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Does AIPLA have positions on these proposals?

Last updated 4/17/2015

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AIPLA is engaging with Members of Congress as well as their staff to give a balanced perspective on the potential impact of the various legislative proposals on behalf of our diverse membership, which represents both patent owners and accused infringers in patent litigation as well as clients in patent prosecution and licensing.  In our statement before the Senate Judiciary Committee on December 17, 2013, we articulated the following guiding principles for any legislative proposals to curb abusive patent litigation:
  1. Preserve the traditional rights of patent owners to protect and secure reasonable returns on their innovations;
  2. Safeguard the interests of users before the USPTO and the courts;
  3. Maintain judicial discretion to appropriately manage litigation;
  4. Carefully target specific abusive actions rather than a particular category of actors;
  5. Avoid singling out patent litigation or a particular category of litigant with inflexible statutory changes to the judicial process; and
  6. Encourage courts to more readily exercise their discretion with existing tools for case management, or, where necessary, the courts acting collectively could provide new tools that maintain the discretion and flexibility so important to trial judges.
AIPLA continues to study the specific provisions of H.R. 9 and S. 632 to determine where these principles are being met and where amendments could be made to ensure that the appropriate balance is being struck and to avoid unintended consequences. See below for a summary of AIPLA’s current positions on some of the key issues being debated. We've also prepared a chart that summarizes the specific provisions of H.R. 9 and AIPLA's positions.


 
 
USPTO Funding: One of the root problems in the current patent landscape relates to what is perceived by some as poor quality or ill-defined patents as granted by the USPTO.  It is clear that improving the quality of patents on the front end will alleviate the need for litigation down the road.  Therefore, it is vitally important that the USPTO be given the necessary resources to carry out its responsibilities.  The USPTO needs full and sustainable funding to improve the patent system and the quality of patents.  This single legislative reform will help reduce abusive patent litigation by reducing the number of lower quality patents with unclear terms, overly broad claims or both.
 
AIPLA strongly supports proposals to provide permanent, full funding to the USPTO. There is no reform more important to the success of the U.S. patent system than ensuring stable and sufficient funding for the USPTO.

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Heightened Pleadings Requirements: The current Innovation Act, if passed, will require every plaintiff alleging patent infringement to plead numerous additional and specific provisions including, among other things, each patent and claim asserted; the identity of each accused apparatus, process, machine, manufacture, or composition of matter; the name or model numbers or description for accused devices; where each claim is found and how each claim is met in an accused instrumentality;  a description of any acts of alleged indirect infringement; a description of the authority of the party alleging infringement to assert each patent; a description of the asserting party’s principle business; a list of prior complaints filed; and whether a standard setting body has deemed it an essential patent.
 
AIPLA opposes statutorily imposing significantly heightened pleading requirements on patent lawsuits that go beyond the pleading standard of other federal civil litigation, and which may deter legitimate infringement actions, particularly by small inventors or businesses, raise costs and prolong the litigation due to, among other things, an increase in preliminary motion practice. AIPLA is analyzing what pleading requirements may be put in place to provide greater clarity at the front end of a lawsuit without placing undue burdens on a patent owner.
 
AIPLA supports encouraging greater case management by the courts while maintaining the courts’ discretion. The Judicial Conference has proposed the repeal of Federal Rule of Civil Procedure 84 governing forms, including Form 18 for patent complaints. This proposal is currently pending before the Supreme Court and is scheduled to come into effect in December 2015. Elimination of Form 18 will subject patent cases to be in line with the higher pleading standards in Iqbal and Twombly,[1] mandated by the Supreme Court and should free the judiciary to develop pleading standards on a case-by-case basis.
 
[1] Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

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Fee Shifting: The Innovation Act contains a presumption which mandates that the court award attorneys' fees to the prevailing party in a case.  Fees shall be awarded to the prevailing party unless the non-prevailing party can prove that its position and conduct was reasonably justified in law or fact, or that special circumstances make such an award unjust.
 
AIPLA opposes mandating the presumption of the imposition of attorneys’ fees in all cases. Mandatory fee-shifting would require an analysis of whether the non-prevailing party’s position and/or actions met certain conditions at the end of every patent infringement case regardless of the merits.  Such a provision may have the unintended consequence of limiting access to the courts for small business owners or independent inventors, would lengthen and add to the cost of already expensive patent litigation, potentially invade the attorney-client privilege in making the determination whether to award fees, and disincentivize patent procurement and innovation.   AIPLA also opposes language which would dictate that a plaintiff that issues a covenant not to sue to be deemed the non-prevailing party for the purpose of attorneys’ fees, potentially discouraging settlement.
 
AIPLA could conditionally support a fee shifting provision if 35 U.S.C. §285 were amended such that: 1) the language was permissive (may) rather than compulsory (shall); 2) reimbursement was limited to an award of reasonable attorneys’ fees; and 3) the burden of proof was placed on the prevailing party to establish that the non-prevailing party’s position was not substantially justified. AIPLA supports encouraging greater case management by the courts while maintaining the courts’ discretion and encouraging courts to assess attorneys’ fees in appropriate cases.  Consistent with this position, courts are now more frequently awarding attorneys’ fees since the Supreme Court’s recent decisions in Highmark and Octane.[2]
 
[2] Highmark Inc. v. Allcare Health Management Sys., U.S., No. 12-1163; Octane Fitness, LLC v. Icon Health and Fitness, Inc., U.S., No. 12-1184.

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Fee Recovery and Joinder: Where fees and expenses have been awarded under Section 285 to a party defending against a claim of infringement and a non-prevailing party is unable to pay, the Innovation Act provides that courts, under certain circumstances, will be required to grant a prevailing party’s motion to join an interested party related to the non-prevailing party if the non-prevailing party is unable to pay the fees and expenses.
 
AIPLA opposes requiring a court to grant a motion of a prevailing party to join an “interested party” where the non-prevailing party’s only interest in the patent was in the assertion of it. The provision as written would remove judicial discretion and impose different requirements or limitations based on the subject matter of the litigation.
 
AIPLA also opposes an alternative fee recovery proposal that would allow courts to require that a party asserting a claim for patent infringement post a bond at the outset of litigation sufficient to ensure payment of the accused infringer’s reasonable fees and expenses, including attorneys’ fees should the accused infringer become the prevailing party. This would have the potential to increase the costs and prolong litigation by requiring a complex bonding analysis at the beginning of every case, regardless of the merits. It also may impede access to the courts for certain parties, such as small inventors and small businesses.

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Limitations on Discovery: The Innovation Act would require a statutory stay of discovery in connection with claim construction in a majority of cases and would require the adoption of patent-specific discovery rules by the Judicial Conference.
 
AIPLA opposes removing judicial discretion and placing statutory limitations on discovery in the manner proposed. Statutory changes to discovery are difficult to modify and may lead to increased litigation in some cases. AIPLA supports encouraging greater case management by the courts without undermining their discretion to supervise the parties.
 
Moreover, proposed amendments to Rule 26 of the Federal Rules of Civil Procedure are currently pending before the Supreme Court and would come into effect in December 2015. The amendments would limit discovery to information relevant to a parties’ claim or defense by removing language from the scope of discovery in Rule 26(b)(1) that allows for broad subject matter discovery where good cause is shown.  Additionally, to ensure discovery is proportional to the needs of the case, the proportionality factors that currently appear in Rule 26(b)(2)(C)(iii) would be amended and moved into Rule 26(b)(1).  The factors to be considered by the courts would be “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

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Demand Letters: The Innovation Act provides that a patent demand letter cannot be used as evidence of pre-suit notification of infringement in support of a claim of willful infringement unless it includes certain specified information.  An alternative proposal targets demand letter abuse by seeking to clarify the authority of the FTC to police the widespread sending of bad faith and deceptive demand letters by treating it like a deceptive trade practice.
 
AIPLA supports policing the bad faith sending of deceptive demand letters through unfair competition laws as long as legislation is carefully crafted so as not to impede legitimate patent licensing and enforcement and also to remove any concerns about violating the First Amendment.  Legislators should proceed cautiously before requiring detailed information to be included in patent demand letters, as there are many legitimate business reasons for sending such a communication.  Patent owners need to be able to engage in regular business communications without the fear of a declaratory judgment or other action based on legitimate enforcement efforts.
 
AIPLA supports inclusion of a federal preemption provision to ensure consistency in the application of patent laws.  At least eighteen states to date have passed legislation addressing patent demand letters.  This developing patchwork of laws has complicated patent enforcement and licensing decisions and has the strong potential to make it more difficult for legitimate patent owners to enforce their rights. 

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Patent Ownership Transparency: The Innovation Act would require plaintiffs to disclose the assignees of each patent at issue, any entity with a right to sublicense or enforce the patent, any entity with a financial interest in the patent, and the ultimate parent entity.  The plaintiff would also be required to continuously update the information at the USPTO once a patent is involved in litigation
 
AIPLA is not opposed to the approach of requiring disclosure of ownership information in patent litigation; however the language of the provision needs further clarification. AIPLA opposes encumbering a patent for the rest of its life with reporting requirements that are triggered when a patent is enforced, and compliance with a requirement to update ownership information at the USPTO within 90 days may be too difficult in some circumstances.

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Stays of Customer Suits: The Innovation Act would require a stay of litigation under certain circumstances against a customer in the event there is pending parallel litigation against the manufacturer or supplier.
 
AIPLA supports this provision in principle, subject to clarification of the language of the final provision, giving the courts clearer instruction to stay customer suits in favor of a suit against a manufacturer where the parties consent. However, any legislation needs to address added complexities of multiple vendors, manufacturers, and retailers as potentially responsible parties, and how stays would work in such instances, i.e., where there is a multi-supplier market.
Patent Case Management by the Judicial Conference: The Innovation Act requires the Judicial Conference to develop case management procedures as well as rules and procedures to address “asymmetries in discovery burdens and costs.”
 
AIPLA supports encouraging greater case management by the courts without undermining their discretion to supervise the parties. Development of such procedures should be left to the discretion of the Judicial Conference. Amendments to the Federal Rules of Civil Procedure governing discovery are currently pending before the Supreme Court and would come into effect in December 2015. These amendments will give the courts more tools to cut back on discovery including an express proportionality requirement. AIPLA opposes requiring the Judicial Conference to develop mandated guidelines that adhere to specific requirements for patent cases. The Judicial Conference should use its discretion to develop discovery guidelines that allow for flexibility on a case-by-case basis. 

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Amendments to AIA Trial Proceedings before the USPTO: The Innovation Act would amend the estoppel provision under the USPTO Post-Grant Review (PGR) provisions (Section 325(e)(2)) to delete “or reasonably could have raised.”  The Act would also adjust the standard for claim construction in Inter Partes Review (IPR) (Section 316(a)) and PGR (Section 326(a)) proceedings to be the same as in district courts.
 
AIPLA supports amending the estoppel provision under post-grant review to strike “or reasonably could have raised.” The amendment would return to the estoppel language that was originally part of the AIA.  The estoppel provision should be narrow to encourage parties to use this new review proceeding to address questionable patents early on.
 
AIPLA also supports adjusting the standard for claim construction in IPR and PGR proceedings to be the same as it would be in district court.  These proceedings should apply the same claim construction standard as used in the district courts. Consistent claim construction across these post-grant validity challenges will provide greater certainty in final decisions and reduce the need for further litigation.  The playing field should be level such that the patent owner is not subjected to a narrower claim construction standard in trying to enforce its claims in district court, but a broader standard for the petitioner to attack its patents before the Patent Trial and Appeals Board at the USPTO.
 
AIPLA opposes proposals that would expand the scope and duration of the Transitional Program for Covered Business Method (CBM) Patents.  CBM was specifically enacted to allow for a specialized provisional post-grant proceeding to review the validity of certain business method patents related to financial services.  There are numerous issues yet to be addressed and it is premature to extend the CBM transitional program before it has been fully tested and evaluated

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