Patent Reform Act of 2009

The Patent Reform Act of 2009 (S. 515/S. 610/H.R. 1260) was a set of proposals introduced in the 111th United States Congress for changes in United States patent law.^[1] Senators Orrin Hatch and Patrick Leahy introduced a Senate bill on March 3, 2009.^[1][2][3][4] Representative John Conyers introduced the House version, H.R. 1260, the same day.^[5][6] Senator Jon Kyl introduced another bill, S. 610, on March 17, 2009.^[7] The bills closely resemble previously proposed legislation including the Patent Reform Act of 2007 and the Patent Reform Act of 2005.^[8][9] On April 2, 2009, the Senate Judiciary Committee voted 15–4 to bring S.515 before the full Senate.^[10] However, the bill was not voted on by the Senate and died.^[11]

The Patent Reform Act of 2009 represented the third consecutive congressional session to attempt the first overhaul of the U.S. patent system since 1952.^{[2][12][13][14]} The bill was succeeded in the following Congress by the America Invents Act, which was passed by Congress and signed into law in 2011.

Proposed changes

The Patent Reform Act of 2009 was similar to the acts of 2005 and 2007, but controversial sections were removed, such as:^[9][15]

• Applicant Quality Submissions: Proposed that patent applicants must find out for themselves if a patent already exists prior to filing.
• Inequitable Conduct: Would eliminate the need for patent filers to act in "good faith" in order to enforce their patents.
• USPTO Authority: Granted the United States Patent & Trademark Office substantial rule-making authority.

Patent infringement litigation

The Patent Reform Act of 2009 proposed to give defendants additional ways to combat infringement allegations and limit damages.^[16][17][18] Specifically the bill:

• Requires infringement suits be brought only in states where the defendant has a physical place of business that constitutes a "substantial portion" of its operations.
• Broadens the use and expediency of appeals.
• Creates stricter rules and criteria for "willful infringement". The patent owner would be required to present compelling evidence that the infringer acted with "objective recklessness", intentionally copied a patented invention with knowledge it was patented, and that the patentee gave the infringer written notice of their violations in a manner that gives "objectively reasonable apprehension of a suit."
• Proposes stricter rules about the criteria for "reasonable royalty" and creates a set criteria for measuring damages
• Allows defendants to win with a "good faith" defense to willful infringement, if they believed in good faith that the patent was invalid, unenforceable or not infringed when violating the patent.^{[1][9][16][17][18]}

Post-grant review

The Patent Reform Act of 2009 suggested revisions to reexamination procedures. In the bill, any party could challenge a patent's validity within 12 months of issuance. If a party – most likely the owner of a pre-existing patent – contested the patent within that time frame, the USPTO would have had to execute discovery procedures and arrive at a decision prior to the end of that 12 months. If the USPTO found in favor of the new patent holder, the petitioner would have been estopped from seeking reexamination or asserting invalidity as a defense in subsequent litigation. ^{[1][9][16][17][18]}

First-to-file

All versions of the Patent Reform Act of 2009 that were proposed would have switched U.S. patent priority from the existing "first-to-invent" system to a "first-to-file" system. The proposed legislation modified the prior art definitions of the patent law. Prior art that barred a patent would have included all public uses, sales, offers for sale, publications, and other disclosures available to the public as of the filing date, other than publications by the inventor within one year of filing (inventor's "grace period"), whether or not a third party also filed a patent application. Applicants that did not publish their inventions prior to filing would have received no grace period. The proceedings at the U.S. Patent Office for resolving priority contests among near-simultaneous inventors who both filed applications ("interference proceedings") would have been repealed, because priority would have been determined based on filing date. The legislation proposed creating a new administrative proceeding—called a "derivation" proceeding—that would ensure that the first person to file the application was actually a true inventor and that the application was not derived from another inventor.^[1]

Additional proposed changes

The Patent Reform Act of 2009 proposed additional changes to patent law, including:^[1]

• Revision to prior art definition to include inventions that were "otherwise available to the public."
• Procedures to allow third parties to submit prior art while applications are pending.
• Permission to allow a company to file an application on behalf of an inventor when there is an obligation to assign-easing the requirement of having a signed declaration.
• Permission to use evidence of non-exclusive licenses to set royalties.
• Elimination of interferences (with the provision that derivation proceedings would be available to assess whether the invention was derived from another inventor).
• Expanded inter partes reexamination.
• Codification of the 2007 In re Seagate Technology, LLC decision's standard for willful infringement.
• Permission to use evidence of prior public use or sale as permissible grounds for reexamination.
• Limitation of venue selection for a patent plaintiff to that related to the defendant's principal place of business, place of incorporation, or where the defendant has committed substantial acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the operations of the defendant.
• Assignment of jurisdiction over interlocutory claim construction appeals to the Federal Circuit.

Advocacy for and against

Those who opposed the bill argued that the proposed revisions favored patent violators over inventors.^[19][20] SEC public records indicate that the seven corporations who lead the Coalition for Patent Fairness, which supported the bill from 1996–2006, paid about half of all patent related awards during the same period.^[13][21] The opposition claims that narrowing the definition of patent infringement based on location and administration, while reducing the consequences of violations, will hinder U.S. innovation, a patent owner's ability to enforce rights, and global competitiveness.^{[13][22][23][24][25][26]} Also argued is that patent reform should remain in the hands of the court system.^[3][22]

Proponents of the bill suggested that technology companies were subject to an unprecedented wave of patent lawsuits, stifling innovation and creating an overburdened and lethargic patent system.^{[2][12][25][27][28]} Advocates for the legislation argued that it would create jobs, bolster innovation, streamline the patent system, reduce patent litigation, and keep the U.S. competitive globally.^{[2][12][24][27][29]}

Supporters also credited the bill with creating more specific criteria for calculating damages in royalty cases,^[30] while the opposition believed that criteria would reduce the award payments of patent violators, reducing the incentive for investors to fund new innovations in the U.S.

Number of patent disputes

Organizations supporting the bill claimed that the number of patent lawsuits increased dramatically in the years leading up to the legislation's proposal.

The Federal Judicial Statistics documented that the number of U.S. patent lawsuits as a percentage of total patents had not changed significantly over the past two decades and remained at approximately 1.5 percent of all patents issued with 93 trial patent cases annually in a system with 1.8 million active patents.^[20][21]

First-to-file

Proponents of this change submitted that it would have simplified the application process and bring U.S. patent law into better harmony with the patent law of other countries, most of which operate on the "first-to-file" system. Proponents also claimed that it would eliminate costly Interference proceedings at the USPTO and reduce U.S. applicants’ costs in seeking patent rights outside of the United States.

Opponents contend that a "first-to-file" system favors larger firms with well-established internal patenting procedures, patent committees and in-house attorneys over small business inventors. Opponents also submit that it will (i) cause loss of patent rights due to new prior art published after the invention date but before the filing date, (ii) weaken the one-year grace period so it cannot be relied on, compelling inventors to behave as if there were no grace period, (iii) replace "interferences" with costly derivation proceedings, (iv) create a “race to the Patent Office” with every new idea, increasing the number of patent applications filed, with the attendant costs in attorney fees and diversion of company personnel to patent application preparation, (v) increase examination backlogs at the USPTO, (vi) do nothing to reduce U.S. applicants’ costs of acquiring patents outside of the U.S., and (vii) decrease average patent quality. ^{[31] [32] [33]}

Opponents also note that the partial harmonization that would be effected by the Patent Reform Act has very little economic value. First, the key issue in any patent validity or infringement inquiry is "claim construction," the procecess of determining what a patent covers. The process of claim construction is rather different under U.S. law than in any other jurisdiction, and as long as this difference remains, any benefit of harmonization is likely very small. Second, note opponents, unless the law is identical (for example, as it is among the 50 United States states), any inquiry must be resolved on a country-by-country basis. Opponents note that in Europe, where the European Patent Convention narrowly confines the differences between European national patent laws, it is still the case that one must get a separate opinion from an attorney in each European member state. Even small differences in law are sufficient to defeat any benefit of harmonization, and the Act merely proposes to go "halfway" toward harmonization, rather than adopting the law of another jurisdiction in its entirety.

The United States Government is currently negotiating with other nations at the World Intellectual Property Organization to gain a one-year grace period for disclosure of patentable materials equal to that in the U.S. As a trade-off to gain this benefit, the U.S. proposes to shift to a first-to-file system. If Congress unilaterally makes this concession, the U.S. is unlikely to secure the grace period provision from other countries.

Opponents note that the bill would replace about 100 interference disputes under today's law with some unknown number of "derivation" proceedings when two inventors file applications at about the same time, and an unknown number of derivation showings that an applicant would have to make to remove prior art. Opponents note that the bill's proponents have not even acknowledged these costs, let alone estimated them.

Damages

Generally, big technology companies like HP, Cisco, and Microsoft are pushing to cut the number of infringement lawsuits against them and the amount of damages they pay, while many other industries and smaller inventors are more interested in protecting their patents through greater compensation for infringement.^{[16][20][26][28][34]}

Post grant procedures

Advocates argue that allowing a challenge of a patent in the first year after the issuance or reissuance of a patent will improve patent quality by allowing third party inputs. Opponents note that the existing inter partes process now takes an average of 5 years and that the legislation does not extend the lost life of a patent that is proven valid, thereby reducing the incentive to invent.

Organizations against

• The Union of U.S. Patent Examiners^[35]
• Institute of Electrical and Electronics Engineers^{[36] [37]}
• The National Small Business Association ^{[38] [39]}
• The Small Business Coalition on Patent Legislation^[31]
• Patent Office Professional Association^[35]
• The Innovation Alliance^[40]
• The Professional Inventors Alliance^[41]
• The TPL Group^[13]
• The American Bar Association's, Intellectual Property Committee^[42]
• The National Venture Capital Association^[36]
• The AFL-CIO^[36]
• General Electric^[36]
• Procter & Gamble^[36]
• Johnson & Johnson^[36]
• Texas Instruments^[36]
• American Innovators for Patent Reform

Organizations for

• Coalition for Patent Fairness (CPF)^[43]
• Business Software Alliance^[44]
• The Software & Information Industry Association (SIIA)^[45]
• The Coalition for 21st Century Patent Reform^[46]

References