Goodlatte Bill Implements a Loser Pays System For Patent Litigation

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. The bill, widely supported within and outside of Congress and with the full backing of the White House, was passed by the House of Representatives on December 5, 2013 in a vote of 325 to 91.

Of note, the bill 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.” In other words, the bill seeks to implement a 'loser pays' system in an attempt to deter aggressive patent trolls by creating the risk of having to pay the defendant’s fees if the defendant wins.

Presently, the court is only required to award legal in exceptional circumstances. The shift to a loser pays system would fall more in line with the system followed by most of Europe, which has required that the losing party pay the winning party’s reasonable legal fees. The bill would require courts, as the default, 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.

The shift to this loser pays system is driven by the goal of curbing patent owners from rushing to file infringement suits based on weak patents and/or highly questionable infringement. However some have criticized that this shift may favor deep pocket defendants against small inventor plaintiffs, presenting added obstacles to enforcing legitimate patents. Others have even taken this line of reasoning one step further and have postulated that it could curb innovation, because if the system makes patents more difficult to enforce the drive to innovate and seek patents may decline as well.

Other Key Points of the Bill

  • The bill would eliminate 35 U.S.C. § 145. Section 145 allows an applicant dissatisfied with the decision of the Patent Trial and Appeal Board to appeal to the Federal Circuit.

  • The bill would require claim construction to be a part of post-grant and inter partes review proceedings.

  • The bill would codify the double-patenting doctrine and apply it to first-to-file patents.

  • The bill would clarify the limits on patent term adjustments.

  • The bill would allow manufacturers to intervene in patent infringement suits filed against its customers, automatically staying the customer suit. The customer must agree to be bound by the court’s decision with respect to any issue it has in common with the manufacturer.

  • The bill would provide for small business education and outreach by the U.S. Patent and Trademark Office to educate businesses on patent litigation.

The U.S. Patent and Trademark Office would be required to develop a website in an effort to communicate patent transparency information.


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