Does the Supreme Court’s latest move further obviate patent reform efforts?

by Thompson Coburn LLP

SCOTUS 2014 - patent troll roundup

One of the key components of patent reform has been increased disclosure requirements for patent complaints. Patent infringement defendants have long derided the sparsity of information provided by patent infringement plaintiffs in opening pleadings. Traditionally, after providing information proving that the plaintiff owns the patent in question (or holds adequate rights to assert the patent) and other jurisdictional requirements, plaintiffs need only assert that the actions of the defendant violated the exclusive rights of the plaintiff in the patent to adequately have pleaded a case of patent infringement.

This causes huge issues for defendants. Often, reading the patent sheds little light on the technology at issue. For instance, patents directed to pagers or sharing information on a dial-up video conference can be asserted against companies that do business on the Internet or broadcast television or against parent companies that have hundreds of subsidiaries involved in myriad of different industries and activities. Defendants have long lamented their ability to prepare a defense to charges that they cannot understand.
There was some hope that the U.S. Supreme Court cases of Iqbal and Twombly would help with the problem. With this pair of cases, the Supreme Court heightened the pleading requirements necessary to satisfy notice pleading under the Federal Rules of Evidence. As a result, courts began to hold plaintiffs to a higher pleading standard in all cases (including patent infringement cases). Patent plaintiffs were increasingly required to disclose more information, including information on the accused technology, in order to adequately plead a case of patent infringement.

But in 2013, the Federal Circuit decided the K-Tech Telecomm. v. Time Warner Cable, 714 F.3d 1277 (Fed. Cir. 2013) case. With that decision, the Federal Circuit held that the Supreme Court’s Iqbal and Twombly decisions did not apply to patent cases. Instead, the Federal Circuit held that because the Federal Rules of Civil Procedure provided a form complaint (the oft cited Form 18), that form, and not case law, established the minimum pleading requirements for a patent infringement complaint. That is the minimum standard that applies to patent infringement cases, the court rules, not the heightened Iqbal and Twombly standard.

Ever since, Congress has labored to address this inconsistency and the perceived inadequacy of patent infringement complaints with patent reform that included a heightened pleading standard requiring patent plaintiffs to disclose more information about what products infringed and how they did so. But as most of us are all too familiar, getting any legislation passed in Congress is a daunting task of late. Last year’s attempt at patent reform stalled at the finish line when Democratic leadership applied the brakes in the Senate. This year, with the Republican control of both houses of Congress, it was anticipated that patent reform would come swiftly. But the process continues to stall. Concerns continue to be raised over the effect of such legislation on legitimate patent litigation efforts, the ability of small inventors to bring litigation, as well as the legislation’s effect on university patenting programs. And, just last week, the Senate Judiciary Committee Chairman announced that still more revisions were underway to the Senate’s Patent Act in an effort to help alleviate a perceived anti-patent bias in AIA proceedings. And thus, patent pleading reform continues to be delayed.

But recent Supreme Court action may have addressed the issue. In an order issued in late April, the Supreme Court, without comment, adopted changes to the Federal Rules of Civil Procedure that would abolish Form 18 and its model patent infringement complaint from the Federal Rules.

The rule changes take effect on December 1, unless modified by Congress. But with Congressional patent reform contemplating heightening patent infringement pleading standards, it would appear that modifications would seem unlikely.

With Congressional patent reform momentum apparently slowing again and this action from the Supreme Court, the question remains, is patent reform legislation necessary? There is little question that the AIA’s strengthening of post-grant review proceedings and the Supreme Court’s Alice decision have had an effect on patent troll litigation. Post-grant reviews are increasing in frequency and routinely result in patents being invalidated. The Alice decision severely limited the patent protection available for software and software business methods — a mainstay of patent troll litigation. When these changes are combined with the Supreme Court’s loosening of the standards necessary to receive an award of attorneys’ fees in patent litigation, the risk to patent trolls has never been higher.

Given this state of events, we may once again be left in a situation where Congress is the last to act on patent reform.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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