STRONGER Patents Act of 2017 Likely Too Heavy Lift for Congress

It may be late July, but the impending Congressional recess has not lessened potential interest by lawmakers in patent reform. On June 21, 2017, Sen. Christopher Coons (D-Delaware) introduced Senate Bill 1390, entitled the Support Technology and Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act of 2017. Sen. Tom Cotton (R- Arkansas), Sen. Richard Durbin (D- Illinois), and Sen. Mazie Hirono (D-Hawaii) cosponsored the bipartisan bill. The Bill’s stated purpose is “to strengthen the position of the United States as the world’s leading innovator by amending title 35, United States Code, to protect the property rights of the inventors that grow the country’s economy.” To accomplish this goal, the Senate Bill proposes to amend many of the patent law core concepts introduced by the America Invents Act of 2011 (AIA) and developed in the Courts in the past 20 years by, among other mechanisms, making patents more difficult to challenge in post-grant proceedings and overturning multiple Supreme Court decisions regarding injunctive relief and standards for induced infringement. The authors of the Bill, citing the fact that the U.S. Chamber of Congress in 2017 ranked the U.S. Patent System as being only the 10th strongest in the world after having ranked it first in every prior year, contend that unintended consequences of the AIA’s reforms and recent rulings from the Supreme Court have weakened the value of patents to such a degree that further legislative action is warranted.

The STRONGER Patents Act incorporates many of the provisions from former Senate Bill 632 (STRONG Patent Act of 2015) and former H.R. 2045 TROL Act (Targeting Rogue and Opaque Letters Act of 2015). The STRONG Patent Act died in the Senate Judiciary Committee, and the TROL Act passed the Committee on Energy and Commerce (30-22) but was never taken up for a vote by the House of Representatives. Despite the bipartisan support, the STRONGER Patents Act is unlikely to become law in its current form anytime soon. However, the Senate Bill does represent a significant attempt to reform many issues in patent law that have produced criticism from certain industry sectors and members of the Bar and, hence, may offer insight into where future efforts at patent reform will be focused.

Amendments to Inter Partes Review and Post-Grant Review Proceedings[1]

Much of the focus of the STRONGER Patents Act consists of providing amendments in Sections 102 and 103 to both inter partes review (IPR) [2] and post-grant review (PGR) proceedings at the Patent Trial and Appeal Board (PTAB) instituted by the AIA. Some of the highlights of these proposed amendments are as follows:

  • Claim Construction: The Bill changes the claim construction standard used in post-grant proceedings from the current standard of broadest reasonable interpretation to the “actual construction” standard applied in district court litigation, effectively overturning the 2016 Supreme Court decision in Cuzzo Speed Technologies v. Lee.[3]
  • Burden of Proof: The STRONGER Patents Act would elevate the burden of proof required to prove invalidity in post-grant review proceedings from the current “preponderance of the evidence” standard to the “clear and convincing” standard used in district court litigation.
  • Standing: The Bill requires that the Petitioner must be sued for infringement to have standing to petition for post-grant review of a patent. This would allegedly block the strategic filing of post-grant review proceedings in order to extort settlements, as was attempted by the Kyle Bass fund in a number of challenges to pharmaceutical patents. This change would also limit the ability of patent defense groups, such as Unified Patents and RPX Corp., from challenging a patent. Currently, anyone but the patent owner can request an IPR, CBM or PGR.
  • Limitation on Reviews: The proposed changes would limit the number of challenges on a patent in post-grant review proceedings to once per claim of the patent, regardless of who filed the previous petition.
  • Interlocutory Appeals From Institution Decision: The Bill would permit patent owners to immediately appeal the institution decision by the PTAB. However, the Bill would not allow Petitioners the right to appeal the PTAB’s denial of institution.
  • Eliminating Repetitive Proceedings: The STRONGER Patents Act limits Petitioners to challenging the patent once, unless later charged with infringement of additional claims. If an inter partes or post-grant review is instituted, the Petitioner cannot bring challenges of the same type in district court.
  • Real Party In Interest: The proposed legislation provides that an entity proving financial support to challenge a patent is a real party in interest and would be estopped from future challenges of the patent. Failure to provide notice of all real parties in interest could result in termination of proceedings.
  • Priority of Federal Court Validity Determinations: The Bill would bar institution of a post-grant review if a district court or ITC reviews the validity of the patent prior to the PTAB.
  • Amendment of the Claims: The STRONGER Patents Act provides for “expedited” examination procedures for amending claims, instead of amending claims before the PTAB. This new examination of amendments would be ex parte, thereby preventing the Petitioner from challenging the proposed amendment. The Act further changes the standards used for claim amendments before the PTAB, entitling a patent owner to an amended claim unless the cumulative evidence before the Board shows the claim would be ineligible.

Section 104 of the Bill would also require that the administrative law judges (ALJs) who determine the ultimate validity of the challenged claims are different from the ALJs that decide whether to institute the review. Section 105 further bars ex parte reexamination of a patent if the request for reexamination is filed more than one year after the date on which the requester or a real party in interest or privy of the requester is served with a complaint alleging infringement of the patent.

Injunctive Relief and Induced Infringement

Section 108 proposes several significant changes to the standards for induced infringement and presumptions of injunctive relief that were introduced by Supreme Court rulings.

For instance, the STRONGER Patents Act would restore the presumption of injunctive relief when a patent is found valid and infringed, essentially overruling the Supreme Court’s 2006 decision in eBay v. MercExchange LLC.[4]

The Act also would “eliminate the single-entity rule for defendants who have intentionally caused the infringement of the patent.” In the Supreme Court’s 2014 decision in Akamai Technologies v. Limelight Networks,[5] the Court held that induced infringement can be found only when a single-entity performs every step of a patent. Additionally, the STRONGER Patents Act would eliminate the 2011 Supreme Court requirement, stated in GlobalTech Appliances v. SEB SA,[6] for actual knowledge that the induced acts constitute infringement. Under the STRONGER Patents Act, proving infringement would only require proof that the alleged infringer intended to perform the acts that constitute infringement.

Section 108(3)(A) of the Bill would appear to expand the current territorial reach for patent infringement beyond the boundaries of the United States, thereby overturning the Supreme Court’s 2007 decision in Microsoft Corp. v. AT&T Corp.[7] Section 108(3)(A) of the Bill proposes adding to the current Patent Act the condition that “[w]hoever, without authority, supplies or causes to be supplied in or from the United States a design for a product embodying a patented invention in such manner as to actively induce the making of that product outside the United States in a manner that would infringe the patent if made in the United States, shall be liable as an infringer.” This new act of infringement would apply even if another inventor independently invented the product with no knowledge of infringement.

Finally, in a nod to complaints from industries and members of the Bar about certain kinds of nonpracticing entity litigation tactics, the Act incorporates many of the provisions from the 2015 TROL Act that allegedly aim to curb abusive, patent-related demand letters by empowering the Federal Trade Commission and state attorneys general to bring suit against entities who engage in misleading and deceptive practices through the sending of patent infringement demand letters.

Summary

In a press release, Sen. Coons stated that the STRONGER Patents Act is intended to address “the problem of repetitive, harassing petitions in the administrative reviews at the USPTO, reducing duplication between these reviews and district court, and providing a new approach to amending patent claims during them. Additionally, the STRONGER Patents Act proposes to restore the presumption of injunctive relief upon a finding that a patent is valid and infringed and addresses other cases in which courts have recently weakened patent rights.”[8]

It is unclear if the current version of the STRONGER Patents Act will fare any better than previous efforts to strengthen the value of patents. While organizations that favor strong patent rights, such as the Medical Device Manufacturers Association (MDMA),[9] the Biotechnology Innovation Organization,[10] and the Innovation Alliance,[11] support the Bill, it is clearly in contrast to many of the patent reforms proposed in the 2015 Innovation Act by Representative Bob Goodlatte (R-Virginia). While the Bill is currently in the Senate Judiciary Committee for discussion, at least one organization predicts this bill of having as little as a 4% chance of being enacted.[12] We will keep you apprised of further developments both with this Bill and any others that Congress introduces aimed at patent reform.

[1] Sen. Coon’s Two-Page Summary of STRONGER Patents Act, (Jun. 23, 2017), https://www.coons.senate.gov/imo/media/doc/STRONGER%20Patents%20Act%20of%202017%20Section-By-Section.pdf

[2] For the sake of brevity, “post-grant” review proceedings encompass all of inter partes review (IPR), covered business method reviews (CBMs), and post-grant review proceedings (PGRs). When post-grant review is noted in title case as “PGR,” it refers to only the procedures in 35 U.S. Code § 321.

[3] 136 S. Ct. 2131 (2016).

[4] 547 U.S. 388 (2006).

[5] 134 S. Ct. 2111 (2014).

[6] 563 U.S. 754 (2011).

[7] 550 U.S. 437 (2007).

[8] Sen. Coon’s introduces STRONGER Patents Act, (Jun. 23, 2017), https://www.coons.senate.gov/newsroom/press-releases/senators-coons-cotton-durbin-hirono-introduce-bipartisan-bill-to-protect-us-patent-holders-inventors

[9] John Eggerton, STRONGER Patents Act Introduced in Senate, Broadcasting & Cable, (June 21, 2017), https://www.broadcastingcable.com/news/washington/stronger-patents-act-introduced-senate/166692

[10] George Goodno, Biotechnology Innovation Organization, BIO Statement of Support for the Introduction of the STRONGER Patents Act of 2017, (June 23, 2017) https://www.bio.org/press-release/bio-statement-support-introduction-stronger-patents-act-2017

[11] Kat Maramba, Innovation Alliance Statement on Introduction of the Bipartisan STRONGER Patents Act of 2017, (June 21, 2017), http://innovationalliance.net/

[12] S. 1390 — 115th Congress: STRONGER Patents Act of 2017.” www.GovTrack.us. 2017. June 23, 2017 <https://www.govtrack.us/congress/bills/115/s1390>