What the Goodlatte Bill Aims to Do for Patent Litigation Abuse

2013 has been the year of the “patent troll.” Indeed, even President Obama has been known to lobby a passionate word or two against them. Only recently, however, has Congressional action had a chance of becoming a reality in terms of curbing what some consider patent litigation abuse.On October 23, 2013, Representative Bob Goodlatte (R.-Va.), Chairman of the House Judiciary Committee, introduced a patent bill entitled the “Innovation Act,” that was designed to address a variety of issues related to patent litigation abuse. What follows below is a very brief summary of some key points of the bill.

Pleadings

One of the main and most exciting parts of the bill deals with new pleading requirements. Under the Goodlatte bill, patent holders that file suit would be required to identify, among other things, each patent and claim asserted, the accused process or apparatus, model numbers for accused devices, and theories of literal or equivalent infringement. The thought behind this is that this will not only allow defendants a better chance at understanding what exactly they are facing, but it will make the patent holders put a little more money into the effort or “threat” they brandish when they are demanding settlements. (The hope is that if patent holders are required to pay a little bit more than the paltry sums they have been to fire off their current demand letters, they may think twice.)

The new pleading requirements also require other new disclosures in the pleadings. Disclosures such as the plaintiff’s right to actually assert the patent, their principal business, other complaints asserting the patents in suit, and any licenses that cover the patents through any standard-setting body or agency would also be required.

The bill also calls for amendments to Section 285, which would require courts to award attorneys’ fees to the prevailing party involved in the litigation unless the court found the position of the party of the losing party to be “substantially justified.” What “substantially justified” means remains to be seen. Clearly, these amendments would be fee shifting to act as deterrence to make it unpalatable for non-practicing entities to continue any sort of abusive patterns of litigation.

Joinder

The bill would also create a new section of Title 35, Section 299, which would require the court to join an interested party if the plaintiff has “no substantial interest” in the patent other than to litigate it. The court still has the authority to deny such a motion, however, if granting such a motion would deprive the court of subject matter jurisdiction or force an improper venue issue. Most likely, this provision was included to ensure that non-practicing entities do not spin off shell companies or subsidiaries to litigate under different names.

Discovery

In regards to discovery, it is can now be limited. Until the key “claim construction” phase of the patent litigation trial has ended, only discovery related to claims will be permitted. As the discovery phase can often be the most expensive phase of the trial due to document production and review, delaying discovery can prevent patent holders from running up the defendants’ costs during the early phases of the lawsuit. There are of course, exceptions, for discovery related to motion practice, or when the patent is going to expire.

Transparency

One of the key parts of the bill is that it now calls for more “transparency” in who holds rights or financial interests in a patent. The Goodlatte bill would now require that the patent owner or plaintiff disclose to the United State Patent and Trademark Office (“USPTO”), to the court, and to each adverse party (1), any assignee, (2), any entity with a sublicense or enforcement rights, (3) any entity with a financial interest in the patent, and (4) the ultimate parent of any assignee. (§4(3), page 12). Note that the Goodlatte bill late defines the aforementioned “financial interest” as the right to receive proceeds with regard to the asserted patent, and direct or indirect ownership of more than 5% control of the plaintiff in the action in a new provision inserted at Section 290(e).

The Goodlatte bill also notes that if the identified entity is a public traded corporation, the corporate name is sufficient, but if it is private, then the complaint must disclose the name, the address, the place of incorporation, and the name of each corporate officer.

The “Transparency” responsibility continues in requiring that patent assignments or any entities with a financial interest or rights to enforcement must be disclose on the record and to the patent office. The bill requires that such a duty is ongoing and that the plaintiff must report such changes in ownership, interest, or enforcement to the USPTO. Please see my next blog post for what else the Goodlatte bill purports to do regarding curbing patent litigation abuse!

Source: http://cdn.arstechnica.net/wp-content/uploads/2013/10/Goodlatte.Innovation.Act_.pdf

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