The Status of Patent Reform Efforts in Congress

Transcription

1 The Status of Patent Reform Efforts in Congress 2nd Annual ACC Washington Technology Summit Doug Stewart Partner, Bracewell & Giuliani LLP

2 Patent Infringement Litigation Still Rising? 2014 had a 13% drop in patent lawsuits filed from 2013 Source: PWC 2013 Patent Litigation Study (May 2015)

3 The Role Of NPEs In Driving Patent Reform Efforts Non-Practicing Entities (NPEs) are blamed for the dramatic surge in patent litigation over the past decade NPE business models rely on the difficulty and cost of patent litigation to extract settlements from a wide range of alleged infringers NPEs by definition are not involved in the commercialization of the asserted patents, thus challenging some of the fundamental perceptions of the role of patents in a technology-based society NPEs fall on a broad spectrum of size, types, and motives

4 NPE Activity In 2015 On Par With 2014 Filings Source: Unified Patents Patent Dispute Reports (April, May 2015)

5 Monetization of Patent Litigation In The US Has Attracted Attention and Participation From Unlikely Sources Foreign governments backing NPE monetization schemes France Brevets (France) Intellectual Discovery (Korea) Innovation Network Corporation (Japan) Third Party Financed Litigation Hedge funds backing NPE patent suits

6 Demand For Reform In Light Of Sheer Volume Of Suits Prevailing attitude among corporations which are targeted by patent trolls is that legislative intervention is necessary Meanwhile, the court system slowly but surely is adjusting both the law and the procedures to undermine the value of a case to an NPE No injunctive relief Damages difficult to prove Limitations on discovery Pleading standards tightened and legal hurdles raised Lowered standards for attorneys fees in some cases

7 Current Legislative Proposals for Patent Reform Objective of Patent Reform Make it more difficult and more expensive for NPEs to bring frivolous patent suits Reduce advantages conferred upon NPEs by existing framework of litigation rules while avoiding harm to patent holders with meritorious claims of infringement Note that patent reform has been a subject of debate for several years, but this year seems to have more traction

8 House Proposal: The Innovation Act (H.R. 9)- Goodlatte Highlights: Heightened Pleading: complaint must be accompanied by a chart explaining with detailed specificity, how each limitation of each claim is met by the product accused on infringing the patent No discovery permitted until after claim construction ruling issues, except in competitor suits Real Party in Interest can be joined, in order to recover attorney s fees (no empty shell companies) Customer Suit Exception: suit can be stayed if customer agrees to be bound by any issues that the covered customer has in common with manufacturer

9 House Proposal: The Innovation Act (H.R. 9)- Goodlatte Most contentious provision: Fees: The court shall award, to a prevailing party, reasonable fees and other expenses incurred by that party [in a patent case] unless the court finds that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust. Effectively creates mandatory fee shifting, which will disincentivize patent owners, whether NPE or otherwise Status: Hearings held at the Committee on Small Business and Entrepreneurship (3/19/2015) Popularity: The House passed a version in 2013, but serious opposition to mandatory fee shifting

10 Senate Proposal: The PATENT Act (S. 1137) - Grassley Highlights: Heightened Pleading Standard: Similar to H.R. 9 Discovery: Requires a court to stay discovery pending resolution of motions to dismiss, transfer venue, and sever accused infringers Courts have discretion to allow limited discovery for preliminary injunction, to preserve evidence, or prevent prejudice Real Party in Interest can be joined, in order to recover attorney s fees

11 Senate Proposal: The PATENT Act (S. 1137) - Grassley Fees: Upon motion by the prevailing party, if the court finds that the conduct or position of the nonprevailing party was not objectively reasonable, the court shall award attorneys fees to the prevailing party with an exception for special circumstances that would make such an award unjust. Status: Hearings held at the Committee on the Judiciary (5/7/2015); Another hearing will be held at the Committee on June 4, 2015 Popularity: Has bipartisan support and greatest chance of making it into law

12 Impact of proposals on patent owners Heightened pleading requirements and fee shifting will make it more difficult and expensive for patent owners to assert their patent rights Patent portfolios will suffer some devaluation due to increased cost and risk Patent enforcement/assertion strategies will need to be reevaluated Source: Patently-O (March 2014)

13 Impact of proposals on parties accused of patent infringement Will generally benefit from heightened pleading requirements Should reduce overall cost in meritorious cases However, fee shifting provisions are agnostic as to party so same risk of attorneys fee award exists for defendant May lead to more conservative defensive strategies Early settlement still the most likely outcome

14 Conclusion Patent monetization and enforcement has come to play a more central role in many companies business strategy, while simultaneously attracting an entire industry based on litigation Courts (most) continue to take/develop hard stance against NPE activity, a trend that will likely continue Questions remain whether special legislation singling out patent litigation for special treatment is necessary Will patent reform cause more problems than it solves for companies operating in the world of technology and information?

15 Thank you for your attention! Doug Stewart Partner Bracewell & Giuliani LLP