Wealth of Ideas Newsletter, May 2009

On April 2, 2009, the Senate Judiciary Committee met to continue discussions of the Patent Reform Act of 2009 (Senate bill S.515). The Committee changed several sections, including those on damages, willfulness, inequitable conduct, best mode, post-grant review, interlocutory appeals and venue. Here’s a quick rundown of some of the major amendments to the Senate version of the bill as reported out of the Senate Judiciary Committee:

Damages: The amended bill replaces the controversial apportionment of damages provision with a compromise “Gate Keeper” provision giving trial judges a greater role in determining damages. The amendment states that the only evidence to be permitted for consideration shall be that which relates to the “determination of damages that is relevant to the methodologies and factors that the Court determines may be considered in making damages determination.” What this means: This change would lead to a sort of “gatekeeper” role for the judge, who would have to decide which evidence is admissible. Critics say that it will further erode the role of a jury in patent cases and will also lead to limitations on the amount of damages that can be awarded in patent infringement cases.

Willfulness: This part of the bill was modified to take into consideration three factors: (1) evidence that there was “reasonable reliance” on the advice of counsel; (2) evidence that the infringer had “sought to modify its conduct to avoid infringement once it had discovered the patent”; and (3) evidence that the infringer had a “good faith belief” that the patent was invalid or unenforceable during the period that they knowingly infringed. What this means: In In re Seagate Technology, LLC (August 20, 2007), the Federal Circuit Court of Appeals made it harder for a patent owner to prove willful infringement. This amendment to the Patent Reform Act seeks to “tighten the willfulness provision in Section 4 to ensure that it is in line with the Federal Circuit’s decision in Seagate,” according to Senator Patrick Leahy’s website – and that would, of course, also have an effect on the determination of damages. Needless to say, raising the bar for proving willfulness only serves to obviate the concern of future infringers.

Change of venue: The amendment made to this section allows a district court to transfer any civil action arising under any Act of Congress relating to patents upon a showing that the transferral of venue “is more convenient than the original venue.” What this means: This change is designed to prevent plaintiffs from “forum-shopping” for the venue that’s most likely to give them the outcome they desire. Instead, under this amendment, a civil action for patent infringement would be required to be filed where the defendant either has its offices, is incorporated, or has committed a “substantial portion of the acts of infringement” and “has a regular and established physical facility which it controls” – unless no venue is available that meets those first three requirements. Eastern District of Texas no more!

Best Mode: The failure to disclose the best mode shall not be a basis for canceling or holding a patent claim invalid or unenforceable. What this means: While the bill would keep the requirement that the specification section of a patent application must disclose the “best mode” of carrying out the invention, the best mode requirement would no longer be grounds for invalidating a patent.

Conclusion: Critics of the Patent Reform Act mainly point to two major problems. First, the proposed changes to the patent system mostly provide relief to corporate patent infringers and do not benefit inventors enough. Second, instead of helping make the process of obtaining a patent easier, the proposed amendments to patent law would actually burden the already-overloaded USPTO even more.

Despite the new administration and its promises of change, the latest iteration of the Patent Reform Act appears to be simply codifying recent precedential decisions, such as In re Seagate.