Abstract
A 2017
In 2011, Congress joined in when it enacted the America Invents Act (AIA), which includes multiple provisions tending to devalue patents, most notably the newly minted inter partes review (IPR) and post-grant review (PGR) processes intended to facilitate the invalidation of issued patents (referred to hereafter as “PTAB proceedings,” since both IPR and PGR are decided initially by the Patent Trial and Appeal Board, or PTAB). 3 Subsequent to the passage of the AIA, Congress considered various proposed bills that would have further eroded the patent right. These actions by Congress and the Supreme Court were driven in no small part by a perception that the patent right had become too strong in the U.S., and more particularly by a perceived problem of “patent trolls” abusing the patent system.
But recently, the continued devaluation of the U.S. patent has provoked a response in Congress, where several bills have recently been introduced that would substantially roll back many of the patent devaluing aspects of the AIA and recent Supreme Court precedent. This article reviews some of the more noteworthy aspects of three of these legislative proposals, after first reviewing some of the patent-eroding provisions of the AIA and decisions of the Supreme Court that would be overturned, entirely or in part, by the proposed legislation.
Patent Devaluation At the Supreme Court and in Congress
Over the years, the United States has experienced periods of expanding and contracting patent rights, as measured in multiple dimensions, including availability, scope, and enforceability. For much of the twentieth century, the courts tended to disfavor strong patent rights, as was the case in the first half of the twentieth century, when the U.S. Supreme Court expanded upon a nonstatutory “inventiveness” requirement for patents and issued a string of decisions striking down patents for a perceived lack of sufficient “creative genius.” Prompted by complaints from patent attorneys and their clients, Congress responded in 1952 by creating the statutory nonobviousness requirement currently embodied in Section 103 of the Patent Act, abrogating the judge-made inventiveness requirement in favor of today's arguably less-stringent and more-predictable requirement of nonobviousness. Thirty years later, Congress moved to further strengthen patent rights with the creation in 1982 of the Court of Appeals of the Federal Circuit, a single court to hear all patent appeals and create a more uniform and coherent body of patent law, with the hope that the patent system would be strengthened in order to provide a better incentive for invention and investment in innovation.
During the 1980s and ’90s, and continuing through the early years of the twenty-first century, the Federal Circuit oversaw a fairly dramatic expansion of patent rights, perhaps most notably in terms of the scope of potentially patentable subject matter, but also with respect to the strength of the patent itself, both in terms of enforceability and resilience to validity challenges. Not surprisingly, the expansion ultimately led to its own backlash, with many arguing that under the Federal Circuit's watch, patent rights had become too strong in the U.S., to the detriment of the public interest. The Supreme Court responded to calls for reining in the Federal Circuit with a string of decisions, continuing to this day, which have tended to undo much of the patent-strengthening precedent created by the Federal Circuit, resulting in an overall erosion of the patent right over roughly the last decade. 4
One of the earliest of these decisions was KSR v. Teleflex, decided in 2007, in which the Supreme Court chastised the Federal Circuit for establishing an overly permissive standard of nonobviousness. KSR effectively raised the nonobviousness bar, resulting in an increased likelihood that the U.S. Patent and Trademark Office (PTO) and lower courts will find a patent claim invalid for obviousness under Section 103. 5 The decision responded to widespread complaints that the PTO was issuing too many patents directed towards “obvious” inventions, and the perception that a strong presumption favoring the validity of issued patents had rendered it unduly burdensome for accused infringers to invalidate patents in the courts.
KSR was a bellwether of things to come. Perhaps the most noteworthy of the Supreme Court's recent patent-eroding precedents is embodied in its four twenty-first century patent eligibility decisions—Bilski, Mayo, Myriad, and Alice. 6 These decisions have substantially contracted the scope of patentable subject matter in certain important areas of biotechnology, particularly relating to software-implemented inventions, diagnostics, and certain vaccines and biologics. Bilski and its progeny have been widely lambasted for their failure to provide adequate guidance as to the standard to be applied in assessing patent eligibility under the newly stringent standard, which has created a great deal of unpredictability and uncertainty at the PTO and in the lower courts. 7 Applied literally, the Alice/Mayo test for patent eligibility threatens to deny patent protection for some of the most important inventions arising out of biotechnology, as borne out in the Federal Circuit's notorious decision in Ariosa Diagnostics v. Sequenom. 8
Another significant patent-eroding decision was eBay v. MercExchange, which made it more difficult for a prevailing patent owner to obtain a permanent injunction enjoining future infringement. 9 Under pre-eBay Federal Circuit precedent, there was a very strong presumption in favor of permanent injunction after a finding of patent infringement, such that in almost all circumstances a patent owner could enjoin future infringement once liability had been established. eBay substantially weakened this presumption, establishing the current four-factor test for whether a court should enter a permanent injunction upon a finding of infringement. Under this test, the prevailing patent owner must show: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. As a practical matter, it has become more difficult for some patent owners to enjoin ongoing infringement, particularly when the patent owner is not practicing or commercializing the patented subject matter.
In TC Heartland LLC v. Kraft Foods Grp. Brands LLC, decided in 2017, the Supreme Court eroded the patent right by restricting the ability of patent owners to choose the venue in which to enforce their patents. 10 Prior to the decision, Federal Circuit precedent provided that the venue with respect to corporate defendants in patent cases was proper in “any judicial district in which such defendant is subject to the court's personal jurisdiction.” 11 The Court rejected this approach in TC Heartland, holding that under 28 U.S.C. § 1400(b), a corporate defendant may only be sued (1) in its state of incorporation, or (2) where it has committed acts of infringement and has a regular and established place of business. The practical effect is that a patent owner facing widespread infringement might be forced to file lawsuits in multiple, often inconvenient judicial districts scattered throughout the country.
In Impression Products v. Lexmark International, also decided in 2017, the Supreme Court held that any authorized sale by a patent owner exhausts all patent rights in the products sold, thus prohibiting a patent owner from enforcing post-sale restrictions through a patent infringement suit. 12 The Court also held that patent exhaustion applies to foreign sales authorized by the patent owner. The decision overturned Federal Circuit law, and created uncertainty as to whether, and to what extent, a patent owner would be able to control downstream use and resale of patented products. For example, it is unclear whether the owner of a patent covering an invention useful in both basic research and commercial applications will be able to sell the product for research use only, while requiring a separate license for commercial use, a common practice in biotechnology prior to Impression Products.
The Supreme Court has also issued two decisions, Microsoft v. AT&T 13 and LifeTech v. Promega, 14 that have limited the ability of patent owners to successfully invoke 35 U.S.C. § 271 to prevent patent circumvention by parties that outsource activities that would constitute infringement if performed in the U.S. Section 271(f) creates an exception to the “general rule under United States patent law that no infringement occurs when a patented product is made and sold in another country,” 15 by creating liability under certain circumstances for a party that supplies a component or components of a patented invention from the United States in a manner that induces or contributes to the use of the components in the manufacture of a U.S. patented product outside the geographic boundaries of the United States. 16
In Microsoft, the Supreme Court held that a patent claim reciting a computer capable of performing a function specified in the claim was not infringed by a company that exported a computer program that, when loaded onto a computer outside the U.S., resulted in a computer covered by the claim. Similarly, an earlier Federal Circuit decision, Pellegrini v. Analog Devices, Inc., held that a U.S. company was not liable for infringement under § 271(f) for supplying instructions that were used outside the U.S. to manufacture a product that would infringe if made, used, or sold in the U.S. 17 The Federal Circuit held in Pellegrini that § 271(f) is only applicable where components of a patented invention are physically present in the United States and then either sold or exported “in such a manner as to actively induce the combination of such components outside the United States in a manner that would infringe the patent if such combination occurred within the United States.” Together, Microsoft and Pellegrini stand for the proposition that supplying instructions from the U.S. intended to induce a patented product (or process) to be manufactured (or performed) outside the U.S. does not constitute patent infringement. In the context of biotechnology, as pointed out in a previous Holman Report, the law would thus appear to sanction avoidance of infringement liability by means of replicating a DNA-based component of a patented invention outside the U.S. 18
Ten years later, the Court issued its decision in Life Technologies v. Promega, another case establishing a relatively narrow interpretation of liability under § 271(f). In Life Technologies, the patent at issue involved a biotechnology invention, more specifically a polymerase chain reaction (PCR)-based method of genetic testing, and the question addressed was “whether a party that supplies a single component of a multi-component invention for manufacture abroad can be held liable for inducing infringement under § 271(f)(1).” A unanimous Court answered the question in the negative, holding that “a single component does not constitute a substantial portion of the components that can give rise to liability under Section 271(f)(1).” 19 In doing so, the Court overturned the district court's and the Federal Circuit's decisions below which had found that the component at issue, Taq polymerase, constituted such an important and critical component of the patented invention that its supply from the United States for combination abroad with other components of the patented test could be the basis for liability under § 271(f).
In Global-Tech Appliances v. SEB S.A, decided in 2011, the Supreme Court held that in order to prevail on a claim for induced infringement under § 271(b), the patentee must prove that the accused infringer had knowledge that the induced acts constitute patent infringement. 20 Thus, to prevail, the patent owner must not only prove that the accused infringer intended to cause the acts constituting infringement, but also that the accused infringer knew of the patent and that the actions will infringe the patent. The Court did allow that the actual knowledge requirement could be satisfied by a showing of willful blindness.
In Limelight Networks v. Akamai Technologies, decided in 2014, the Supreme Court further diminished the value of patents in another decision rendering it more difficult for a patent owner to establish induced infringement. 21 In the decision below, Akamai Technologies v. Limelight Networks, the en banc Federal Circuit had held that a party that performs some (but not all) of the steps recited in a method claim can be held liable for inducing infringement if that party actively encourages others to perform the remaining steps of the method. 22 The Supreme Court reversed, holding that in order for a defendant to be held liable for inducing infringement under § 271(b), it is necessary to establish that someone has engaged in activities that constitute direct infringement under § 271(a), and pointing out that under Federal Circuit precedent, liability for direct infringement of a method claim under § 271(a) requires that performance of all the method steps recited in the claim be attributable to a single entity. 23
In Cuozzo v. Lee, decided in 2016, the Supreme Court interpreted two provisions of the AIA in a manner that renders it more difficult for patent owners to defend their patents during IPR proceedings. 24 In particular, the Court held that a provision specifying that the Patent Office's determination as to whether to institute IPR “shall be final and nonappealable” entirely precludes judicial review of at least some PTO decisions to institute IPR, including the decision at issue on appeal in the case. The Court also upheld a regulation promulgated by the PTO that requires the agency, when conducting an IPR, to give a patent claim “its broadest reasonable construction in light of the specification of the patent in which it appears.” 25 The Justices rejected the patent owner's contention that the PTO should, like the courts, give claims their “ordinary meaning … as understood by a person of skill in the art,” 26 holding that the agency had legal authority to issue its broadest reasonable construction regulation under a provision of the Patent Act that grants the PTO authority to issue “regulations … establishing and governing inter partes review under this chapter.” 27 As pointed out in an amicus brief filed by PhRMA, the PTO's broadest reasonable construction regulation “creates the risk that a patent claim could be (correctly) found valid by a district court under Phillips, but also (correctly) found invalid by the PTAB in an IPR proceeding under the BRI [i.e., broadest reasonable construction] standard.” 28
In 2018, a divided Supreme Court considered but then turned aside a constitutional attack on IPR proceedings in Oil States Energy Servs. v. Greene's Energy Grp. 29 The majority rejected the petitioner's argument that actions to revoke a patent must be tried in an Article III court before a jury.
Devaluation of patent rights has not been limited to the Supreme Court. Congress has also gotten into the act, most notably through the passage in 2012 of the America Invents Act. The AIA is probably the most significant single piece of patent legislation to be enacted since 1952, and while it has some meritorious aspects, overall, it has substantially eroded the patent right. First and foremost, the AIA has weakened patent rights by creating the new IPR and PGR processes for challenging issued patents, compelling patent owners to spend large sums defending their patents in proceedings that have resulted in the revocation of patents at a very high rate, leading some to dub the PTAB, the tribunal that decides these matters, a “death squad” for patents. 30 Other aspects of the AIA have also served to weaken the patent right, including the shift from a first-to-invent system to first-inventor-to-file, which expanded the scope of prior art for assessing the novelty and nonobviousness of an invention.
Following enactment of the AIA, members of Congress continued to introduce legislation that would further weaken the patent right. During the 113th and 114th Congresses (2015–16) Rep. Goodlatte introduced the “Innovation Act” (H.R 9), which if enacted would have made it more difficult for patent owners to enforce their patents by creating enhanced pleading requirements for patent infringement lawsuits, an award of attorney's fees to a prevailing party under certain circumstances, and procedural mechanisms for staying discovery pending a preliminary motion. The Innovation Act would have also amended the federal judicial code to restrict the venues where patent actions may be brought and to require disclosure at the outset of litigation of any persons and entities with a financial interest in the patent at issue in the litigation. These provisions were intended to address the concern that “patent trolls” were abusing the patent system, but they would have made it significantly more difficult for patent owners, especially small firms and independent inventors, to enforce their rights.
The 114th Congress also saw the introduction of the Targeting Rogue and Opaque Letters (TROL) Act of 2015, which would have made it an unfair or deceptive act or practice under the Federal Trade Commission (FTC) Act to engage in a pattern or practice of sending demand letters that contain misrepresentations about patent rights, and authorized the FTC go after those engaged in such practices. The proposed legislation would also require that demand letters include key information, such as the person with the rights to the patent, parent companies, contact information, and information on how the recipient is infringing the patent. Notably, pro-patent groups such as the American Intellectual Property Law Association (AIPLA) and the Biotechnology Innovation Organization (BIO) have come out in support of TROL, acknowledging that abuse of the patent system by some patent owners is a problem that should be addressed. 31
Legislative Proposals to Restore Patent Rights
Numerous bills have been introduced during the current session of Congress (115th Congress, 2017–2018) relating to patents, including a number that would substantially amend the Patent Act. 32 Some of the proposed legislation would continue the weakening of the patent right as described above, including the Preserve Access to Affordable Generics Act (S. 124), which would prohibit certain reverse payment settlements in Abbreviated New Drug Application (ANDA) litigation, and bills intended to abrogate sovereign immunity as a defense in IPR proceeding (S. 1948 and H.R. 3517). The overall trend, however, has clearly shifted toward a strengthening of patent rights. This section of the article focuses on three bills that would seek to strengthen the patent right in a variety of ways, largely by turning back many of the patent-weakening developments described above—the STRONGER Patents Act, the RALI Act, and the Inventor Protection Act.
The STRONGER Patents Act of 2018
H.R. 5340, the “Support Technology and Research for Our Nations Growth and Economic Resilience Patents Act of 2018 (STRONGER Patents Act),” introduced by Congressman Stivers of Ohio, would substantially roll back many of the patent-eroding provisions of the AIA, including sweeping reforms of IPR and PGR (PTAB proceedings). 33
For example, the proposed legislation would explicitly define the standard to be used by the PTAB in construing claim language during PTAB proceedings. As noted above in the discussion of Cuozzo, the Patent Act is currently silent on this point, leaving it to the discretion of the PTO, which has opted to use the broadest reasonable construction standard (i.e, broadest reasonable interpretation, or BRI) in these review processes. Under the BRI standard, claims can be interpreted more broadly during PTAB proceedings than they would be in an action brought in federal court, thus rendering claims more susceptible to invalidation in PTAB proceedings.
The change to the standard under the STRONGER Patents Act, pursuant to which claims undergoing IPR or PGR review, including substitute claims, are to be afforded their ordinary and customary meaning, as such would be understood by a person having ordinary skill in the art (PHOSITA), taking into account the patent's prosecution history, i.e., the Phillips standard argued for by the petitioner in Cuozzo. 34 The Act also specifies that if a court has previously construed a claim in a civil action to which the patent owner was a party, the PTO “shall consider that claim construction” during review.
Note that on May 8, 2018, the PTO published a proposed rulemaking that would essentially change the claim construction standard employed during PTAB proceedings in the way provided by the STRONGER Patents Act, i.e., by applying the same claim construction standard as is currently used in the federal courts and the International Trade Commission (ITC), and requiring the PTAB to consider claim constructions previously made during a civil action or ITC proceeding. 35 According to the PTO, the “purposes of the proposed rule include, among other things, to ensure consistency in claim construction between the PTAB and proceedings in district court or at the ITC, and to increase judicial efficiency.” 36
The STRONGER Patents Act would also heighten the burden of proof for patent challengers during PTAB proceedings, by mandating a presumption of validity for any previously issued claim that is challenged, and requiring a petitioner to prove the unpatentability of a previously issued claim by clear and convincing evidence. The current standard does not presume the validity of issued claims during PTAB proceedings, and allows a petitioner to prevail under the significantly less stringent preponderance of the evidence standard.
The STRONGER Patents Act also creates a more stringent standing requirement for PTAB proceedings. Pharmaceutical companies have been particularly critical of the current standard, which allows, for example, a party that is in no danger of being sued for infringement of a patent to nonetheless challenge the patent and seek to profit from the challenge by short sale of the company's stock. Under the proposed legislation, the only entities who will have standing to petition for an IPR or PGR are those which have been either sued for or “charged with” infringement of the patent. The bill defines “charged with infringement” as meaning that “a real and substantial controversy regarding infringement of a patent exists such that the petitioner would have standing to bring a declaratory judgment action in federal court.”
The STRONGER Patents Act creates a variety of additional protections for patent owners. It sets a threshold for review, such that the PTO may not authorize institution of review unless the Office determines that the petitioner has established a reasonable likelihood that it will prevail with respect to at least one of the challenged claims. It also bars the PTO from authorizing institution of review of a claim with respect to which the Office has previously instituted IPR or PGR. Under the Act, a decision by the Office not to institute review shall be final and nonappealable. On the other hand, the Act authorizes interlocutory appeal to the Federal Circuit of a determination to institute review.
In order to eliminate repetitive proceedings, the STRONGER Patents Act amends the Patent Act to include estoppel provisions prohibiting a petitioner from filing a subsequent petition seeking review of a patent claim with respect to any ground that the petitioner raised or reasonably could have raised in the initial petition, unless after filing of the initial petition the petitioner has been charged with infringement of additional claims of the patent. The Act also estops a petitioner from asserting in a civil action that the claim is invalid under Section 102 or 103 (i.e., anticipation or obviousness) unless the invalidity argument is based on allegations that the claimed invention was in public use, on sale, or otherwise available to the public, i.e., based on prior art other than a printed publication.
The bill includes provisions establishing that a federal court's determination of patent validity takes priority over a contrary ruling in a PTAB proceeding. In particular, certain final judgments of patent validity by a district court under Section 102 or 103 will bar the institution of a review proceeding, or, in the case of a proceeding that has already been instituted, stay the proceeding pending appeal and terminate the proceeding if the validity determination is “finally upheld.”
The proposed legislation also provides for more liberal amendment practice before the PTAB during IPR and PGR, creating a rebuttable presumption that a patent owner will be allowed to substitute amended claims, so long as it can make a prima facie showing that the substitute claim responds to each ground of unpatentability on which the review was instituted, meets the written description requirement under 35 U.S.C. § 112, and does not enlarge the scope of the claims or introduce new matter. The Act also allows the PTAB to order an expedited patentability report from a patent examiner on a substitute claim, and grants the PTAB discretion to order expedited IPR or PGR reexamination.
The STRONGER Patent Act's patent-strengthening reforms extend well beyond PTAB proceedings. Responding to eBay, the Act includes a section entitled “Restoration of Patents as Property Rights,” which provides that, upon a finding of infringement of a patent that has not been proven invalid or unenforceable, a court shall presume that further infringement of the patent would cause irreparable injury, and that remedies available at law are inadequate to compensate for that injury. Essentially, the proposed legislation requires a court to presume that the patent owner has satisfied two of the four eBay criteria, which would significantly increase the likelihood that a court will grant a permanent injunction once infringement has been proven.
The STRONGER Patents Act would also eliminate diversion of fees from the PTO, creating an Innovation Promotion Fund into which all fees collected with respect to patents or trademarks is to be deposited, and which is to be used to pay for administrative and operating expenses of the Office.
In one of the more interesting reforms provided under the proposed bill, the STRONGER Patents Act would substantially amend 35 U.S.C. § 271(b) so as to make it easier for a patent owner to prevail on a claim of induced infringement. As amended by the Act, § 271(b) would no longer require a patent owner to prove that an accused inducer of patent infringement knew of the patent, so long as it can be shown that the accused party intended to cause the acts that constitute infringement. The amended statute would also create new bases for liability for acts of infringement that occur outside the U.S. In particular, a party would be liable for infringement under § 271(b) if it supplies a design for a product embodying a patented invention in such a manner as to actively induce making that product outside the U.S. in a manner that would infringe the patent if the product were made in the United States. It would also be an act of infringement to supply a specification for performing a patented method in such a manner as to actively induce the performance of that method outside the U.S. in a manner that would infringe the patent if the method was performed in the United States. Furthermore, under the amended statute a party could be found liable for actively inducing infringement of a process patent under § 271(b), or for contributory infringement of a process patent under § 271(c), even if all of the steps of the patented process are not practiced by a single entity. This basically codifies an interpretation of § 271(b) attempted by the Federal Circuit several years ago in Akamai, but which was subsequently overturned by the Supreme Court in Limelight (as mentioned above and discussed in more detail in another Holman Report 37 ).
The elimination of the requirement that the performance of all steps of a patented process must be attributable to a single entity, at least in the context of induced and contributory infringement, could be very significant for some biotechnology patent owners. As the law now stands, it is hard for a patent owner to hold a diagnostic testing company liable for infringement of a diagnostic method claim that recites a step of performing a diagnostic test and another step of using the information provided by the diagnostic test in the treatment of a patient, for example by adjusting the dosage of drug. 38 Under the current law of divided infringement, there would be no infringement unless both steps could be attributed to a single party, and in practice, while the diagnostic testing company performs a diagnostic testing step, it does not perform a step of using the information, for example, in adjusting a patient's use of a drug. 39 By doing away with the requirement that all the steps of a patented process must be practiced by a single entity, the proposed amendment of § 271(b) would open up the door for a patent owner to establish that a diagnostic testing company is liable for inducing infringement under § 271(b) if it performs the test and provides the result to a doctor and/or patient in a manner that induces that party to use the information to adjust drug dosage.
In a nod to universities, the STRONGER Patents Act provides that institutions of higher education will be treated as micro entities, thus providing universities access to the lower fees available to micro entities under the Patent Act.
The STRONGER Patents Act also includes provisions intended to assist small businesses in navigating the U.S. patent system. It calls on the Small Business Administration (SBA) to prepare a report analyzing the impact of patent ownership by small business concerns, as well as the impact of civil actions against small business concerns relating to patent infringement. It also calls for an expansion of the patent pilot program in certain district courts, and requires designated district courts to develop procedures for accelerating cases in which an individual or small business concern is accused of patent infringement. It also mandates the PTO to make available to the public at no charge all patent and trademark information that is available at the PTO's Public Search Facility.
Finally, the STRONGER Patents Act incorporates the provisions of the Targeting Rogue and Opaque Letters (TROL) Act (discussed above).
The RALI Act of 2018
H.R. 6264, the “Restoring American Leadership and Innovation Act of 2018 (RALI Act),” introduced by Congressman Thomas Massie of Kentucky, would go even further than the STRONGER Patents Act in rolling back recent erosion of the U.S. patent right, to a large extent restoring the patent system as it existed at the turn of the twenty-first century. The proposed legislation would find that the AIA and “several decisions of the Supreme Court have harmed the progress of Science and the useful Arts by eroding the strength and value of the patent system,” and would seek to ensure that a patent “secures a private property right to an inventor.” The RALI Act explicitly seeks to “restore the patent system as envisioned by the Constitution of the United States.”
The RALI Act would entirely repeal some of the most patent-devaluing provisions of the AIA. Most significantly, it would abolish IPR and PGR, and it would not reinstitute their pre-AIA predecessor, inter partes reexamination. In other words, the legislation would turn the clock back to pre-1999, when ex parte reexamination was the only avenue through which a party could challenge an issued patent in proceedings before the PTO. It would also do away with the PTAB and revive the Board of Patent Appeals and Interferences (BPAI) as it existed pre-AIA.
The RALI Act would also repeal the AIA's first-inventor-to file system, restoring first-to-invent and mandating a full one-year grace period for inventors. The Act would not only revert back to pre-AIA Section 102, it would introduce new language into Section 102 specifically providing that certain disclosures before the issuance of a patent will not be treated as prior art, including information that was obtained directly or indirectly from the inventor, information that was publicly disclosed by the inventor, and information owned by the same person or subject to an obligation of assignment of the same person. Under the bill, it would be the sense of Congress that “restoring the one-year grace period will promote the progress of science and useful arts by enabling inventors once again to disclose inventions in order to attract investment, complete research and development on the invention, test, improve, and perfect the invention so as to improve the invention and the quality of the patent application.”
The proposed legislation includes provisions for eliminating fee diversion and fully funding the PTO, along lines similar to the provisions described above in connection with the STRONGER Patents Act.
The RALI Act would also overturn the Supreme Court's recent patent eligibility decisions by amending Section 101 of the Patent Act to make clear that the eligibility of a claimed invention under Section 101 “shall be determined without regard as to the requirements or conditions of sections 102, 103, and 112 of this title, or the claimed invention's inventive concept.” Under the amended Section 101, a claimed invention would only be excluded from patent eligibility if it “exists in nature independently of and prior to any human activity, or exists solely in the human mind.” Otherwise, “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof,” is patent eligible. The Act explicitly states that the amendment would “effectively abrogate [Alice] and its predecessors to ensure that life sciences discoveries, computer software, and similar inventions and discoveries are patentable, and that those patents are enforceable.” The language of this amendment of Section 101 was originally jointly proposed by the American Intellectual Property Law Association (AIPLA) and the Intellectual Property Owners Association (IPO) and intended as a statutory repeal of Bilski and its progeny. 40
The Act also includes provisions intended to “restor[e] patents as a property right.” This would be accomplished by adding a new section to the Patent Act stating that “[a] patent right is a private property right secured to an inventor upon issuance of the patent that shall only be revoked by a court ruling in a judicial proceeding, unless the patent owner consents to an administrative or other procedure.” It would amend 35 U.S.C. § 261 by inserting the following language:
As private property rights, applications for patents, patents, and interests therein shall be freely transferable, in whole or in part, including conveyance by assignment or license. Any successors, heirs, assigns, or licensees of a patent owner, who receive a lesser interest in a patent, shall be subject to any and all restrictions of their interest in the patent, provided that the successors, heirs, assigns, or licensees have actual or constructive notice of such restrictions.
41
This amendment is intended to overrule Impression Products v. Lexmark International (discussed above). Under the RALI Act, it would be the sense of Congress that Impression Products and other recent jurisprudence of the Supreme Court has harmed the progress of science and the useful arts by limiting the ability of patent owners to exclude unlicensed customers from supply chains, and that “meaningful patent rights must permit patent owners to freely assign their rights in whole, or in part, and to ensure that successors, heirs, or assigns of patent owner, or their assigns, are duly bound by restrictions or exclusions set by patent owners on the use of their property.”
The RALI Act would also end the current practice of automatically publishing U.S. patent applications 18 months after filing. Prior to 1999, the PTO did not publish patent applications, and it maintained the secrecy of any information relating to a patent application until a patent issued from the application. This changed in 1999 with the enactment of the American Inventors Protection Act, which amended the Patent Act to provide for the automatic publication of patent applications 18 months after the filing date. 42 A patent applicant is permitted to opt out of publication, if the applicant is not filing the application outside the U.S., but the applicant must take affirmative action to avoid publication. 43 The default is publication at 18 months post-filing. The RALI Act would change the default, by providing that a patent application will only be published upon the request of the patent applicant. The Act states that automatic publication under the current regime has “harmed the progress of science and useful arts by creating ‘prior art’ by operation of law that prevents a patent owner from applying for a patent on the same invention if a patent does not issue.”
Furthermore, under the RALI Act “[n]o information concerning a patent application shall be available to the public unless and until a patent issues.” Currently, the prosecution history of a patent application is available to the public through Public PAIR once the application has published, allowing anyone to see how the prosecution of the patent claims is progressing. 44 This opportunity for competitive intelligence would thus be eliminated under the Act. The Act would specify that it is the sense of Congress that early disclosure of claimed inventions subjects inventions that have been reduced to practice in the United States to theft or appropriation by foreign competitors.
Section 282 of the Patent Act currently provides that a patent shall be presumed valid, and that the burden of establishing invalidity rests on the party asserting invalidity. The RALI Act would amend Section 282 so as to explicitly provide that that the presumption of validity applies “in any judicial or administrative proceeding conducted in any court or federal agency, or of any state.” The amended statute would also specify that the burden of proof for invalidating a patent claim is clear and convincing evidence. This heightened standard of proof is currently applied in district court proceedings, but not in PTAB proceedings, where a patent challenger is only required to show that a patent claim is unpatentable by a preponderance of the evidence, i.e., that the claims are more likely than not unpatentable. Of course, if enacted in its entirety, the RALI Act would eliminate these review processes altogether, but the clear and convincing standard would appear to be applicable in ex parte reexamination, which would still be available under the proposed legislation.
The RALI Act would also amend Section 282 to provide for tolling of the patent term during a judicial validity challenge. The patent term would be tolled from the time the validity of the patent is challenged until the court resolves the validity issue. It appears that this tolling of the patent term would only apply with respect to the party that is challenging the validity of the patent, since the language of the proposed statute states that the patent term shall be tolled “in an action involving a patent where the validity of the patent has been challenged.” The bill also provides that a court may award damages to a patent owner in a case in which the validity of a patent was challenged in bad faith.
The proposed legislation would address eBay by amending 35 U.S.C. § 283 to include language requiring a court, upon a finding of infringement of a patent, to presume that further infringement of the patent would cause the patent owner irreparable harm, and that this presumption can only be overcome by a showing of clear and convincing evidence by the infringing party that the patent owner would not be irreparably harmed by further infringement of the patent. In addition, the patent owner would not be required to make or sell a product covered by the patent in order to show irreparable harm.
Finally, the RALI Act would restore pre-AIA law by reinstating the best mode requirement as a ground for invalidating a patent in court. This is the only aspect of the RALI Act that would tend toward weakening the patent right, by providing an additional ground for invalidating a patent, but any devaluation of the patent right should be minimal. Successful best mode challenges were quite rare pre-AIA. To my mind, the best mode requirement functioned primarily as a trap for unwary foreign applicants who prepare their patent application in a jurisdiction that does not require disclosure of the best mode (i.e., most of the world outside the U.S.), and then neglect to add the best mode for the U.S. filing.
The Inventor Protection Act
The Inventor Protection Act (IPA), H.R. 6557, was introduced in the House of Representatives by Congressman Rohrabacher of California on July 26, 2018. The bill focuses primarily on protecting the interests of inventors, as distinguished from other patent owners such as companies or investors. The IPA defines an “inventor-owned patent” as a patent held entirely by the inventor of the claimed invention, and creates a number of protections specifically for such patents. It provides, for example, that no executive entity other than the PTO may re-examine, review, or otherwise make a determination about the validity of an inventor-owned patent, and even the PTO may not do so unless such action is voluntarily agreed to by the inventor.
The IPA also partially overrules TC Heartland, at least with respect to inventor-owned patents, by providing that an inventor may bring suit for infringement of an inventor-owned patent in any district where the defendant is subject to the court's personal jurisdiction, or where the defendant has committed an act of infringement, regardless of whether the defendant has a regular and established place of business in such district. On the other hand, the bill provides that any claim for declaratory judgment relating to any inventor-owned patent may only be entered in the district where the inventor is domiciled or has consented to jurisdiction. Furthermore, the bill would establish expedited judicial proceedings for the enforcement of inventor-owned patents. These expedited proceedings would require a trial of no more than seven days in duration and within 12 months after service of a complaint, a maximum of 10 discovery requests for each party, pleadings limited to 100,000 words per party, and “such other provisions as the court determines appropriate to ensure relief is accessible to the inventor.”
The inventor-protective aspects of the IPA also extend to remedies. The bill partially overrules eBay by creating a presumption that any infringement of an inventor-owned patent causes the inventor irreparable harm. This presumption could only be overcome by clear and convincing evidence that the inventor would not be irreparably harmed by further infringement of the patent, thus ensuring that an inventor will generally be able to permanently enjoin infringement of an inventor-owned patent.
The proposed legislation would also create a new form of simplified damages as an alternative form of relief for inventors whose patents have been infringed. Thus, as an alternative to the currently available reasonable royalty or lost profits damages, an inventor could be awarded damages equal to the sum of the greater of the total profits attributable to the infringement of the patent or 25% of the sales attributable to the infringing party's use of the patented invention.
The bill also creates a presumption that any infringement by “an expert in the field of the invention” is willful, and thus subject to treble damages, at the discretion of the court. Furthermore, if an inventor successfully brings a claim for infringement of their inventor-owned patent, the court is to award the inventor any amount of their attorneys fees that exceed 10% of the amount of any damages the court awards to be inventor.
Conclusion
The three bills discussed in this article reflect a growing call for reform of patent law that has shifted too far against the rights of inventors and patent owners, particularly with respect to patent eligibility and PTAB proceedings. Some of those with the most intimate knowledge of the workings of the patent system, including patent attorneys, patent owners, Federal Circuit judges, and Directors of the PTO have all voiced their concerns. Two leading organizations representing patent attorneys and patent owners, the American Intellectual Property Law Association (AIPLA) and the Intellectual Property Owners Association (IPO), respectively, jointly proposed a statutory amendment to Section 101 that would effectively overrule Alice and its predecessors. 45 As discussed above, this proposed amendment has been incorporated into the RALI Act.
In a concurring opinion in Berkheimer v. HP, a Federal Circuit decision not to rehear a case addressing the Alice patent eligibility standard en banc, Judges Lourie and Newman lamented “what so many in the innovation field consider [to be] problems” with Alice and its predecessors, and encouraged Congress to intervene. 46 The Federal Circuit's former Chief Judge Michel has complained to Congress that the weakening of the patent system, particularly the Supreme Court's recent patent eligibility precedent and the PTO's implementation of PTAB proceedings, have pushed the U.S. patent system into “crisis mode.” 47 His former colleague on the Federal Circuit, retired Chief Judge Rader, has been a particularly outspoken critic of the IPR process, likening it to a “death squad” for patents. 48
A former Director of the PTO, David Kappos, has reportedly stated that the standard for assessing patent eligibility standard is in “total chaos” and that Alice and its predecessors have diminished patent protection for software and medical diagnostics. 49 Along similar lines, Bob Stoll, the PTO's former Commissioner for Patents, has also openly discussed the patent eligibility crisis and its negative impact on innovators, particularly those working in software and biotechnology. 50
The current PTO Director, Andrei Iancu, recently testified before the Senate Judiciary Committee that the Supreme Court's patent eligibility decisions have “introduced a degree of uncertainty into this area of law.” 51 He told members of Congress that the PTO “will work to provide more concrete tests—to the extent possible given Supreme Court precedent—that guide examiners and the public toward finding the appropriate lines to draw with respect to eligible subject matter.” He identified patent eligibility as an area that “must be addressed,” and said that “should Congress decide to explore a legislative adjustment of Section 101 [the PTO] would work with this Committee and with stakeholders to explore viable options.” He also indicated that the PTO is currently reviewing many aspects of PTAB proceedings with an eye toward reform. The PTO's recent proposal to change the standard for claim construction during these proceedings from the broadest reasonable interpretation to the Phillips standard, discussed above, is a positive development in this regard.
It remains to be seen if and when any of the legislative proposals discussed in this article will actually become law. Meaningful statutory reform of the patent law has typically only come about after a significant gestation period. For example, multiple sessions of Congress considered a variety of proposals for reform to the patent law prior to enacting the AIA in 2011. Thus it should not come as a surprise if Congress does not enact any of the bills discussed in this article immediately or in their current form. But that does not mean they are not important and worth following, because they could represent the initial salvo in a mounting campaign to restore strong patent rights in the U.S. I think that there is reason for cautious optimism that ultimately these efforts will meet with at least some degree of success.