PATENT REFORM PROPOSALS
David W. Hill Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. October 25, 2005
Origins in the FTC & NAS Reports
FTC Report
18-month publication, post-grant review, PTO financing, prior user rights, and require actual notice for willful infringement. Open-ended, flexible system; post-grant review; “harmonizing” reforms (“first-inventorto-file”); and, eliminating “subjective elements” from patent litigation (best mode, willful infringement, and inequitable conduct).
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NAS Report
Patent Reform Act of 2005
House Committee Print on April 14, 2005. H.R. 2795 introduced on June 8, 2005. July 26 Amendment in the Nature of a Substitute to H.R. 2795 published. September 1 “Coalition Text” distributed. House Hearings on April 20 & 27, June 9, & Sept. 15, 2005. Senate Hearings on April 25, June 14, & July 26, 2005.
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Patent Reform Act of 2005
Sec. 1. Short title; table of contents. Sec. 2. Reference to title 35, United States Code. Sec. 3. Right of the first inventor to file. Sec. 4. Right to a patent. Sec. 5. Duty of candor. Sec. 6. Right of the inventor to obtain damages. Sec. 7. Post-grant procedures & other quality enhancements. Sec. 8. Submissions by third parties. Sec. 9. Venue. Sec. 10. Applicability; transitional provisions.
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Inventor’s Rights Contests
Whenever patents or applications for patent naming different individuals as the inventor are deemed by the Director to interfere because of a dispute over the right to patent under section 101, the Director shall institute an inventor’s rights contest for the purpose of determining the right to patent.
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§ 102 Conditions for Patentability; Novelty (Substitute for H.R. 2795)
(a) NOVELTY; PRIOR ART.—A patent for a claimed invention may not be obtained if— (1) the claimed invention was patented, described in a printed publication, or otherwise publicly known— (A) more than one year before the effective filing date of the claimed invention; or (B) one year or less before the effective filing date of the claimed invention, if the invention was patented or described in a printed publication or otherwise publicly known before the invention thereof by the applicant for a patent; or
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§ 102 Conditions for Patentability; Novelty (Substitute for H.R. 2795)
(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.
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Repeal of Best Mode
35 U.S.C. § 112: must disclose best mode known to the inventor. Often presents a difficult issue at time of application.
Increases cost of discovery.
Best mode seen as least costly of the three subjective issues.
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Constrain Inequitable Conduct
Material misstatement or omission with intent to deceive. Most common: failure to cite important prior art.
Other examples: concealing early offers for sale or public uses.
Can render the entire patent
unenforceable.
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Constrain Inequitable Conduct Adopt “But-For” Test
If all claims in a patent are valid— “Inequitable conduct” defense is barred. If court has invalidated one or more patent claims in an infringement action—
May move to amend the pleadings. To establish “but for” misconduct. Invalidated claims would not have issued in the patent.
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Limit Compensatory Damages
Goal is to foster consistency by the courts in determining damages for patent infringement. Damages should reflect the value contributed by the patented invention to an infringing product, no more or less. Related to the “entire market value rule”:
Damages can be based on the entire value of an infringing product or process if the patented feature is the “basis for customer demand.” Rite-Hite Corp. v. Kelley Co., Inc. Courts should distinguish “non-patented elements, manufacturing process, or business risks” from value arising from the patented invention. Georgia-Pacific Corp. v. United States Plywood Corp.
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Codifies the “apportionment” doctrine:
Limit Compensatory Damages Substitute for H.R. 2795
“In determining a reasonable royalty (a) in the case of a combination, the court shall consider (b) if relevant and among other factors, the portion of the realizable value that should be credited to (c) the inventive contribution as distinguished from other features of the combination, the manufacturing process, business risks, or significant features or improvements added by the infringer.”
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Limit Compensatory Damages Coalition Text
The patent owner must establish the economic contribution to a product or process arising from the patented invention. The infringer can distinguish any economic contributions it has added to the product or process. Damages must be limited to contributions arising from the patented invention.
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Limit Willful Infringement
FTC found that some companies avoided the reading of their competitors’ patents for fear of treble damage liability, and recommended that deliberate copying or actual notice be a predicate for liability for willful infringement. NAS found willful infringement to be one of the subjective elements that increase cost and decrease predictability of patent infringement litigation and recommended its elimination or significant modification. The bills adopt the FTC recommendation and permits finding of willful infringement only if an infringer intentionally copies a patented invention, or continues to infringe after receiving a specific notice, without justification.
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Post-Grant Oppositions Recommended by Both FTC & NAS
Nine month window from patent grant. Any issue of validity a court could consider. Parties can submit affidavits and declarations. Affiants and declarants can be cross-examined. Panel of three administrative law judges. Burden of proof is “preponderance of the evidence.” Decision in 12 months (exceptionally, 18 months). Appeal to Federal Circuit.
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Prior User Rights
FTC recommended enacting legislation to create “prior user rights” to protect parties from patent claims first introduced in a continuing application. Currently, prior user rights exist only for those commercially using “a method of doing or conducting business” before a patent application is filed by another. Both bills would enlarge prior user rights to apply all inventions, both products and processes.
Opposed by some in university community.
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Publish All Applications
Recommended by both FTC and NAS.
Currently, applicants can request that applications not being filed abroad not be published (≈ 10%). With pendencies in some areas exceeding five years, competitors can be ambushed by late patents. Publication will also improve patent validity.
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Pre-Grant Submission of Prior Art
Anyone can submit patents or publications of relevance to examination of an application. Submission cannot interfere with ongoing examination.
Must concisely describe the relevance of each submitted document. Existing ban on pre-grant opposition remains.
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Venue Substitute for H.R. 2795
Modifies existing special patent venue statute. Allows filing suit only in judicial district where—
The defendant resides (or is incorporated), or
The defendant has committed acts of infringement and has a regular and established place of business.
Would restrict patentees from bringing actions where they are located and where significant evidence relating to the case may be located. Would force them to travel to a distant judicial district to bring suit.
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Conclusions
Consensus exists that major changes are needed to U.S. patent law. Patent law serves many constituencies that must agree on what is a fair and balanced package.
Difficult to predict when legislation will be enacted—AIPA took five years.
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