UPDATED at 5:39pm ET on Wed. June 10, 2015
The House Judiciary Committee will hold a hearing on Thursday morning, June 11, 2015, at 10am ET in order to markup the Innovation Act. The Manager’s Amendment is currently available on the hearing webpage. Additional proposed amendments by Judiciary Committee members are excepted to come in and be posted sometime later today. While a markup of this legislation has been rumored numerous times only to be postponed, it seems that this hearing will go forward. It is widely expected that the Innovation Act will easily clear the House Judiciary Committee. The resulting bill with whatever amendments may be approved may move quickly to the full House of Representatives for a vote.
Yesterday, Congressman Dana Rohrabacher (R-CA) gave an impassioned speech in the House of Representatives urging his colleagues on the House Judiciary Committee to defeat H.R. 9, which is better known as the Innovation Act. Last week a similar measure — the PATENT Act — passed the Senate Judiciary Committee by a vote of 16-4.
Congressman Rohrabacher is not a member of the House Judiciary Committee, but he has long been a friend to both the United States Patent and Trademark Office and to innovators, including independent inventors, startups and Universities. Rohrabacher argues that the Innovation Act, which purports to reform patent litigation, will stifle American innovation and drastically harm small inventors.
This bill is called ‘the Innovation Act of 2015,’ but it is actually anti-innovation,” said Rohrabacher, who has been fighting similar attempts throughout his quarter-century in Congress. “In all my years here I have never seen a bill so deserving of the description ‘crony capitalism.’
The bill, drafted by Congressman Bob Goodlatte (R-CA), who is Chair of the Judiciary Committee, claims to reduce costly lawsuits brought against corporations by so-called “patent trolls,” but one of the major criticisms of the bill is that it goes well beyond what is necessary to address the limited abuse witnessed in the patent enforcement marketplace. “H.R. 9 addresses a legitimate issue,” said Rohrabacher, “but in reality makes it harder for small inventors to protect their patents and easier for big corporations to steal them.”
Perhaps the two most contentious issues are related to fee-shifting and customer stays.
Under the terms of the Innovation Act, the losing party would have to pay the attorneys fees of the prevailing party unless there is a finding by the district court judge that the positions taken by the losing party were objectively reasonable. The wording of the Innovation Act creates a presumption of fee-shifting, which is different than the PATENT Act in the Senate. While the PATENT Act also contains fee-shifting language the would be no presumption of fee-shifting. Still, many question whether any fee-shifting legislation is required given the Supreme Court’s recent decisions giving district court judges broad discretion to award attorneys fees, something they had not previously enjoyed.
Since the Supreme Court said district courts have broad discretion on the issues of fees they are being requested far more and granted far more frequently already. Still further, some question whether shifting fees will do anything to stop patent trolls given that corporations almost always settle with patent trolls for several tens of thousands of dollars rather than litigate. If corporations are going to continue to make these extortion-like payments to patent trolls there will never be an opportunity to shift fees because there will be no prevailing party.
The “customer stay” provision found in both the Innovation Act bill in the House of Representatives and in the PATENT Act bill in the Senate, would ostensibly protect downstream customers of a patent infringer, such as a small coffee shop offering Wi-Fi service using a device that, unbeknownst to the coffee shop, infringes a patent. In earlier versions of the Innovation Act the term “covered customer” was quite broad. In the Manager’s Amendment the customer stay provision has been narrowed to end users and retailers, with retailers being defined to exclude “an entity that manufacturers or causes the manufacture of a covered product or covered process, or a relevant part thereof.” In this incarnation the customer stay provision has been dramatically curtailed, which is a positive step in the right direction. Of course, a significant problem remains for patent owners. Patent infringers simply refuse to negotiate licenses even when they are well aware that they are infringing. If retailers can stay patent infringement litigation and continue selling infringing devices while an infringer fights a war of attrition and refuses to negotiate in good faith that means that the patent, which is supposed to be an exclusive right, no longer carries any right of exclusion.
Late in the day on Wednesday, a statement was released from the Association of American Universities (AAU), the Association of Public & Land-Grant Universities (APLU), the Innovation Alliance (IA), the Medical Device Manufacturers Association (MDMA), the National Venture Capital Association (NVCA), and the Alliance of U.S. Startups and Inventors for Jobs (USIJ) released the following joint statement on the House Judiciary Committee markup of H.R. 9, the Innovation Act:
“As representatives of a broad coalition of universities, inventors, manufacturing technology and life science companies, venture capitalists and startup communities, we must express our continued opposition to H.R. 9, the Innovation Act, as it is currently drafted. Although we welcome some of the changes made in the latest version, these changes do not go nearly far enough. Overall, H.R. 9 would still dramatically weaken intellectual property rights, harm U.S. competitiveness and undermine a patent system that has been critical to incentivizing innovation and job creation in our country for more than 200 years. We urge the House Judiciary Committee to reject H.R. 9 in its current form.”
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