On May 7 the Senate Judiciary Committee held a hearing titled “The ‘PATENT Act’: Finding Effective Solutions to Address Abusive Patent Practices.” Witnesses were MARK CHANDLER, Cisco Systems; KEVIN RHODES, 3M Co.; DIANE LETTELLEIR, JC Penny Corp.; HENRY HADAD, Bristol-Myers Squibb; and JULIE SAMUELS, Engine. The witnesses in general spoke favorably about the provisions in the PATENT Act, S. 1137, which was introduced by committee chairman CHUCK GRASSLEY (R-Iowa) on April 29. The bill was said to reflect a number of compromises to address abusive litigation practices but preserve the rights of patent owners who might need to litigate to address infringement. In his opening statement, Grassley said he was committed to addressing the concerns of some stakeholders that inter partes and post-grant review proceedings were being abused and were “stacked against patent holders.”
Witness Chandler, on behalf of Unified for Patent Reform, said the omission of a stay of discovery prior to claim construction was unfortunate. While it was helpful that the bill would stay discovery until the resolution of motions to transfer venue, sever accused infringers, or dismiss, two provisions were needed to make the provision effective. First, transfer motion decisions should be subject to interlocutory appeal. Second, a provision in the bill allowing courts to require the exchange of validity and infringement contentions needed clarification that these issues would not be exempt from the stay. He praised the bill’s authors for resisting the call for changes to the proceedings created by the America Invents Act such as requiring the PTAB to use district court claim construction standard rather than the broadest reasonable interpretation (BRI).
Witness Rhodes, for the 21st Century Patent Coalition, said the group believed the bill was a measured reform that struck the right balance and reflected compromise among various industry groups. However, he said the bill was not ready to be reported out by the committee because meaningful reform would include provisions to ensure that the post grant proceedings were fair to both patent challengers and patent owners and addressed abuses occurring in those proceeding. 21C proposed three legislative changes: 1) reforming procedures used when the PTO was considering petitionings to institute an IPR or PGR proceeding by requiring challengers to disclose all known material information that tended to refute its position, allowing a patent owner to introduce live testimony in its preliminary response, and designating a party other than the PTAB to decide whether to grant petitions; 2) allowing patent owners to have issues raised in newly-filed petitions first considered in reissue or reexamination proceedings prior to institution of an IPR or PGR proceeding; and 3) applying the same claim construction, burdens of proof, and presumptions used in district court proceedings.
Witness Lettelleir focused her testimony on the “devastating impact of abusive patent litigation practices” on JCPenney, which had been a defendant in 30 “NPE” lawsuits in the last six years and has received countless patent demand letters. She said these abuses were undercutting opportunities for commercializing innovation. The cost of defending or settling abusive patent suits had caused JCPenney to mostly abandon its practicing of adopting technology offered by small inventors and small companies, including many start-ups. Lettelleir said that all of the bill’s provisions were necessary but highlighted the need to address patent demand letters, raise the pleading standard for patent infringement, and allow stays of litigation against customers while litigation on a matter proceeded against a manufacturer.
Witness Hadad praised Grassley and the bill’s cosponsors for their significant effort to strike a balance between curbing abuses and protecting the interests of patent owners. Though the bill reflected a number of meaningful compromises, Hadad urged the committee to address abuses in PTO post patent grant proceedings. He said three procedural changes would more fairly balance the proceedings: 1) construing granted patent claims as they were construed in district courts and applying the same burdens and presumptions; 2) allowing only very limited amendments in post patent grant proceedings but providing the option for owners of challenged patents to amend claims in reissue or reexamination proceedings; and 3) revising procedural rules governing the proceedings to allow patent holders to introduce the same evidence as petitioners, designating a party other than the PTAB to decide whether to grant a petition, and allowing live testimony.
Witness Samuels said the PATENT Act was a strong bill that removed incentives to assert bad patents and leveled the litigation playing field. She praised provisions requiring transparency of patent ownership, placing limits on discovery, lowering the standard for when attorney fees could be awarded, allowing stays of litigation against customers while litigation on a matter proceeded against a manufacturer, and requiring specificity in demand letters. She said a number of areas could be made stronger. For example, Engine urged the mandated sharing of core documentary evidence, along with a breakdown of who would bear the costs of exchanging additional evidence. Engine also encouraged Congress to address venue, which she called one of “the most flagrant abuses of the patent system,” so that parties would be able to move cases out of the Eastern District of Texas. Engine also thought the customer stay provision could make it easier for manufacturers to intervene and defend suits on behalf of customers and that the bill should make it easier and cheaper to challenge patents through inter partes review proceedings.
Senator DICK DURBIN (D-Ill.) joked that the panelists were divided between “those that love the bill and those that really love bill.” He noted that there were opponents to the bill, notably the venture capital community. Senators Sheldon Whitehouse (D-R.I.) and Chris Coons (D-Del.) called for more hearings on the bill where more stakeholder views could be explored.
Witness statements and a video of the hearing are available on the committee website.
