Innovation Act


The Innovation Act of the 113th Congress is a bill that would change the rules and regulations surrounding patent infringement lawsuits in an attempt to reduce patent lawsuits.
This article primarily describes the previous version of this bill in the 113th United States Congress, which was passed by the House on December 5, 2013, but was never passed by the United States Senate. Instead, the Senate responded with several bills, including the Patent Transparency and Improvements Act ; in December 2013, the full Senate Judiciary Committee held a hearing on the topic.
In April 2014, the U.S. Supreme Court decided Octane Fitness, LLC v. ICON Health & Fitness, Inc., which shifted lawyer's fees for "frivolous" patent suits to the plaintiff, reducing the incentive to file illegitimate suits in the hope of inducing a settlement.
[|In May 2014], Senator Patrick Leahy, the Chairman of the Senate Judiciary Committee, announced he was "taking the patent bill off agenda" due to a failure of the House and Senate to "combat the scourge of patent trolls on our economy without burdening the companies and universities who rely on the patent system every day."
The bill was reintroduced in the 114th United States Congress in February 2015 by its original sponsor, Rep. Bob Goodlatte, and by June 9, 2015, it had accumulated 26 cosponsors.

Background

litigation has significantly increased since 2011, when the Leahy–Smith America Invents Act—the most recent patent law—was passed. The litigation has moved from targeting mostly tech companies to targeting restaurants, grocery stores, and other businesses in non-tech industries, building additional support for a new law.
Current law allows patent owners to file complaints that specify what products they think infringe their patents and/or failing to identify specifically which claims from their patents they are asserting. The revelation of such details can be delayed until the discovery phase, which is often expensive. For example, the discovery stage of a single patent case against SAS Institute required the company to produce over 10 million documents, costing the defendant over 1.5 million dollars; the plaintiff ended up identifying fewer than 2000 documents as evidence, and lost by summary judgment.
Patent owners currently can sue customers and other end-users using a product that the plaintiff claims violates their patent, sometimes before or in lieu of the company making the product. Examples include the following:
The bill would create additional requirements as part of the legal process associated with patent infringement under United States law. One requirement would be for the plaintiffs filing the lawsuit to be more specific about the alleged violation, making it harder for them to file a vague claim of infringement.
The bill would require "a party alleging infringement in a civil action involving a claim for relief arising under any Act of Congress relating to patents to include in the court pleadings, unless the information is not reasonably accessible, specified details concerning: each claim of each patent allegedly infringed, including each accused apparatus, feature, function, method, service, or other accused instrumentality; the person alleged to be the direct infringer for each claim alleged to have been infringed indirectly; the principal business of the party alleging infringement; each complaint filed that asserts any of the same patents; and whether the patent has been declared essential, potentially essential, or having potential to become essential to any standard-setting body as well as whether the United States or a foreign government has imposed any specific licensing requirements."
The bill would also require plaintiffs that lose their suit to pay the costs incurred by the winning defendant.

Congressional Budget Office report

This summary is provided by the Congressional Budget Office, as ordered reported by the House Committee on the Judiciary on November 20, 2013. This is a public domain source.
The Congressional Budget Office estimates that implementing H.R. 3309 would cost $3 million over the 2014–2018 period, assuming appropriation of the necessary amounts, mainly for reports to be prepared by the Administrative Office of the United States Courts and the Government Accountability Office and administrative costs incurred by the AOUSC associated with new judicial procedures. Pay-as-you-go procedures do not apply to this legislation because it would not affect direct spending or revenues.
Based on information from the Patent and Trademark Office, the CBO also estimates that implementing H.R. 3309 would have a gross cost to the PTO of about $30 million per year. However, the PTO is authorized to collect fees sufficient to offset its operating expenses; therefore, the CBO estimates that the net budgetary effect of PTO's activities undertaken to implement H.R. 3309 would not be significant, assuming appropriation actions consistent with the agency's authorities.
H.R. 3309 would change administrative and judicial processes that support the protection of intellectual property rights. The CBO expects that, by requiring inventors to be more specific in pleadings to the court, awarding attorney fees to the prevailing party, and limiting discovery early in an infringement proceeding, the bill would affect the decisions of inventors to initiate lawsuits for patent infringement.
H.R. 3309 would make several adjustments to judicial procedures for patent infringement cases, including which parties may join a suit and when a court is required to grant a motion to stay an action. Further, the bill would require the courts to award the prevailing party reasonable fees and other expenses incurred in connection with such cases. The bill also would require the AOUSC to develop rules and procedures related to the discovery of evidence in lawsuits for patent infringement.
The bill would change procedures that the PTO has in place to examine patent applications, award patents, and determine the validity of a patent that has already been granted. Among other things, H.R. 3309 would specify that the agency use methods similar to those used in district courts to evaluate the validity of a patent. The bill also would require the agency to develop new databases to make information about patent ownership and litigation available on its website, perform an additional review of certain declarations made on original applications, and prepare several studies and reports on patent ownership and the behavior of certain patent owners.
H.R. 3309 would impose a mandate as defined in the Unfunded Mandates Reform Act on both public and private entities because the PTO would charge fees to offset the costs incurred to collect and make some information related to patents publicly available. Other provisions in the bill also would result in increased patent fees. The requirement to pay those fees would be a mandate because the federal government controls the patent and trademark system, and no reasonable alternatives to that system exist.
Based on information from PTO, the CBO estimates that the annual cost to comply with the mandate would be about $30 million, with less than $1 million of those costs accruing to public entities and the rest accruing to private entities. Therefore, the cost for public and private entities to comply with the mandate would fall below the annual thresholds established in UMRA for intergovernmental and private-sector mandates.

Procedural history

The Innovation Act was introduced into the United States House of Representatives on October 23, 2013, by Rep. Goodlatte. It was referred to the United States House Committee on the Judiciary. The Committee held hearings about the bill on October 29, 2013 and markedup the bill on November 20, 2013. The Committee voted 33–5 on November 20, 2013 to report the bill. It was reported by the Committee on the Judiciary on December 2, 2013 alongside . On November 27, 2013, House Majority Leader Eric Cantor announced the H.R. 3309 would be considered on the House floor on December 4 or 5, 2013. On December 5, 2013 the House voted in to pass the bill 325–91. Both House Republicans and House Democrats disagreed internally on the issue. Republicans voted 195 in favor and 27 against, while Democrats voted 130 in favor and 64 against.
President Barack Obama has indicated his support for the bill.

Debate and discussion

The bill had sixteen co-sponsors in the House:
  1. Spencer Bachus
  2. Steve Chabot
  3. Jason Chaffetz
  4. Howard Coble
  5. Peter DeFazio
  6. Anna Eshoo
  7. Blake Farenthold
  8. George Holding
  9. Michael Honda
  10. Jared Huffman
  11. Bill Johnson
  12. Rick Larsen
  13. Zoe Lofgren
  14. Tom Marino
  15. Betty McCollum
  16. Lamar Smith
Supporters of the bill argued that the frivolous lawsuits filled by patent trolls hurt the economy. Rep. Goodlatte said that "The tens of billions of dollars spent on settlements and litigation expenses associated with abusive patent suits represent truly wasted capital." The Electronic Frontier Foundation was among the supporters of the bill, saying "It gives defendants tools to fight back, makes litigation cheaper and includes an important fee-shifting provision, so companies that stand up to the trolls have a chance to recover their fees and costs at the end of litigation. It requires trolls to make their case up front by providing basic information about their patents and the supposed infringement. And it prohibits trolls from hiding behind shell companies."
Opponents of the bill argued that the law would hurt smaller inventors that are trying to defend their patents from larger companies with more money to spend on legal action.
There were 91 House members who voted against the bill, four of whom were Democratic members of the Subcommittee on Courts, Intellectual Property and the Internet. Those four, joined by a fifth Democratic member of the Committee on the Judiciary supplied [|dissenting views].
  1. Justin Amash
  2. Rob Andrews
  3. Joyce Beatty
  4. Xavier Becerra
  5. Tim Bishop
  6. Rob Bishop
  7. Bruce Braley
  8. Jim Bridenstine
  9. Mo Brooks
  10. Paul Broun
  11. Mike Capuano
  12. John Carney
  13. André Carson
  14. Matt Cartwright
  15. Kathy Castor
  16. David Cicilline
  17. John Conyers [|Dissenting]
  18. Kevin Cramer
  19. Elijah Cummings
  20. Susan Davis
  21. Danny K. Davis
  22. Rosa DeLauro
  23. Jeff Duncan
  24. Jimmy Duncan
  25. Donna Edwards
  26. Keith Ellison
  27. William Enyart
  28. Bill Foster
  29. Lois Frankel
  30. Marcia Fudge
  31. John Garamendi
  32. Louie Gohmert
  33. Paul Gosar
  34. Alan Grayson
  35. Raúl Grijalva
  36. Andrew P. Harris
  37. Rubén Hinojosa
  38. Rush D. Holt, Jr.
  39. Tim Huelskamp
  40. Bill Huizenga
  41. Hank Johnson Dissenting
  42. Walter B. Jones, Jr.
  43. David Joyce
  44. Marcy Kaptur
  45. William R. Keating
  46. Ron Kind
  47. James Langevin
  48. John Lewis
  49. David Loebsack
  50. Alan Lowenthal
  51. Michelle Lujan Grisham
  52. Cynthia Lummis
  53. Stephen Lynch
  54. Thomas Massie
  55. Jim McDermott
  56. Jerry McNerney
  57. Gwen Moore
  58. Grace Napolitano
  59. Gloria Negrete McLeod
  60. Ed Pastor
  61. Donald Payne, Jr.
  62. Scott Peters
  63. Tom Petri
  64. Chellie Pingree
  65. Mark Pocan
  66. Bill Posey
  67. Charles B. Rangel
  68. Dana Rohrabacher
  69. Keith Rothfus
  70. Ed Royce
  71. Matt Salmon
  72. John Sarbanes
  73. Jan Schakowsky
  74. Adam Schiff
  75. Bobby Scott Dissenting
  76. Carol Shea-Porter
  77. Brad Sherman
  78. Louise Slaughter
  79. Steve Stockman
  80. John F. Tierney
  81. Niki Tsongas
  82. Juan Vargas
  83. Filemon Vela, Jr.
  84. Pete Visclosky
  85. Maxine Waters
  86. Mel Watt Dissenting
  87. Randy Weber
  88. Frederica Wilson
  89. Frank Wolf
  90. Ted Yoho
The EFF had some issues with the version passed by the House, saying "It doesn't go nearly far enough to reform the demand letter problem. Its provisions protecting consumers and end-users, while present, aren't as robust as we would hope. And it dropped expanded covered business method review, a provision that would have helped ensure that the Patent Office issues fewer patents for "inventions" that aren't particularly inventive.
In February 2015 the Association of Public and Land-grant Universities published a press release and an open letter to the senior members of the House and Senate Committees on the Judiciary, documenting their objections:
The provisions with the most potential for damaging university technology transfer include fee-shifting and joinder. Most universities, non-profit technology transfer organizations, and their licensees — often small businesses and start-ups— lack extensive resources to enforce their patents. The heightened litigation risks created by the fee-shifting and joinder provisions in the Innovation Act would devalue patents, creating uncertainty that would undermine the incentives of potential licensees and venture capitalists to invest in commercialization of university innovation.

Dissenting views

Five Democrats provided dissenting views: John Conyers, Sheila Jackson Lee, Hank Johnson, Bobby Scott, and Mel Watt.
They "believe that any serious reform of the patent laws" must end fee diversion "to ensure adequate hiring, proper training of examiners, and sustained patent quality"; they also believe H.R.3309 "creates an imbalance in the patent system skewed in favor of big corporate interests, negatively impact all patent owners thereby undermining innovation, and would encroach on our longstanding deference to the prerogatives of the Judiciary." They wanted provisions "concerning real parties in interest, customer stays, and small business assistance" as well as a "revolving fund to end fee diversion", a "study on the practice of deceptive demand letters and a report with tailored recommendations on changes to laws and regulations that would deter the use of those letters."

Senate actions

On November 18, 2013, Senator Patrick Leahy, the Chairman of the Senate Committee on the Judiciary introduced the Patent Transparency and Improvements Act, the first of several Senate bills written in response to the Innovation Act.
On December 17, 2013, the full Senate Judiciary Committee held a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse."
In May 2014, Senator Patrick Leahy, the Chairman of the Senate Committee on the Judiciary, announced he was "taking the patent bill off the Senate Judiciary Committee agenda." According to Leahy:
Unfortunately, there has been no agreement on how to combat the scourge of patent trolls on our economy without burdening the companies and universities who rely on the patent system every day to protect their inventions. We have heard repeated concerns that the House-passed bill went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders who employ thousands of Americans.