Reaction to the Passage of the Innovation Act (H.R. 3309)

by McDonnell Boehnen Hulbert & Berghoff LLP

As we reported last week, the House of Representatives passed H.R. 3309, the Innovation Act, by on overwhelming margin.  A copy of the final bill can be found here.  The next step is consideration by the U.S. Senate, where on December 17th, the Committee on the Judiciary will hold a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse."  It is likely that the Senate will consider S. 1720, which was previously introduced by Sen. Leahy.  As we have noted in the past, this bill professes to have a similar goal as the Innovation Act, but the two pieces of legislation have several provisions that are not shared by the companion piece, and the provisions that are in common are not necessarily coextensive.  It will be interesting to see what impact the passage of the Innovation Act will have on these discussions.

Nevertheless, the reaction from stakeholders in the industry has been overwhelming since the Innovation Act was passed -- some positive, some negative.  We collect below the reaction of several orgainiziations representing these stakeholders in the industry.

Biotechnology Industry Organization

Biotechnology Industry Organization (BIO)BIO did not support the Innovation Act, even before it was voted on, because it believed that the Act would undermine biotech research and innovation.  As Daniel Seaton noted on BIO's Patently Biotech blog, the Act would ultimately make it more difficult for patent holders with legitimate claims to protect their intellectual property.  In general, BIO supported the goals that the Innovation Act was touted as addressing, coming out in support of "increased transparency" and in opposition of "abusive litigation tactics."  However, because the Act contained certain provisions that were overly broad, BIO believed that the legislation would have resulted in too many unintended and unknowable consequences.  "Provisions in the legislation would erect unreasonable barriers to access justice for innovators, especially small start-ups that must be able to defend their businesses against patent infringement in a timely and cost-effective manner, and without needless and numerous procedural hurdles or other obstacles," BIO stated in a press release.

Mr. Seaton did note, however, that BIO supported three of the amendments introduced on the floor.  First, BIO supported Rep. Rohrabacher's amendment that removed the repeal of 35 U.S.C. § 145, which provides for an appeal of an adverse decision at the Patent Office to a U.S. district court.  Even though these appeals are rare, "there are legitimate instances where such appeals are important and necessary, because one can introduce new evidence that could not otherwise be considered in deciding the patentability of an invention," Mr. Seaton wrote.  BIO also supported and amendment by Rep. Massie, which would have struck the "customer-suit exception" from H.R. 3309, although this amendment was defeated.  BIO believed that this provision was ambiguous, and applied to parties beyond end-users and resellers.  As a result, the provision will invite "piecemeal adjudication" and could result in "systematic delays."  Therefore, as explained by Mr. Seaton, this provision which is supposed to streamline litigation "could end up doing the exact opposite."  Finally, BIO supported Rep. Watt's attempt to amend the "loser pays" provision by allowing district courts the discretion to reduce or deny an award if the prevailing party engaged in "dilatory litigation tactics."  This amendment was also defeated.

Intellectual Property Owners Organization

IPO #2The IPO has not taken a position on the Innovation Act per se, but has been tracking all of the legislative efforts, and has taken positions on some of the provisions found in the Innovation Act in whole or in part.  With regard to the fee-shifting provision, the IPO has taken the position that an award should go to the prevailing party unless the "position and conduct of non-prevailing party was objectively reasonable and substantially justified."  However, the IPO did agree that such fees should not be required "if exceptional circumstances" make them unjust.  In addition, the IPO supports some form or heightened pleading standard for patent infringement.  However, unlike the provision found in the Innovation Act, the IPO instead supports modifying Form 18 to include the identification of at least one claim, a statement explaining the infringement of that claim (or claims), and a statement addressing any alleged indirect infringement.  Moreover, the IPO does support a stay against customers while a suit is pending against a manufacturer.  But, much like with BIO, the IPO believes such a stay should be carefully tailored to avoid unintended adverse consequences.  Finally, the IPO supports expanding the current rules for the disclosure of the real party-in-interest, but only to the extent of including the ultimate parent of the owner.  The IPO opposes multiple mandatory disclosures, and requiring the disclosure of non-ownership interests, such as direct financial interest, exclusive licensees, and other with the right to enforce the patent.

The IPO did oppose two provisions which had been part of the originally introduced bill, but were not included in the final version that passed.  First, the IPO opposed an expansion of the covered business method patent review, which was removed in a Manager's amendment during a mark-up by the committee.  In addition, the IPO opposed the repeal of 35 U.S.C. § 145.

All of IPO's positions with regard to these efforts can be found on its website.

America Intellectual Property Law Association

AIPLA #1The AIPLA did not come out in support of the Innovation Act, but instead "urged continued progress on patent reform to 'strike the right balance.'"  In a press release by the organization, AIPLA Executive Director Q. Todd Dickinson expressed appreciation for the interests and efforts shown by the House in its attempt to improve the U.S. patent system by dealing with certain abusive behavior.  However, even if grateful for the sentiment behind the Act, "there remains a lot more work to be done as it moves on to the U.S. Senate," Mr. Dickinson said.  The AIPLA noted that the bill had improved since its original introduction, including removal of the expansion of the Covered Business Method Patent Review and the rejection of proposed amendments, such as those that proposed a bonding requirement, which would have "burdened small inventors and start-ups."  Mr. Dickinson also noted that the AIPLA looks "forward to continuing to work together with Congress toward a goal of ensuring that any legislation strikes the right balance between restraining abusive behavior while not impairing the legitimate rights of patent owners."


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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