Senate Judiciary Committee Takes Up, Then Tables, Patent Reform

by McDonnell Boehnen Hulbert & Berghoff LLP

Senate SealEarlier today, the Senate Committee on the Judiciary held an Executive Business Meeting in which the Patent Transparency and Improvements Act was considered, then held over for another week.  Nevertheless, several members of the committee provided comments indicating where they stand on the issue.  While everyone expressed the opinion that patent trolls "need to go," and almost everyone believed that legislation was possible this year, there were a few voices of caution.  In addition, there were many references to undisclosed "staff-level discussions," with the consensus being that these discussions were being made in good faith, but that they were still on-going.

After the initial matter of discussing judicial and executive nominations (some of which were voted on, and some of which were held over), Chairman Leahy provided his statement on the issue (a copy of which can be found at the committee's website).  After commenting on how so-called "patent trolls" are harming businesses in his state, Vermont, he pointed out that he was working closely with other members of the committee on a Manager's Amendment to incorporate additional provisions into his bill.  For example, Leahy and Lee's Patent Transparency and Improvements Act does not currently contain any provision related to fee-shifting, so presumably one will be included.  He also mentioned that he had convened a series of briefings in the past few months, with the outcome being an expectation of incorporating changes to the "customer stay" provision in the bill.  Sen. Leahy expressed appreciation for the different perspectives that have been expressed, including those of inventors, small businesses, federal judges, and the university community.  He at least professed the desire to craft a properly tailored bill that will deter abusive conduct while that the same time not harm legitimate businesses seeking to enforce their rights.

After Sen. Leahy's comments, Sen. Grassley spoke out in support of patent reform legislation.  He indicated that he was willing to work on compromise language, but that any such compromise could not be so weak as to be ineffective to deter so-called "trolls."  These comments prompted Sen. Leahy to bring up the example of Robert Kearns, a sole-inventor who obtained patents on the intermittent windshield wiper after working on his invention in the proverbial basement.  Mr. Kearns spent most of his adult life asserting his patents against Ford and Chrysler, accusing them of stealing his ideas.  Sen. Leahy's illustration was apropos.  If Mr. Kearns were to have brought his suit in today's climate, it seems more than likely that the automobile industry would have labeled his activities as "troll-like."  This is why the process of narrowly tailoring legislation is so difficult -- just how do you differentiate between legitimate and illegitimate patent assertion when Mr. Kearns' activities could be characterized either way.  Of course, the patent community has reason to be concerned when Sen. Leahy invoked Potter Stewart's infamous proclamation, in this case as applied to patent trolls -- "I know it when I see it."

Sen. Feinstein was the first Senator to seriously express concern and caution over the possibility of patent litigation reform.  She indicated that she was between "sixes and sevens on this" issue.  Her dilemma stems from the fact that she represents California, which according to her, accounts for 26% of U.S. patents.  Moreover, her state apparently has the top five cities in the country with regard to participation in the patent system, with another three cities in the top ten.  Nevertheless, she recognizes that there is a growing "patent troll" problem, despite the recent passage of the AIA.  She expressed the desire to change incentives for "trolls," but to not harm legitimate patent holders.  Sen. Feinstein concluded by noting her conflicting interests.

Sen Hatch expressed optimism that the Senate could craft a bipartisan solution.  Not surprisingly, he highlighted the need for fee-shifting, and addressing the issue of fee-shifting "recovery-proof" parties.  Sen. Hatch warned that we need to protect against insolvent shell companies by holding the real-parties-in-interest accountable.  Sen. Cornyn also expressed optimism of getting something done this year despite all the talk of a division between the parties, and the typical lament that nothing happens in election years.

In his remarks, Sen. Schumer suggested that he would hold the Committee accountable for passing real reform.  If any provision is introduced that is not meaningful, Sen. Schumer indicated that he will be the first to speak out against it.  He indicated that this is an issue of vital importance, and credited the patent system as the reason that the U.S. has the foremost economy in the world.

Finally, Sen. Klobuchar provided perhaps the bleakest picture of the so-called "patent-troll" problem.  However, as when most individuals throw around statistics and antidotes about this problem, she provided very little support for her allegations.  For example, she stated as fact that 62% of all patent lawsuits initiated last year were by trolls.  However, as we have noted often in this forum, these numbers are far from certain, and they (along with the reasons behind them) have been hotly contested by both sides of the issue.  Moreover, Sen. Klobuchar cited as an example of abusive tactics the plight of a maker of medical devices for babies being targeted by the owner of a patent with a picture of a truck on the front.  Even though no more detail was provided, it is presumed that she is referring to the case of Rydex Technologies suing Medtronic based on the sale of its insulin pumps, because allegedly the pumps used similar technology as that for monitoring how tractor trailer trucks are fueled.  The technology apparently related to wirelessly transmitting information to a remote device about fluid delivery.  Without speaking to the merits of that case (which apparently settled), this example betrays the danger in oversimplifying any dispute for dramatic effect.  Sen. Klobuchar ended up disparaging all patent attorneys when she reported on a meeting with 30 or so patent lawyers, indicating sarcastically:  "that was fun."  However, instead of feeling slighted, this author felt as though she was speaking directly to him when she apologized for that comment to any "patent lawyers watching on C-Span."

In all, the committee's comments regarding the need for caution was refreshing, especially in view of the speed with which the Innovation Act passed through the House.  Nevertheless, stating an interest in narrowly tailoring legislation is one thing, but making it reality is another.  As always, we will continue to monitor the progress of this bill, and any amendments that are made to it.


Written by:

McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP on:

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