The Patent Reform Act of 2010: A substitute S. 515

Here comes the Patent Reform Act of 2010 in the form of anamendment to S. 515. The amendment seems to meet the goal of establishing asimpler, objectively based, transparent patent system that can eliminatepatents that should not have been issued and speed the processing of patentsthat should be issued. The new patent law includes a number of improvements tothe patent laws, such as provisions to update and improve the patent markingstatute.

By eliminating the arcane and subjective rules associatedwith the current first-to-invent system, the amendment will make it easier andless costly to obtain patent protection in the United States, which willstimulate investment in new technologies. Moreover, while all inventors willcontinue to benefit from a one-year grace period in which to file a U.S. patentapplication after publicly disclosing their inventions, the incentive of thefirst-inventor-to-file system to file applications promptly will redound totheir benefit in obtaining patents in our major trading partners. Inventors whodelay filing their U.S. applications (on the tenuous assumption that they willbe able to obtain a U.S. patent by proving that they were first to make theinvention) run the risk of being second-to-file in the rest of the world wherepatents are awarded to the first inventor to file. Facilitating patentprotection outside the United States for American technology will stimulate theexport of American products produced by American workers.

The amendment will strengthen patents granted in the UnitedStates by allowing the public to participate in the patent granting process andby strengthening the administrative procedures in the U.S. Patent and TrademarkOffice (USPTO) for reviewing patents after grant. The bill will expand theopportunity for the public to submit information to patent examiners working onindividual patent applications, together with concise descriptions of itsrelevance. This will help ensure that all relevant information will beconsidered during the examination process, allowing the USPTO to conduct aquality examination before a patent is granted, reducing the need to rely onpost-grant clean-up procedures.

The amendment will provide a robust, post-grant review thatmust be requested within nine months after patent grant and, if initiated, becompleted within one year. Patents could be challenged on all issues ofpatentability. While both the initial post-grant review and the revised interpartes re-examination proceedings willcontribute to ensuring that only valid patents will survive, both proceduresalso contain safeguards to prevent harassment of patent owners. Both procedureswill be handled by a panel of administrative law judges. Importantly, patentowners who promptly file suit after patent grant will be assured that the courtwill not automatically stay its consideration of the patent owner's motion fora preliminary injunction on the basis that a petition requesting a post-grantreview has been filed or that such a proceeding has been instituted.

The amendment would address a number of litigation reforms,some initially recommended by the National Academies of Sciences (NAS), andothers, some quite controversial, urged by various special interests. Theamendment addresses the recommendation of the NAS to modify or remove thesubjective elements of patent infringement litigation that depend on theassessment of a party's state of mind and increase the cost and decrease thepredictability of such litigation. Under the bill, "failure to disclose thebest mode shall not be a basis on which any claim of a patent may be canceledor held invalid or otherwise unenforceable."

Another of the subjective elements of patent infringementlitigation that unnecessarily increases the costs for both obtaining patentsand litigating them is the doctrine of "inequitable conduct"—whether aninventor or patent attorney intentionally misled the USPTO in prosecuting theoriginal patent. While the amendment does not go as far as modifying orremoving the doctrine as recommended by the NAS, it does provide a remedialavenue for patent owners to bring to the attention of the office informationwhich might affect the scope of their patents. The bill allows patent owners torequest, prior to the institution of litigation, "supplemental examination" toconsider any information believed to be relevant to the patent. Any patentsurviving such reexamination will not be held unenforceable on the basis thatsuch information had not been considered or was incorrect in the initialexamination process.

Importantly, supplemental reexamination would not allow apatent owner to avoid sanctions based upon violations of criminal or antitrustlaws nor would it allow those responsible for any misconduct in proceedingsbefore the office to avoid disciplinary sanctions.

The amendment maintains the compromise reached in the SenateJudiciary Committee that fully responds to the allegations of inconsistency andunfairness in awards of reasonable royalty patent damages. It rejects theproposals calculated to reduce inventors' recoveries by narrowing claimedinventions through the use of definitional devices by limiting the claimedinvention for damages purposes to "its inventive contribution," its "patentablefeatures" or "the patent's specific contribution over the prior art." Instead,the bill sets forth a "gatekeeper" approach which ensures that courts or juriesconsider only those damages contentions that are cognizable at law andsupported by substantial evidence. This approach ensures that patentees willreceive appropriate compensatory damages for the unauthorized use of theirpatented inventions, while at the same time fully responding to the allegationsof runaway jury awards.

The third subjective element in patent litigation addressedby the NAS is "willful infringement," under which a court may increase damagesup to three times if the court or jury determines that the accused infringerwillfully infringed a patent. During the period when the NAS reviewed thisdoctrine, there was no effective threshold test for alleging willfulinfringement, therefore the required level of pre-filing investigation by theplaintiff was relatively modest and willfulness was asserted in most cases.

In response to a growing number of patent infringement casesfiled by patentees in perceived pro-plaintiff venues with little or no connectionto the parties in the case or the locations of their operations, witnesses ordocuments, proposals were made to essentially restrict patent suits to thejurisdiction where the infringer had its principal operation. This draconianrule would have denied manufacturing patentees the opportunity of bringing suitagainst infringers in the district where the patentee was located and had itswitnesses and evidence.

The amendment to S. 515 provides a very measured andsalutary approach to reigning in undesirable forum shopping. It requires thecourt to transfer a patent infringement action "upon a showing that thetransferee venue is clearly more convenient than the venue in which the civilaction is pending."

Stephen Albainy-Jenei is a patent attorney at Frost Brown Todd LLC, serving up chat atPatentBaristas.com. Further analysis of the amendment to S. 515 can be found onthat Web site. Write albainy-Jenei with comments or questions atStephen@patentbaristas.com.