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Senate Poised to Take Up Patent Reform Bill
- 2/24/2011

When the U.S. Senate returns to session in the beginning of March, one of the first orders of business will be the Patent Law Reform Act of 2011 (S. 23) (“Patent Reform Bill”).  Unlike the version that was debated last year, there is now an increased confidence in Congress that some form of the bill will pass into law.  Some pertinent provisions in the Patent Reform Bill include a change to a “first-to-file” system, a section relating to damages in a patent litigation, a provision for post-grant review proceedings, the establishment of a Patent Trial and Appeal Board, a provision for pre-patent issuance submissions by third parties, funding agreements, and an amendment to limit damages in a false patent marking lawsuit to a recovery that is “adequate to compensate for the injury.”
The bill was approved by the Senate Judiciary Committee early in February, and is making its way for debate and eventual vote in the Senate.  If the bill survives the Senate, it must be approved by the House of Representatives and signed by President Obama to pass into law. 
Here are some of the pertinent provisions of the Patent Reform Bill:

- First-to-File. As reported on the Ostrolenk Faber web site last year, the Patent Reform Bill proposes to change the current U.S. system from a first-to-invent system to a first-to-file system.  In other words, patent protection will be granted to the first inventor who files a patent application.  Part of the policy behind this change is to bring the United States in line with the rest of the world, which predominantly supports a first-to-file system.  One potential downside to the first-to-file system is that many parties, particularly those with less funding, may file patent applications that are of a low quality because of a perceived rush to get at least something on file with the Patent Office.  It is also possible that the Patent Office will receive an even larger influx of patent applications, despite the hundreds of thousands of backlogged patent applications.

- Limit Damages in False Marking Suits.  The Patent Reform includes an amendment to the false patent marking provisions of the Patent Act (35 U.S.C. §292) to limit an award of damages to be commensurate with an injury.  Currently, §292 limits damages to “not more than $500.00 for every such offense.”  As reported in the Ostrolenk Faber Newsletter and in a follow-up article on the Ostrolenk Faber web site, the Court of Appeals for the Federal Circuit recently held in Forest Group, Inc. v. Bon Tool Co. that damages of  “not more than $500.00 for every such offense” applied per falsely marked article.  Given the possibility of huge damage awards, the decision in Forest Group arguably caused a tremendous surge in false marking lawsuits.  In response, Congress proposed amending §292 in the Patent Reform Bill to reign in the amount of potential damages in a false marking lawsuit.

- Post-Grant Review.  The Patent Reform Bill also proposes to give defendants in a patent-related litigation a new avenue for invalidating a patent.  Parties may institute post-grant review proceedings, which are limited to determinations of novelty and non-obviousness under the Patent Act (35 U.S.C. §§102 and §103), and then only on the basis of patents or printed publications.  In one option, someone who is not a patent owner may file a petition with the Patent Office to institute an inter partes review proceeding.  Alternatively, a person may file a petition to institute a “post-grant” review for a patent, which is not an inter partes proceeding.  Further, the Patent Reform Bill provides for “additional grounds for instituting a post-grant review” that include a showing that the petition “raises a novel or unsettled legal question that is important to other patents or patent applications.”  During a post-grant review, a patent owner may file a motion to amend a patent to cancel a challenged claim or to propose a number of substitute claims.  A final decision is rendered by a Patent Trial and Appeal Board, which is a newly established body formed by the Patent Reform Bill.  The Board’s decision may be appealed. 

- Damages.  The Patent Reform Bill regards a potential limitation of damages resulting from patent litigation.  The Patent Reform Bill requires that, by the end of the final pretrial order, “the parties shall state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages … specifying the relevant underlying legal and factual bases for their assertions.”  The court is also afforded the authority to consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis.  These procedural limitations may serve to reduce the amount of damages that would otherwise be available to plaintiffs.

- Pre-Issuance Submissions.  The Patent Reform Bill includes a section for “Pre-Issuance Submissions By Third Parties.”  In this section, any third party may submit any printed publication of relevance for consideration by a patent examiner while a patent application is pending and after the patent application has published.  The Patent Reform Bill requires that any such submission be accompanied by a “concise description of the asserted relevance of each submitted document.”  
During hearings that took place in mid-February, the House of Representatives Subcommittee on Intellectual Property heard testimony from former Chief Judge Paul Michel of the United States Court of Appeals for the Federal Circuit.  Judge Michel testified that in his view, which he stressed was unbiased and disinterested, the primary problem plaguing the patent system regards excessively long delays for obtaining patent protection, particularly for new technologies.  Judge Michel noted that operations and resources of the United States Patent Office, as well as in the courts, need to be better funded and staffed in order to enable patent applications to be examined “expeditiously and carefully.”  Some of the points that Judge Michel made included that the Patent Office requires several thousand additional patent examiners, dozens of additional members for the Board of Appeals, and a significant upgrade needs to be made to the Patent Office information technology systems, which Judge Michel said were “antiquated, inadequate and unreliable.” 

Judge Michel also offered criticism of the legislative process associated with the Patent Reform Bill, and complained that representatives of small business, including “CEOs of start-up technology companies and members of the venture capital industry” were not adequately represented or have not been “adequately heard.”  It is generally agreed that large corporations favor passage of the Patent Law Reform Act of 2011, while small businesses and individual inventors generally do not.  Notwithstanding the debate that is likely to take place in March and the amendments to the Patent Reform Bill that will likely occur, without the types of changes proffered by Judge Michel during his testimony in February, the problems faced by the Patent Office resulting from extensive delays will not be quickly resolved. 

Click here for a PDF copy of the Patent Reform Bill. 

Stay tuned to the Ostrolenk Faber LLP website for continued updates on this important story.