Innovation Act eases through the House
US patent reform is a step closer after the House of Representatives passed the Innovation Act, a bill seeking to reduce abusive patent litigation, on Thursday.
The bill’s measures include making it easier for losers to bear the costs of litigation and forcing complainants to disclose more information about their patents.
Backed by both parties, the bill passed with 325 votes to 91. It now proceeds to the Senate.
The bill, introduced by House Representative Bob Goodlatte in October, is the latest legislative attempt to stop companies, sometimes referred to as "patent trolls", from using patents to file frivolous lawsuits in pursuit of a payout.
Among the current bill’s other provisions, complainants must explain their motives for filing a lawsuit, while cases filed against customers can be stayed if a manufacturer agrees to manage the suit.
The bill was amended from its previous draft on three grounds. The first means patent applicants can sue in a district court to obtain a patent after it’s rejected by the US Patent and Trademark Office (USPTO). Second, before they sue, claimants must provide additional disclosure information to claim for wilful infringement. Finally, there will be a study on the bill’s economic impact.
Further amendments were rejected. One would have removed the ‘fee-shifting’ provision, another would have stripped the ‘customer stay’ measure. A third, put forward by House Representative John Conyers, a staunch opponent of the bill, would have more or less scrapped the draft legislation.
Although the bill passed by a wide margin, the final vote masks some heated disagreement on certain key provisions – particularly the ‘loser pays’ and ‘joinder’ provisions, said Andy Baluch, special counsel at Foley & Lardner LLP.
“Those two provisions were fiercely debated on the House floor. Universities have come out against ‘loser-pays’, warning that the prospect of paying the defendant’s legal fees might have a chilling effect on start-ups that seek to enforce their patent rights.
“The ‘joinder’ provision will require anyone with a financial interest in the asserted patent to be joined as a party in the lawsuit. For example, venture capital funds might be hauled into court on the basis of this ‘joinder’ provision, if the funds have a ‘financial interest’ in a company that enforces its patents,” Baluch said.
Following the vote, Goodlatte said enacting the bill is something he considers central to US competitiveness, job creation and economic security.
“The bipartisan legislation takes meaningful steps to address the abusive practices that have damaged our patent system and resulted in significant economic harm to our nation,” he said.
But the bill has not been welcomed so warmly everywhere. David Kappos, former director of the USPTO, has claimed that if passed in its current form, the bill would undermine job creation and innovation.
Writing on thehill.com, a news site covering Congress, Kappos said: “Several provisions must be narrowed and a strong fee diversion provision added.”
Because of its negative impact, the bill would send the “wrong signal internationally, where we are trying to get important new players such as Brazil, China and India to strengthen their patent and overall intellectual property laws”, Kappos explained.
But he noted there will be opportunities for “significant” improvements to the bill in the Senate.
That the bill does not actually single out non-practising entities, said Robert Berman, chief executive of patent licensing company CopyTele, is a "huge" victory.
"Previously proposed patent legislation tried to cast all of one type of company as 'good', and another type as 'bad'. The legislation would have been discriminatory on its face, and in my view, likely unconstitutional.
"CopyTele fully supports this legislation and hopes that it passes through the Senate, as is," he said.
