Senate Judiciary Committee Tables Patent Reform, Again

by McDonnell Boehnen Hulbert & Berghoff LLP

Senate SealThe Senate Committee on the Judiciary was set to consider the Patent Transparency and Improvements Act of 2013 (S. 1720) earlier today during an Executive Business Meeting.  Instead, the Committee again tabled the bill, this time until next Tuesday (April 8, 2014).  In his statement on the issue, Chairman Leahy suggested that it was Senator Hatch's "bonding" provision that was the sticking point necessitating the delay.  However, it was clear that the Committee had been receiving feedback from stakeholders, which may have been slowing the process.  For example, Sen. Leahy's statement included the observation:

Even casual observers may have noticed that the Senate does not operate like the House of Representatives.  Not only do Senators like to talk.  Senators listen to those who oppose their ideas.  There has been a lot of talk about the need for patent reform.  And over the past several weeks, I actually think there has been a lot of listening.  We have heard concerns about unintended consequences; for instance, this having an impact outside of the context of patent law.  We have heard concerns about pending Supreme Court cases, like the case they heard this week about the patentability of software patents.  We have heard concerns from businesses on Main Street and the tech community that reforms must be meaningful to address the problems they face.

Nevertheless, he did sound optimistic that the few remaining issues could be nailed down in the next day or so.  Sen. Grassley echoed those sentiments, indicating that staff discussions have been productive and that they are moving in the right direction.

The key words used by many of the Senators that provided a statement were "optimism" and "unintended consequences."  It was heartening to hear supporters on both sides of the issue express concern over the potential impact that the proposed provisions might have on the legitimate assertion of patents.  For example, Sen. Lee, co-sponsor of the above-referenced bill, indicated that he was addressing concerns from both sides regarding the consumer stay and demand letter provisions, so to "appropriately and narrowly target patent troll behavior."  He stressed that he was seeking to take into account the legitimate concerns of patent holders and trying to minimize any unintended consequences.  Sen. Lee's stated goal was to have a patent system that serves its Constitutional purpose, by encouraging, not hindering, innovation.  Of course, the unintended consequences of the proposed legislation that we are most concerned about is just that, a hindering of innovation.

Sen. Schumer also expressed optimism that the Committee could reach an agreement.  As he did the other day in his event with the Internet Association, Sen. Schumer compared patent trolls to hookworms (or tapeworms), because "they do nothing, they attach themselves to the insides of the body, and eat the food that other people have worked to cultivate and digest."  Sen. Franken was not fond of this analogy (maybe it was too close to lunch), and Sen. Leahy quipped that they would hold the biology mark-up right after this.  But to his credit, Sen. Schumer did identify one of the most serious unintended consequences of the fee-shifting provision -- even with the prospect that fees might be recouped, younger companies will not be able to survive the potential five plus years of litigation to get them.  He reiterated his desire to expand CBM patent review, but acknowledged that it was unlikely to be accepted.  Finally, he welcomed the delay if it would ensure a better bill, because a good bill is better than passing ineffective legislation.

It was not until Sens. Durbin and Feinstein provided their statements that a sense of the opposition to the legislation was truly felt.  Sen. Durbin began by pointing out that the extent of the "patent troll" problem may have been exaggerated.  He quoted from the GAO report that determined that only 19% of the patent infringement suits were brought by non-practicing entities.  The overwhelming majority, therefore, were brought by non-"trolls."  He criticized the House of Representatives for hurriedly passing the Innovation Act, expressing concern that they did not engage in thoughtful deliberation.  He explained that many of the House members were probably not aware that "universities, manufacturers, biotech companies, venture capital groups and independent inventors had serious concerns about this House bill."  Sen. Durbin continued by stating the concerns have not gone away, and then read from the letter delivered by the Innovation Alliance and others, which we reported on yesterday.  He was shocked by the diversity of organizations that signed that letter, and was surprised by its content.  Instead of the policy concerns he was expecting, the letter addressed a fundamental question -- that some of the measures go far beyond what is necessary to address the threat of abusive litigation, and instead "would do serious damage to the patent system."  He concluded by pointing out that because this legislation will be more controversial than anticipated, Congress needs to make sure to protect the legitimate patent holders.

Sen. Feinstein also described a letter that she received, this one from medical device manufactures.  She expressed gratitude that this letter listed all of the concerns with the various bills clearly and distinctly.  She pointed out that letters that only cite generalities were not very useful.  In making this comment, could she have been responding to Sen. Schumer's comments on messaging from the other day, in which he urged people to ignore the details and instead just focus on the fact that "trolls" are sucking the vitality of America (see "Stopping Bad Patents -- Senator Schumer Takes on the 'Patent Trolls'")?

A copy of the webcast of the committee meeting can be found here.  As always, we will continue to monitor and report on the progress of this bill.


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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