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House of Representatives Passes the Innovation Act — What You Need to Know

They may be derided as a ‘do-nothing’ Congress, but both the Senate and House are taking up important new legislation to reform patent litigation.

The Innovation Act

On December 5, the House of Representatives passed H.R. 3309, a piece of patent reform legislation known as the “Innovation Act of 2013.” The bill passed 325-91, with most of the opposition coming from Democrats, but with some Republican opponents as well. The bill would amend U.S. Code Title 35 (the section that governs patent law) and the “America Invents Act,” which Congress passed in 2011 (but which most folks agree did not accomplish nearly enough in the way of true reform).

The legislation now moves to the Senate, where lawmakers will have to dealt with it in conjunction with the “Patent Transparency and Improvements Act of 2013” (S. 1720), the Senate’s version of similar patent reform. (The Senate bill proposes less sweeping reform than the House version; on December 16, the Senate Judiciary Committee began hearings on the legislation.)

H.R. 3309

Here’s my take on the major provisions of H.R. 3309, most of which would change the patent system to eliminate some of the more egregious litigation tactics adopted by patent “trolls”:

  • The Innovation Act would require plaintiffs to plead with more specificity in the complaint how the defendant allegedly infringed the plaintiff’s patent. The plaintiff must identify each patent and claim asserted, each accused device or process, and how each claim corresponds to each accused device or process.
  • The bill contains limits on discovery in the pre-claim construction phase of ligation. Until a claim construction decision is issued, discovery is limited to determining the meaning of claim terms. However, the judge or the parties may agree to expand the scope of discovery as necessary.
  • The legislation proposes a fee-shifting rule, which would require a losing plaintiff to pay the attorneys’ fees incurred by a winning defendant. The law would create a presumption that attorneys’ fees are awarded to the prevailing party, unless the court finds that the non-prevailing party’s position was “reasonably justified . . . or that special circumstances make an award unjust.”
  • The act would address a more recent, and increasingly common troll tactic of suing end users of technology (such as restaurants or hotels offering their customers Wi-Fi access) rather than the technology provider (such as the manufacturer of the Wi-Fi equipment). These end users — often small independent businesses or franchisees of chain companies — can be easily intimidated into paying a settlement regardless of the merits of the case. The Innovation Act would allow technology manufacturers to step in and fight these lawsuits on their customers’ behalf. Similarly, the bill provides that a suit against a customer must be stayed if the manufacturer is involved in a separate patent action related to the same product, and the customer agrees to be bound by the decision in that other action.
  • More transparency in patent ownership will be required, as plaintiffs must identify any entity that has a financial interest in the patent being litigated.

Stay tuned for further updates here, as the House and Senate move forward with this much-needed patent reform legislation, The Innovation Act.