New Patent Reform Bill Attempts to Address Problems with Patent Litigation

On October 23, 2013, the House of Representatives introduced the “Innovation Act,” a bill designed to curb frivolous patent litigations. The “Innovation Act” would heighten the standard for filing a patent infringement complaint, improve the chances that a prevailing party receives its attorneys’ fees, limit discovery, and protect customers. The bill is expected to have widespread bipartisan support within Congress. Based on President Obama’s past executive orders directed at curbing frivolous patent litigation, we can also expect strong support from the White House. The key provisions of the Innovation Act are summarized below. A copy of the “Innovation Act” can be found here.

Patent Infringement Complaints Must be Specific

The cornerstone of the Innovation Act is a new heightened pleading standard for patent infringement complaints. Whenever possible, a claim of patent infringement must identify where each element of an asserted patent claim is found within the accused instrumentality and how the terms of the asserted claim correspond to the functionality of the accused instrumentality. Moreover, a patent owner would need to allege specific facts about the accused product and how it is alleged to be within the scope of the asserted patent claims. This provision of the Innovation Act would finally settle the debate as to whether the Supreme Court’s stricter pleading standards apply to claims of patent infringement, instead of the bare-bones requirements in Form 18 of the Rules of Civil Procedure. In fact, the Innovation Act would go even further than the Supreme Court’s plausibility pleading standard, by requiring specificity. In order to avoid any doubt, the Innovation Act would abolish Form 18 altogether.

Attorneys’ Fees and Costs for the Prevailing Party

The Innovation Act would create a presumption in favor of awarding reasonable attorneys’ fees to the prevailing party, unless the court finds that the position of the losing party was “substantially justified.” This would replace the current standard for fees and costs in patent cases, which places the burden on the prevailing party to demonstrate that the case was “exceptional.” It is unclear how high the bar will be for losing parties to demonstrate substantial justification, but reversing the burden of persuasion on attorneys’ fees motions may make some patent plaintiffs think twice before bringing a patent infringement claim.

Discovery Limitations

The Innovation Act would limit discovery in patent cases until after the court has issued a claim construction decision. Although courts will have limited discretion to expand the scope, discovery will ordinarily be limited to issues relating to claim construction until the court issues its claim construction order. This should allow patent litigants to more fully assess the merits of the case before spending significant time and money on discovery.

Customer Protections

The Innovation Act also allows a defendant-manufacturer accused of patent infringement to stay any patent infringement actions against their customers relating to the same accused product. As long as the customer agrees to the litigation stay and agrees to be bound by the judgment against the manufacture, courts would be obligated to issue a stay of the litigation relating to the customer. This would afford a manufacturer the opportunity to spare its customers the aggravation and costs associated with patent litigation, while the manufacturer resolves the dispute.

Many of the provisions of the Innovation Act represent fundamental changes to the procedures for patent infringement litigation and may help limit some frivolous patent litigation.