problem facing our patent
system today” because “continuing fee diversion constitute[s] a tax on innovation and
undermine[s] efforts of the USPTO to reduce its backlog [of pending patent applications].”244
238 S. 1137 (as reported), § 11(c)(1).
239 See Figueroa v. United States, 466 F.3d 1023, 1027-28 (Fed. Cir. 2006). The USPTO became fully user-fee funded
as a result of P.L. 101-508, the Omnibus Budget Reconciliation Act (OBRA) of 1990. For more information about
USPTO’s funding structure, see CRS Report RS20906, U.S. Patent and Trademark Office Appropriations Process: A
Brief Explanation, by Glenn J. McLoughlin.
240 In the absence of an appropriation making fees collected by an agency available to that agency, the collected fees
are placed in the general fund of the Treasury as miscellaneous receipts, unless otherwise directed. See Government
Accountability Office (GAO), Office of the General Counsel, 3 Principles of Federal Appropriations Law 1-12 (2004)
(citing 31 U.S.C. § 3302(b)).
241 See Intellectual Property Owners, USPTO Funding, at http://www.ipo.org/index.php/advocacy/hot-topics/uspto-
funding/.
242 35 U.S.C. § 42(c)(2).
243 Id.
244 H.Rept. 113-279, p. 104.
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The STRONG Patents Act would put an end to USPTO fee diversion.245 Section 107(a) of S. 632
would establish within the U.S. Treasury a revolving fund246 called the “United States Patent and
Trademark Office Innovation Promotion Fund” (Fund). Any fees collected by the USPTO would
be deposited into this Fund and would be available to the USPTO Director until they are
expended.247 The amounts in the Fund would be available, without fiscal year limitation, to pay
for all expenses of the USPTO, including all administrative and operating expenses that the office
incurs.248
Venue
Title 28 of the U.S. Code, which governs the federal judicial system, contains a venue statute
(Section 1400(b)) specifically applicable to patent cases, providing that “[a]ny civil action for
patent infringement may be brought in the judicial district where the defendant resides, or where
the defendant has committed acts of infringement and has a regular and established place of
business.”249 However, a 1990 opinion by the Federal Circuit, VE Holding Corp. v. Johnson Gas
Appliance Co., applied the general federal venue statute (Section 1391(c)) to patent infringement
cases, arguing that Congress, in amending the general venue statute in 1988, intended to change
the scope of the patent venue statute in Section 1400(b):
Other than by the clear language of the statute, Congress has not given any indication of
whether it intended to change the scope of venue under § 1400(b). If we can infer anything
from Congress’ knowledge of the prior judicial interpretation of § 1400(b), given the clear
language of the statute, it would be that Congress did intend to change the scope of venue
under § 1400(b).250
VE Holding Corp. thus expanded venue in patent infringement cases beyond what is permitted by
Section 1400(b), by allowing the filing of patent infringement lawsuits in “any district where
there would be personal jurisdiction over the corporate defendant at the time the action is
commenced.”251 In other words, defendants in patent cases could be sued wherever they offer
products for sale. The Federal Circuit’s liberalization of venue in patent cases has led to forum
shopping, as plaintiffs (in particular patent assertion entities) seek to file infringement lawsuits in
districts where judges and juries have reputations as being particularly favorable to patent
holders, such as the Eastern District of Texas.252
245 A bill introduced in the House, the Innovation Protection Act (H.R. 1832), would similarly end USPTO fee
diversion. However, this legislation does not contain provisions unrelated to the funding of the USPTO.
246 S. 632, § 107(a)(4), adding revised 35 U.S.C. § 42(d)(2).
247 Id. § 107(a)(2), adding revised 35 U.S.C. § 42(c)(1).
248 Id. § 107(a)(4), adding revised 35 U.S.C. § 42(d)(4).
249 28 U.S.C. § 1400(b).
250 VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1581 (Fed. Cir. 1990).
251 Id. at 1583.
252 Ryan Davis, House Bill Would Shut Down Eastern Texas Patent Docket, Law360.com, June 12, 2015, at
http://www.law360.com/articles/667339/house-bill-would-shut-down-eastern-texas-patent-docket (noting that “u]nder
current venue rules, nonpracticing entities are able to buy up patents and rent an office in the Eastern District of Texas
in order to establish venue there, then have free rein to sue just about any company in America. Given the district’s
reputation and history of large jury awards for patent owners, many nonpracticing entities take advantage of that
opportunity.”).
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The Innovation Act (as reported) would effectively overturn VE Holding Corp. by imposing
limitations on the judicial districts in which a civil action may be brought for patent infringement
or for a declaratory judgment that a patent is invalid or not infringed. The reason for this change
is to “restore Congress’s intent that patent infringement suits only be brought in judicial districts
that have some reasonable connection to the dispute” and to “protect parties against the burden
and inconvenience of litigating patent lawsuits in districts that are remote from any of the
underlying events in the case.”253 The Innovation Act (as reported) would expressly exempt the
special venue statute for patent actions from the applicability of the general venue statute (28
U.S.C. § 1391) and would also revise it to allow an action relating to patents to be brought only in
a judicial district254
1. where the defendant has its principal place of business or is incorporated;
2. where the defendant has committed an act of infringement of a patent in suit and
has a regular and established physical facility that gives rise to the act of
infringement;
3. where the defendant has agreed or consented to be sued in the instant action;
4. where an inventor named on the patent in suit conducted research or development
that led to the application for the patent in suit;
5. where a party has a regular and established physical facility that such party
controls and operates (not primarily for the purpose of creating venue) and has
a. engaged in management of significant research and development of an
invention claimed in a patent in suit prior to the effective filing date of the
patent;
b. manufactured a tangible product that is alleged to embody an invention
claimed in a patent in suit; or
c. implemented a manufacturing process for a tangible good in which the
process is alleged to embody an invention claimed in a patent in suit
The Innovation Act (as reported) would allow subsection (d) of the general venue statute (28
U.S.C. § 1391(d)) to govern venue for patent cases involving foreign defendants that are not
incorporated in the United States or have no regular and established physical facilities in the
United States.
Provisions Concerning Small Businesses
The patent reform litigation legislation introduced in the 114th Congress contains several
provisions designed to help small businesses that are involved in the patent system either as
patent owners or as defendants in infringement lawsuits.
253 Statement of Chairman Goodlatte, on the Manager’s Amendment to the Innovation Act, available at
http://judiciary.house.gov/index.cfm/hearings?Id=2848E2C2-F705-4A03-800C-64930626A395&Statement_id=
CF3D1F76-9219-4E6C-9B28-692BD6206E21.
254 H.R. 9 (as reported), § 3(g)(1), amending 28 U.S.C. § 1400(b).
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Patent Litigation Reform Legislation in the 114th Congress
Innovation Act and the PATENT Act
Section 7(a) of the Innovation Act and Section 12 of the PATENT Act would require the USPTO
director to develop educational resources for small businesses with respect to their “concerns
arising from patent infringement.”255 Furthermore, the Innovation Act would require that the
USPTO’s existing small business patent outreach programs, as well as relevant offices at the
Small Business Administration and the Minority Business Development Agency, provide
education and awareness on abusive patent litigation practices.256 Section 7(b) of the Innovation
Act and Section 12(b) of the PATENT Act would require the USPTO to create and maintain a
“user-friendly” section of its official website, in which the public can find information about
patent cases that have been filed in federal court and information about the patent at issue
(including the disclosures regarding patent ownership that are mandated by the Innovation Act
and PATENT Act). Neither bill authorizes or provides additional appropriations to pay for these
initiatives; rather, they are to be implemented using existing agency resources.
Section 8(g) of the Innovation Act would require the USPTO director, in consultation with several
heads of relevant agencies and interested parties, to conduct a study that examines the economic
impact of the Innovation Act on the ability of individuals and small businesses owned by women,
veterans, and minorities to enforce their patent rights. STRONG Patents Act
Section 111 of the STRONG Patents Act would require the Small Business Administration to
produce a report that analyzes the impact of patent ownership by small businesses (those that are
independently owned and operated and which are not dominant in their field of operation) and
patent infringement actions against small businesses. In addition, the STRONG Patents Act would
require the Director of the Administrative Office of the United States to designate at least six U.S.
district courts (that are already participating in the patent cases pilot program) “for the purpose of
that program to address special issues raised in patent infringement suits against individuals or
small business concerns.”257 These specially designated courts would be required to expedite
cases in which an individual or small business concern is accused of patent infringement.258
255 H.R. 9, § 7(a)(1); S. 1137, § 12(a)(1).
256 Id. § 7(a)(2); S. 1137, § 12(a)(2).
257 S. 632, § 111(c)(1).
258 Id. § 111(c)(2).
Congressional Research Service
36
Table 1. Patent Litigation Reform Legislation in the 114th Congress
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Pleading
Proposed pleading requirements to
Proposed pleading requirements to include:
n/a n/a n/a
Requirement
include:
•
each patent allegedly infringed;
•
each patent allegedly infringed;
•
each claim of each patent allegedly
•
all claims necessary to identify
infringed;
each process, machine,
manufacture, or composition of
•
accused instrumentalities;
matter alleged to infringe any claim • description of infringement
of each patent;
General description where information is not
•
accused instrumentalities;
available
•
description of alleged infringement; Confidential information may be filed under
•
seal
authority of plaintiff to assert
patent
ANDA suit exception
General description of the above
where information is not readily
accessible
Confidential information may be filed
under seal
ANDA suit exception
CRS - 37
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Limits on
Postpone discovery if the defendant
Discovery stayed pending court’s ruling on
n/a n/a n/a
Discovery
makes a motion to dismiss, transfer
defendant’s motions to dismiss, transfer venue,
venue, or sever accused infringers
or sever accused infringers; such motion must
be filed prior to the first responsive pleading
Such motions must be filed within 90
days after service of the complaint and
Court may allow limited discovery necessary
must include a declaration or other
to resolve those motions
evidence in support of the motion
Court may allow additional discovery to
Court may allow such discovery that
preserve evidence or prevent prejudice to
the court deems is necessary to decide
party
those motions
Parties may consent to exclusion from
Stay of discovery does not apply to an
discovery limitations
action in which patent holder seeks a
preliminary injunction to prevent
ANDA suit exception
competitive harm
Parties may also consent to exclusion
from discovery limitations
ANDA suit exception
CRS - 38
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Transparency
Upon filing of initial complaint for
Within 14 days of filing the complaint, plaintiff
n/a n/a
n/a
of Patent
infringement, plaintiff must disclose to
must notify court and adverse parties of:
Ownership
USPTO, court, and all adverse parties:
•
Assignee(s)
•
Assignee(s) of the patent
•
Entities with right to sublicense or
•
Entities with right to sublicense or
enforce patent
enforce patent
•
Entities with financial interest in the
•
Entities with financial interest in
patent or in the plaintiff (direct or indirect
the patent (right to receive
ownership/control of > 20% of the
proceeds related to patent
plaintiff)
assertion) or in the plaintiff (direct
or indirect ownership/control of
•
UPE of the above
more than 5% of the plaintiff)
•
List of other complaints filed in prior 3
•
Ultimate parent entities (UPE) of
years asserting the patent
the above entities
•
Any licensing requirements that patent is
•
Description of the principal
subject to
business of the plaintiff
Patentee may file this information under seal if
•
List of all other complaints filed
confidential
that assert the patent
Patentee must file information regarding
•
identity of entities with USPTO but no ongoing
Any licensing requirements that
patent is subject to
duty to update the information
Plaintiff has an ongoing duty to notify
Assignment of all substantial rights in issued
USPTO of any changes in the above
patent (and name of assignee and UPE) must
be recorded in USPTO upon grant of patent
Failure to comply with duty of
and whenever subsequent assignments are
disclosure means plaintiff may not
made
recover treble damages or reasonable
fees during period of noncompliance;
Same consequences as Innovation Act for
court may award fees to prevailing
failure to comply with duty to disclose
party for expenses incurred to uncover
assignment/UPE information to USPTO
the updated information
NO ANDA suit exception
ANDA suit exception
CRS - 39
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Stays of
Court required to suspend/postpone
Court required to suspend/postpone litigation
n/a n/a n/a
Customer-
litigation against customer if:
against customer if:
Suits
•
manufacturer is party to the civil
•
manufacturer is party to the civil action or
action or in a separate action
in a separate action involving the patent
involving the patent
•
customer agrees to be bound by issues
•
customer agrees to be bound by
decided against the manufacturer
issues decided against the
manufacturer
•
Consent of the manufacturer to the stay
is needed only if manufacturer was made
•
customer requests stay within the
a party to the action on motion by the
later of: 120 days after first
customer
pleading is served, or the first
scheduling order in the case
•
customer requests stay within the later
of: 90 days after first pleading is served, or
Defines “customer” as a retailer or end
the first scheduling order in the case
user who has not material y modified
the product/process alleged to infringe
Same definitions for “customer,” “retailer,”
the patent
and “end user” as the Innovation Act (as
reported)
Defines “end user” and “retailer” to
exclude entities that manufacture the
Same criteria as the Innovation Act for lift of
product/process at issue
the stay
Stay may be lifted if suit against
ANDA suit exception
manufacturer will not resolve major
issue in suit against customer or if stay
unreasonably prejudices or is manifestly
unjust to the party seeking to lift it
ANDA suit exception
CRS - 40
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Shifting of
Requires a court to award attorney
On motion of the prevailing party, court must
n/a
n/a n/a
Attorney Fees fees to prevailing party unless court
determine whether the nonprevailing party’s
finds that either:
position was “objectively reasonable in law and
fact” and whether its conduct was “objectively
•
nonprevailing party’s litigation
reasonable”
position and conduct are
“reasonably justified in law and
•
If they were not, court must award
fact” or
reasonable attorney fees to prevailing
party unless special circumstances exist
•
special circumstances exist that
that make an award unjust
make an award unjust (special
circumstances include undue
•
Special circumstances include undue
economic hardship to a named
economic hardship to a named inventor
inventor)
or to an institution of higher education
NO ANDA suit exception
The prevailing party shall bear the burden of
demonstrating that the prevailing party is
entitled to an award of attorney fees
ANDA suit exception
CRS - 41
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Attorney Fee
If nonprevailing party cannot pay, court
Defendant may file initial statement expressing
n/a n/a n/a
Recovery
shall join an interested party to pay if
good faith belief that the plaintiff’s primary
prevailing party shows that
business is asserting patents
nonprevailing party has no substantial
interest in the case other than asserting Plaintiff must file a certification within 45 days
the patent
of defendant’s initial statement that includes:
Defendant must file initial statement
•
that the party has sufficient funds to pay
expressing good faith belief that plaintiff
for any potential fee award,
has no substantial interest in the case
•
that the party’s primary business is not
other than asserting the patent
asserting/enforcing patents,
Plaintiff must certify within 45 days of
•
identity of interested parties, or
defendant’s initial statement that: (a)
the party has sufficient funds to pay for
•
no such interested parties exist
any potential fee award, (b) the party
has substantial interest in the case
Plaintiff must provide interested parties notice
other than asserting the patent, or (c)
that the party may be held accountable to pay
no other interested parties exist
for an award of attorney fees if the plaintiff
cannot satisfy the ful amount of the award
Court may deny motion to join
interested party if: (a) interested party
Interested parties may avoid financial liability
is not subject to service of process, or
by renouncing their interest in the patent,
(b) joinder would deprive court of
within 120 days of receipt of the notice above
subject matter jurisdiction or make
Interested parties may intervene in the action
venue improper
to contest its identification as an interested
Court must deny motion to join
party or their liability for attorney fees
interested party if: (a) party did not
Court may exempt interested party from
receive timely notice of being identified
liability in the interest of justice
as an interested party, or (b) interested
party renounces in writing and with
Exceptions for: universities, non-profit tech
notice to the court and parties, any
transfer organizations, and ANDA suits
ownership, right, or direct financial
interest in the patent
Exceptions for: university tech transfer
organizations
CRS - 42
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Demand
“Sense of Congress” that action
Party may not rely on evidence of pre-suit
Defines a demand
Entity that sends
Defines a
Letters
including litigation stemming from
notification to establish willful infringement
letter as an unfair
20 or more
demand letter as
purposely evasive demand letter should
unless communication contains specific
or deceptive
demand letters
a unfair or
be considered fraudulent or deceptive
information
practice under
per year must
deceptive
practice
FTC Act if
disclose specific
practice under
Prohibits pre-suit notification from containing
wrongly and in bad information to
FTC Act if
statements that:
faith misrepresents USPTO
wrongly and in
•
request, demand, or offer to accept a
specific details
bad faith
Demand letters
specific monetary amount in exchange for
misrepresents
must include
a license, settlement, or similar agreement
specific details
specific
to resolve al egations of patent
information
infringement; or
relating to the
•
demand a specific monetary amount
patent claim
based on the cost of legal defense in a
allegedly infringed
lawsuit concerning any asserted claim
and the party
alleging
Defines widespread demand letter abuse as
infringement
violation of FTC Act
CRS - 43
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Reforms of
Requires the Patent Trial and Appeal
Requires the PTAB, in IPR and PGR
Requires the
n/a n/a
PTAB’s IPR
Board (PTAB), in inter partes review
proceedings, to follow the same claim
PTAB, in IPR and
and PGR
(IPR) and post-grant review (PGR)
construction standard used by district courts
PGR proceedings,
Proceedings
proceedings, to follow the same claim
to fol ow the same
construction standard used by district
Narrows the estoppel effect arising from a
claim construction
courts
PGR by allowing a PGR petitioner to raise in a
standard used by
later civil action issues (with respect to the
district courts
Narrows the estoppel effect arising
validity of a patent claim) that they “reasonably
from a PGR by allowing a PGR
could have raised” during the PGR
Provides a
petitioner to raise in a later civil action
presumption of
issues (with respect to the validity of a
Clarifies that the patent challenged in an IPR or validity to a
patent claim) that they “reasonably
PGR shal be presumed to be valid
previously issued
could have raised” during the PGR
Allows the USPTO Director to refuse to
claim that is
chal enged during
Prohibits IPR or PGR from being
institute an IPR or PGR proceeding “if the
an IPR or PGR
initiated unless petitioner certifies that
Director determines that institution would not proceeding
the petitioner:
serve the interest of justice;” factors relevant
to such determination include:
Requires IPR/PGR
•
does not own and will not acquire
petitioner to
a financial instrument that is
•
whether the grounds of unpatentability
prove
designed to hedge or offset any
are the same as those considered and
unpatentability of a
decrease in the market value of an
decided in prior judicial or USPTO
previously issued
equity security of the patent
proceedings, and
claim “by clear and
owner or an affiliate of the patent
•
whether there is another proceeding or
convincing
owner; and
matter involving the same patent that is
evidence” (existing
•
has not demanded payment
pending before the USPTO
law is
(monetary or otherwise) from the
Requires that panels convened to adjudicate
“preponderance of
patent owner or an affiliate of the
PGR or IPR proceedings have no more than 1
the evidence”)
patent owner in exchange for a
person, if any, who participated in the decision
Provides more
commitment not to file a petition
to institute such proceeding
stringent standing
for IPR with respect to the
requirements for
owner’s patent, unless the
IPR/PGR
petitioner has been sued for or
petitioner
charged with infringement of the
patent
CRS - 44
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Elimination of n/a n/a
Establishes
a
n/a n/a
USPTO Fee
revolving fund in
Diversion
which fees
col ected by
USPTO would be
deposited; such
fees would be
available to
USPTO until
expended
CRS - 45
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Venue
Limited to judicial districts where:
n/a
n/a n/a n/a
•
defendant has its principal place of
business or is incorporated;
•
defendant has committed an act of
infringement of a patent in suit and
has a regular and established
physical facility that gives rise to
the act of infringement;
•
defendant has agreed or
consented to be sued in the
instant action;
•
where inventor named on the
patent in suit conducted research
or development that led to the
application for the patent in suit;
•
a party has a regular and
established physical facility that
such party controls/operates and
has engaged in significant research
and development of, or
manufactured a tangible product
that is alleged to embody, the
invention claimed in the patent
General venue statute (28 U.S.C. §
1391(d)) governs venue for patent
cases involving foreign defendants that
are not incorporated or have no
regular and established physical facilities
in the United States
CRS - 46
H.R. 1896
S. 632
Demand Letter
H.R. 9
S. 1137
STRONG
Transparency
H.R. 2045
Innovation Act (as reported)
PATENT Act (as reported)
Patents Act
Act
TROL ACT
Small
Requires USPTO director to develop
Requires USPTO director to develop
Requires Small
n/a
n/a
Business
educational resources for small
educational resources for small businesses with Business
businesses with respect to their
respect to their “concerns arising from patent
Administration to
“concerns arising from patent
infringement”
produce a report
infringement”
analyzing the
Requires USPTO to create and maintain a
impact of patent
Requires USPTO and other federal
“user-friendly” section of its website in which
ownership by
agencies to provide, through existing
the public may find information about filed
small businesses
small business outreach programs,
patent cases and the patents at issue in those
and patent
education and awareness on abusive
cases
infringement
litigation practices
actions against
Requires USPTO to create and
small businesses
maintain a “user-friendly” section of its
Requires Director
website in which the public may find
of the
information about filed patent cases and
Administrative
the patents at issue in those cases
Office to designate
Requires USPTO director to conduct a
at least six district
study examining the economic impact
courts to address
of the Innovation Act on the ability of
special issues
individuals and small businesses owned
raised in patent
by women, veterans, and minorities to
infringement suits
enforce their patent rights
against individuals
or small business
concerns; such
courts would be
required to
expedite cases in
which an individual
or small business
concern is accused
of patent
infringement
Source: Congressional Research Service.
CRS - 47
Patent Litigation Reform Legislation in the 114th Congress
Author Contact Information
Brian T. Yeh
Emily M. Lanza
Legislative Attorney
Legislative Attorney
byeh@crs.loc.gov, 7-5182
elanza@crs.loc.gov, 7-6508
Congressional Research Service
48