Currently, according to many academics, business leaders, and government officials, the United States patent system is facing a crisis. With the sheer volume of applications before the Patent and Trademark Office (PTO) on the rise, growing problems with bad patents that never should have been issued and costly litigation have come to the forefront of the discussion.[1] So, it may come as a surprise that United States patent policy has not gone through a significant overhaul since 1952. For such an important and foundational element of technology policy and innovation, the government is long overdue to revise patent policy to reflect the incorporation of new technologies and account for growing trends in patent law. This long-standing need explains why despite numerous other looming domestic issues, the proposed Patent Reform Act of 2009 is one of the hot issues currently introduced before both the House of Representatives and the Senate. The bill represents the third attempt in a series of proposed legislation, following the Patent Reform Act of 2005 (H.R. 2795) and the Patent Reform Act of 2007 (H.R. 1908, S. 1145), to remedy a “profoundly flawed” patent system[2]. There are currently two versions of the bill in the Senate, one championed by senators Patrick Leahy and Orrin Hatch[3] (hereafter the Leahy-Hatch bill) and one by Senator Jon Kyl[4] (hereafter the Kyl bill). Representative John Coyners introduced an identical version of the Leahy-Hatch bill in the House of Representatives (H.R. 1260) on the same day as the Senate bill. This website will primarily analyze the Leahy-Hatch bill in the Senate, as this bill has thus far received the most attention and action by Congress.

I will provide three distinct angles from which to analyze the patent reform debate:

“Reaching the Decision Agenda”

This page will look at how S. 515 has reached the decision agenda. Primarily, it will use John W. Kingdon’s theory of political streams and Kevin R. Baumgartner and Bryan D. Jones’s theory of punctuated equilibrium to analyze the process.

“Influence of Patent Examiners”

This section will focus on the impact of an actor that has opposed patent reform, describing the role that patent examiners have played in the debate over S. 515. It will mostly analyze the history of their influence dating back to the Patent Reform Acto of 2007. Specifically, I will look at the impact of the Patent Office Professional Association (POPA).

“Supreme Court Involvement”

In contrast with the previous section, this section will look at the role the Supreme Court, which has been a proponent and active agent of patent reform debate. It will analyze the recent decisions and actions that have made the Supreme Court a powerful and relevant factor in patent reform.

[2] Editorial, Patent Sanity is Pending, L.A. TIMES, Dec. 4, 2005, at M.4

[3] The Patent Reform Act of 2009, S. 515, 111th Cong., 1st Sess. (2009) (as introduced).

[4] The Patent Reform Act of 2009, S. 610, 111th Cong., 1st Sess. (2009) (as introduced).

I. Provisions That Simplify and Harmonize the Patent System

The most significant change to simplify and harmonize the patent system, proposed by both the Leahy-Hatch and Kyl bills, is to alter the US’s patent priority rules, shifting from a “first-to-invent” system to a “first-to-file” system. Priority in patent law addresses the situation where two or more persons independently claim to develop identical or similar inventions at the same time. The rule attempts to determine which inventor is entitled to patent protection.

Under a “first-to-file” system, an applicant is granted the right to a patent based on filing date rather than on invention date. That is, the first person to file a patent application gains patent protection, regardless of when the invention was actually conceived. Most countries in the world operate under a “first-to-file” rule.[1] The most notable exception to worldwide adoption of “first-to-file” is the United States, which currently operates under a “first-to-invent” rule. Under the “first-to-invent” system, priority is granted to the person who first conceives of an invention, even if the first inventor was not the first person to file a patent application. Thus, the actual date of conception is extremely important[2].

Both the Leahy-Hatch and Kyl bills propose a change to a “first-to-file” system because it sets simple and less ambiguous standards for patent seekers. The actual date of conception and how diligently the inventor sought to reduce the invention to practice all require very complicated legal and factual determinations. Thus, while a “first-to-invent” system, at first glance, may seem like the fairest approach to determining who should receive a patent, the system can become bogged down in complex and muddled procedures called interference proceedings[3]. Interferences attempt to determine priority of inventorship when two or more patent applications are filed claiming the same invention. A switch to “first-to-file” would void the need for these costly interference proceedings. Another advantage is that the shift would bring the United States in line with most international standards, as most countries operate under a “first-to-file” rule. The US stands alone amongst industrialized nations in its retention of “first-to-invent”, so the switch would inject much needed consistency into the system.

The bills also agree on a tightening of the one-year grace period for disclosures prior to a patent application. The one-year grace period is an almost uniquely American concept that provides a one-year time limit after the first public disclosure or offer of sale of an invention (by the inventor or a third-party) during which a patent application must be filed.[4] An inventor will lose his or her right to obtain a patent if the application is not filed within this period. The one-year grace period has been a standard of US patent law, especially coupled with the “first-to-invent” system, but most countries do not grant such a period or grant a much shorter period (i.e. any prior disclosure means the invention is unpatentable). The Leahy-Hatch and Kyl bills both propose removing the one-year grace period for most cases, only keeping the period for disclosures made by the inventor. Notably, this means that third party activity and disclosures even one day before the filing of an application can be used as prior art by the PTO. Both bills hope to leverage the move to a “first-to-file” system with international patent organizations in order to secure the one-year grace period for US inventors internationally, making it easier for US inventors to receive patent protection abroad.

[2] U.S. Pat. & Trademark Office, U.S. Dep’t of Commerce, Manual of Patent Examing Procedure §2138.05 (8^th ed., 7^th rev. 2008) [hereinafter MPEP].

[3] Id. at §2300.01; 35 U.S.C §135.

[4] 35 U.S.C. §102(b); MPEP at §2133.

II. Provisions That Improve Patent Quality

The two main proposals that are meant to improve patent quality are the expansion of pre-issuance submission procedures and post-grant opposition. Both provisions encourage third parties to cross-validate the PTO’s examination procedure by expanding the ability of members of the public to submit information to the PTO. Poor patent quality has become a growing concern to all members of the patent community.

Pre-issuance submissions:

Under current law, pre-issuance submissions are a strictly controlled procedure. While interested third parties may initiate protest proceedings, the American Inventors Protection Act of 1999 limits these protests to the narrowest of cases, saying “no protest… may be initiated after publication of the [patent] application”.[1] In spite of this legislation, the PTO developed a limited rule for individuals to submit specific information related to a pending patent application within two months of the applications publication. This rule however can, again, only be used in the strictest of cases. Accepted information must be either a patent or printed publication; other information is not given any consideration. Comments and explanations regarding the submitted information are not given any consideration either.

The Leahy-Hatch and Kyl bills both propose an identical expanded pre-issuance examination procedure. Under the new provision, any third party may submit prior art to the PTO during the examination of a patent along with “a concise description of the asserted relevance of each submitted document”.[2] The documents must be submitted by the later date of either (1) six months after the publication of an application or (2) before the first office action on the merits (the first substantial communication between examiner and prosecutor). This proposal would undoubtedly give the PTO increased access to pertinent information on pending patent applications. If members of the public submit prior art that examiners miss, the new pre-issuance submissions should lead to a more accurate PTO examination process. However, if a multitude of new documents were submitted that are identical to references found by the PTO’s searchers, this provision may only succeed in bogging down the PTO’s examiners.

[2] S. 515 § 10.

Post-grant review:

Another side to improving patent quality deals with challenges to already issued patents. Currently, after a patent is granted in the United States, a third party or an inventor can initiate a process called a reexamination proceeding to dispute the validity of a granted patent. Under the reexamination rules, any individual may cite a prior art patent or printed publication to the PTO with respect to a new patent. If the PTO determines that the new reference raises a “substantial new question of patentability”, it can reopen prosecution of that issued patent. The result of this reexamination will be a certificate of reexamination that revalidates the patent’s original claims, an amendment to the patent’s claims, or even a complete invalidation of some or all of a patent’s claims.

Reexamination proceedings are generally ex parte (between only the examiner and the inventor), but a third party petitioner can request an inter partes reexamination and participate more actively in the process. These proceedings are especially useful during patent litigation to help determine the validity of a patent, both making use of the PTO’s technical expertise and reducing time in court. However, such inter partes reexaminations can be a large risk to requesters, as the current law states that third party participants may not assert in court that the patent is invalid “on any ground that [the requester] raised or could have raised during the inter partes reexamination proceeding”.[1] The focus here is on the language “or could have raised”, as potential participants could be dissuaded from initiating an inter partes reexamination in fear that new insights and prior art found in the future could not be used to invalidate a patent.

The Leahy-Hatch bill expands current reexamination provisions by allowing the public to challenge issued patents based on all grounds of patentability. Additionally, under the proposed changes, reexamination proceedings may be requested based on not just patents and publications but evidence of prior public use or sale, as well. The proposal also completely reworks inter partes reexamination, making them more like court cases. These proceedings would be conducted under the purview of an Administrative Patent Judge rather than a PTO examiner, ensuring that the requests would be dealt with promptly and that only challenges that raise serious doubts as to an issued patent’s patentability would be considered. At the same time, the Leahy-Hatch bill proposes the elimination of the above-mentioned phrase “or could have raised” from the statute thus limiting the resulting estoppel to only arguments that the requester actually did make during the proceeding. This would greatly reduce the risk of requesting an inter partes reexamination as the door would still be open to invalidate the patent in the future.

The Kyl bill sets up a substantially different reexamination procedure. First, the proposed change establishes two timeframe windows in which a patent may be challenged. In the first window, within nine months of the issuance of a patent, an individual may “request to cancel as unpatentable 1 or more claims of a patent on any [grounds for patentability]”.[2] In the second window, which extends from nine months after the issuance of a patent onwards, a challenger “may request to cancel as unpatentable 1 or more claims of a patent only on [the grounds of obviousness or novelty] and only on the basis of prior art consisting of patents or printed publications.”[3] The Kyl proposal clearly describes a more restrictive procedure than the Leahy-Hatch proposal, which provides more allowances to reexamination requesters.

[2] S. 610 at § 5(c)(b)(1).

[3] Id. at (c)(c)(1).

III. Provisions That Reduce the Cost of Litigation

The proposed changes that impact US patent litigation are few and far between the most controversial of all the proposed changes in both patent reform bills. These issues include a complete overhaul of how damage awards are calculated, changes to what constitutes proper venue, and a reform of the doctrine of inequitable conduct.

Damages:

The determination of damages awarded in patent litigations is perhaps the single most controversial issue currently being debated in the patent reform process. If a judge or jury finds that an accused patent infringer has indeed made, used, or sold a patented invention, the patent holder is entitled to seek monetary compensation for said infringement. If the court finds these remedies to be appropriate, the judge can award compensatory damages in some amount. The current damages statute is not very instructive as to how the determination of amount should be made, only stating that damages must be “adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer.”[1] The concept of a “reasonable royalty” has mostly been defined by the courts. One method is through a hypothetical negotiation in which the court effectively makes an estimate as to what the infringer would have paid in licensing fees if the invention had been properly licensed. The 15 factors codified in the case Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) are another key way that courts determine a reasonable royalty.

In actuality, these rules result in damage awards that are generally considered to be higher than what would result from a negotiated license.[2] There are two main reasons for this problem. Royalty stacking refers to the situation where multiple patents cover a claimed invention and infringers may bear the responsibility of paying multiple sets of royalties. This particularly can affect industries like computer hardware and consumer electronics where inventions are often covered by several patents. The resulting “patent thickets” create a tragedy of the anti-commons where the existence of multiple patent holders can result in an undo burden on infringers that can actually exceed the market price of an infringed product.[3] Another problem is an uncertainty problem with damages rules as written. Because “the royalty rules are so loose”, juries have been found to act “quite unpredictabl[y]”. This causes them to “tend toward large damage awards”.[4] The new damages proposals seek to remedy some of these issues.

[2] Dennis Crouch, Patent Reform 2009: Damages, Patently-O Blog, March 3, 2009, http://www.patentlyo.com/patent/2009/03/patent-reform-2009-damages.html .

[3] Mark A. Lemley and Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Texas Law Review 1992, 2012 (1991).

[4] Crouch, supra n. 28.

Venue:

The forum in which a patent case can be filed has become an important debate in recent years. The concept of venue refers to the doctrine that limits which specific courts a particular case can be filed in. Patent infringement cases fall under federal as opposed to state jurisdiction. That is, the cases must be filed in one of the 94 federal district courts in the United States and its territories.[1] Under current law, plaintiffs have incredible leeway in choosing a court in which to file a suit, as they may sue a corporate defendant anywhere that the defendant is subject to personal jurisdiction.[2] The primary purpose of venue is “the convenience of litigants and witnesses”[3] (e.g. a California plaintiff suing an Oregon defendant should not be brought to federal court in Texas), and venue limitations are put in place to prevent what is informally referred to as “forum shopping.”

The term forum shopping describes the practice of filing a case in the court thought most likely to return a favorable outcome for the plaintiff, ignoring convenience. There are many factors that can benefit plaintiffs that forum shop including patent-holder-friendly juries, large compensatory damage awards, speedy litigations, and high trial rates. These factors added together have resulted in highly variable win-rates for patent holders in some courts. The Eastern District of Texas’s Marshall division courthouse has gotten national attention in recent years for it’s desirability as a forum in patent cases. Despite the fact that Marshall itself has “little to recommend it”, many high profile cases have been tried in the community of 25,000, making patent litigation the town’s most lucrative industry.[4] This phenomenon has caused a high influx of cases to the Eastern District of Texas and has raised growing concerns that venue can decide patent cases before they even begin.

The 1990 VE Holding Corp. v. Johnson Gas Appliance Co. case in the Court of Appeals for the Federal Circuit was imperative to this increase in forum shopping. Historically, the plaintiff in patent cases filed cases in venues “where the defendant resides” or where the “defendant has committed acts of infringement and has a regular and established place of business”.[5] The ruling in VE Holding broadened the standard for venue by redefining “where the defendant resides” to mean anywhere that corporate defendants are subject to personal jurisdiction.[6] Both the Leahy-Hatch bill and the Kyl bill seek to address the issue of forum shopping in patent cases by redefining proper venue.

[2] VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1583 (Fed. Cir. 1990).

[3] 14D Charles Alan Wright et al., Federal Practice & Procedure § 3801, at 2-4 (3d ed. 2007).

[4] Julie Creswell, So Small a Town, So Many Patent Suits, N.Y. Times, Sept. 24, 2006, § 3 (Sunday Business), at 1, available at http://www.nytimes.com/2006/09/24/business/24ward.html.

[5] 28 U.S.C. § 1400(b).

[6] 917 F.2d at 1574, 1580.

Inequitable Conduct:

Patent prosecution in the United States is traditionally an ex parte procedure, meaning it only involves the applicant and the PTO[1]. Third-parties like the public and the applicant’s competitors do not play a role in these proceedings. Thus, the patent system relies on the applicant’s strict observance of the duty of candor towards the PTO. Because of the great incentive to conceal information that may be detrimental to the granting of an applicant’s patent, US law penalizes applicants who do not act in good faith in the prosecution of their patent. Under the doctrine of inequitable conduct, a patent can be declared “unenforceable” if the applicant intentionally misrepresented or failed to disclose information to the PTO during prosecution. During patent litigation, an infringement defendant will often claim that the patent-in-suit is unenforceable due to inequitable conduct. This defense has become so routine in patent infringement cases that the Court of Appeals for the Federal Circuit that oversees patent appeals has called it “an absolute plague”[2]. Because inequitable conduct requires an extensive analysis of the patent prosecution proceeding, it is often cited as one of the key contributors to the cost and length of litigation.[3] Some experts have even recommended the complete elimination of the doctrine of inequitable conduct.

[2] Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988).

[3] Scott D. Anderson, “Inequitable Conduct: Persistent Problems and Recommended Resolutions,” 82 Marquette Law Review (1999), 845.