MVS Filewrapper® Blog: Update on "Patent Troll" Legislation in the Wake of the 2014 Elections

Post by Luke Holst

In December of 2013, the U.S. House of Representatives passed H.R. 3309, the "Innovation Act," ostensibly to address the problem of abusive patent litigation, sometimes referred to as patent trolling.  While H.R. 3309 passed with bipartisan support by an overwhelming margin of 325-91 votes, its companion bill failed to clear the Senate.  Failure of the Senate bill is attributable to removal of controversial fee-shifting language from H.R. 3309 by Judiciary Committee Chairman Patrick Leahy, D-Vt. The fee-shifting provisions required losing parties in patent litigation to pay their opponent's legal fees—a situation critics argued would discourage the filing of meritorious patent suits by small businesses.  After votes on the Senate counterpart bill stalled repeatedly, Senator Leahy withdrew the bill from the Senate Judiciary Committee's agenda last May.

 

In the wake of the 2014 midterm elections, Republicans have vowed to take up the legislation again early in 2015.  House Judiciary Committee Chairman Bob Goodlatte, R-Va., recently stated that a new version of the Innovation Act, and two companion bills addressing trade secret protections, should be reintroduced in the U.S. House of Representatives in January and pass with bipartisan majorities.  The trade secrets legislation looks to create private civil trade secret misappropriation lawsuits under the federal Economic Espionage Act, which currently only allows prosecutors to bring criminal cases.  On the Senate side, Senator Charles Grassley, R-Ia., is expected to replace Leahy as Chairman of the Judiciary Committee as the Republicans take over the Senate majority in January.  Senator Grassley has signaled his intention to make patent reform a priority in the new Congress and believes patent reform can be accomplished early next year.  In addition, the White House has signaled its support for legislation curbing abusive patent litigation, signaling that this may be an issue for which meaningful legislative action could be seen during the 2015 term.

 

 

MVS Filewrapper® Blog: FDA Releases First "Purple Book" for Biosimilar Products

The Biosimilars Act (BSA) was passed into law on March 23, 2010 with the goal of encouraging the market entry of generic products, similar to the system that exists for generic drugs under the Hatch-Waxman Act.  The BSA sets forth an abbreviated approval pathway for biologics through a regulatory demonstration of biosimilarity (i.e. interchangeability).

 

More than 4 years after the BSA went into effect, the FDA has released its "Purple Book" listing biological products, including any biosimilar and interchangeable biological products licensed by FDA.  The Purple Book is intended to serve a similar function to the "Orange Book" that lists drug products with therapeutic equivalence evaluations that have been approved by the FDA.  The release of the Purple Book follows closely behind the filing of the first two applications for approval of biosimilar products.

 

For more information about the BSA, see the June 2014 issue of MVS Briefs, available here. 

More information on the "Purple Book"—including current lists of licensed biological products— is available from the FDA website here.

 

 

 

 

 

MVS Filewrapper® Blog: USPTO Issues Report on Virtual Patent Marking Under the AIA

Among the provisions of the America Invents Act that went into effect on September 16, 2011 was a change to the patent marking provisions contained in 35 U.S.C. § 287(a).  Marking an article as with a patent number provides constructive notice to the public that the article is patented, and failure to appropriately mark an article can preclude the recovery of damages for infringement until effective notice is given. The revised marking statute allows patent owners to identify their products with the web address containing the patent information, limits false marking lawsuits to those filed by the U.S. government or by a competitor who can prove competitive injury, and does away with provisions making it a violation to mark a product with a patent that covered the product, but has since expired.

 

The USPTO has issued a Report on Virtual Marking that provides analysis of the effectiveness of virtual marking under the AIA; whether virtual marking has limited or improved the ability of the general public to access information about patents; legal issues, if any, that arise from virtual marking; and any deficiencies arising from virtual marking.  The report is based on comments solicited by the USPTO, along with independent research. 

 

The conclusion the USPTO Report is that virtual marking has likely met its intended objectives of reducing manufacturing costs and facilitating public notice.  The Report identifies several benefits demonstrated by the analysis, in particular the ability of patent owners to dynamically update patent information, to provide a real-time, complete list of associated patents, and to include additional patent-related information, which all may help increase transparency by improving the public’s ability to access a wider scope of information about relevant patents.  The Report also notes that there is little applicable case law on the subject, due to the recency of the new marking provisions, and that virtual marking may have deficiencies that are not yet totally apparent, and as a result the issues may need to be revisited at a later date. 

 

The full report is available here.

MVS Filewrapper® Blog: Should Trade Secret Misappropriation be Federalized?

The legal community (along with bipartisan legislation) has been discussing the creation of a private cause of action under federal laws for trade secret misappropriation – or trade secret theft. In light increased cyber-espionage and the apparent ease in which trade secrets can be misappropriated in the marketplace, Congress has taken an apparent interest in "strengthening" trade secret protections.

 

Currently, trade secrets are a matter of state law. This means that each state has established requirements for trade secret misappropriation. In sum, these require a finding that a trade secret holder has a "secret" with value as a result of it not being generally known by others (i.e. competitors), that the trade secret holder has taken efforts to maintain secrecy, and that the party alleged to have access or appropriated the secret used some sort of improper means. Although the precise definitions for these standards may vary among the states, there are relatively small distinctions among the states.

 

Both the House and the Senate may consider bills introduced as early as this fall to consider federalizing this cause of action. The "Defend Trade Secrets Act of 2014" ("DTSA") (S. 2267) and the "Trade Secret Protection Act of 2014" (H.R. 5233) have been introduced to create a private cause of action under the existing Economic Espionage Act of 1996.  The DTSA as drafted would authorize a trade secret owner to bring a civil cause of action in federal court for either (1) a violation of the Economic Espionage Act (which criminalized types of trade secret theft), or (2) a “misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” The Judiciary Committee has held a hearing to discuss the benefits of the federal cause of action. A few of the purported benefits of establishing federal legislation would be to grant access to federal forums (based on the subject matter instead of matters of diversity and/or supplemental jurisdiction), along with granting access to federal remedies for seizures to prevent irreparable harm caused by trade secret misappropriation.

 

As expected, there are vocal critics of such federalization, including a group of legal scholars and professors (see opposition letter at http://cyberlaw.stanford.edu/files/blogs/FINAL%20Professors%27%20Letter%20Opposing%20Trade%20Secret%20Legislation.pdf). As stakeholders continue to voice opinions (and concerns) over pending legislation, more information will be provided through Filewrapper.com.

MVS Filewrapper® Blog: Federal Trade Secret Protection Proposed in the Senate

Defend Trade Secrets Act of 2014

 

Senators Chris Coon (D-DE) and Orrin Hatch (R-UT) proposed a bill on April 29, 2014 that would provide federal protection for trade secrets. Under the current state of the law, trade secrets are protected by a combination of various state statutes, state common law, and aspects of contract law.  There is no private federal cause of action for appropriation of trade secrets, although 18 U.S.C. 1832 is a criminal statute prohibiting theft of trade secrets.

The Defend Trade Secrets Act would allow an owner of a trade secret to pursue civil action in federal court for misappropriation of a trade secret used in interstate or foreign commerce.  The proposed bill would also authorize the court to issue orders for the preservation of evidence in a civil action, including making a copy of electronic storage where the trade secret is located or allowing seizure of any property used to facilitate the theft of the trade secret. However, this seizure is limited to that which is not merely incidental and so long as the seizure does not interrupt the normal and legitimate business operations unrelated to the trade secret. This seizure will essentially be enforced through the requirements in paragraphs (2)-(11) of the Trademark Act of 1946.

The bill also provides for remedies including the granting of injunction against any actual or threatened violation of the Act and if appropriate, affirmative actions to protect the trade secret. Additionally, if injunction is inequitable, the court may condition the future use of the trade secret on the payment of a reasonable royalty for the time for which use could have been prohibited. The court may also award damages for actual loss and for any unjust enrichment caused by the misappropriation. Finally, if the trade secret is wilfully or maliciously misappropriated, the court may also award exemplary damages not to exceed three times the amount of actual damages. The Act would also allow for the granting of attorney's fees in this instance and in the situation where the claim of misappropriation was made in bad faith.

It is important to note that misappropriation is defined within the statute as using improper means to acquire the trade secret including: theft bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. However, improper means does not include reverse engineering or independent derivation.

The text of this Act reads very similar to the Uniform Trade Secrets Act (USTA) which has been enacted by 48 states (New York and Massachusetts have not adopted this legislation). However, each state often modifies the UTSA allowing for different interpretations.  Notably, the Defend Trade Secrets Act states that nothing in the Act would "preempt any other provision of law" and does not contain the language of the USTA which states that it "displaces tort, restitutionary, and other laws." Ultimately, this means that the Defend Trade Secrets Act still leaves the possibility for state law variations and allows plaintiffs to choose federal or state court for their action.

The Senate Judiciary Committee, Subcommittee on Crime and Terrorism held a hearing on May 13, 2014 concerning economic espionage and theft of trade secrets, including the proposed bill, and heard testimony from two panels of witnesses. No action has been documented since that date.

 

 

MVS Filewrapper® Blog: Senate Bill Aimed at Combating Cyber Espionage

Senator Carl Levin (D-MI) has introduced a bill called the "Deter Cyber Theft Act" to the Senate floor that would require the Director of National Intelligence to report annually to congressional committees concerning foreign countries that engage in economic and industrial cyber espionage relating to intellectual property and proprietary information owned by U.S. companies.

 

Under the proposed regime, each report would include:

·         A list of foreign countries engaging in economic or industrial cyber espionage against U.S. entities, including a watch list of the worst offenders;

·         A list of U.S. technologies or proprietary information being targeted, and if possible, a list of the information that has been stolen;

·         A list of items manufactured or services provided as a result of the stolen technologies and information;

·         A list of foreign companies benefiting from such theft;

·         Details of the espionage activities of foreign countries;

·         Actions being taken by U.S. federal agencies to combat cyber espionage.

 

The bill went before the Senate on May 7, 2013 and was referred to the Committee on Finance. Although no action on the bill is currently pending, Senator Levin has stated that his renewed efforts to move this bill through Committee are prompted by recent events concerning cyber espionage.  Senator Levin's complete comments on the bill can be found here. 

MVS Filewrapper® Blog: Senate Consideration on Patent Transparency and Improvements Act Stalls Out

With the House of Representatives passing H.R.3009 Innovation Act in December 2013, the question is now whether the Senate will pass their version of an Innovation Act in the coming months. The Patent Transparency and Improvements Act (S.1720) is similar to the House text, with eight of the eleven major Senate provisions included in the bill approved by the House. The primary distinction is that while the House appears to focus on rules of procedure, specifically those regarding joinder and discovery, the Senate does not include those provisions but rather promotes a heightened layer of transparency for parent entities who are transferred patent rights. Three provisions discuss parent entities in detail, leading to the ultimate conclusion that nondisclosure of a transfer of rights to a parent entity after the three-month grace period is considered misconduct that will enable fee shifting and the possibility for recovering increased damages. It appears that this Senate bill represents a compromise between the House patent reform bill and the current law.

 

S.1720 was repeatedly slated for consideration by the Senate Judiciary Committee, which held a primary hearing on December 17, 2013. Testimony was heard from two panels of witness testimony, including intellectual property counsel for private corporations as well as the Executive Director of the American Intellectual Property Law Association. In addition, a number of organizations—including the American Bar Association—have addressed letters to the Judiciary Committee voice their support and concerns for the bill.

 

S.1720 has been removed from the Judiciary Committee agenda as of May 21, 2014.  Senator Leahy, chairman of the Judiciary Committee, has cited insufficient support behind any comprehensive deal as the reason for taking the patent bill off the Senate Judiciary Committee agenda.  The press release from Senator Leahy is available here.

 

In light of this stall in the Senate, it is extremely unlikely that any patent reform legislation will be enacted this year.

MVS Filewrapper® Blog: Bring on the New Year—What is in Store for IP in 2014?

Happy New Year to all of our FilewrapperÒ followers! We hope 2013 was a productive year and wish you the best in 2014. As the New Year quickly approaches we would like to share with you a few predictions for 2014 for you to look forward to and for which to prepare!

·         Increased opportunities for quasi-litigation under AIA.  Various new mechanisms are available to challenge patents under the America Inventors Act (also referred to as “AIA” or “Patent Reform”) many provisions of which took effect in 2013. New strategies are available to challenge patents at the USPTO instead of challenging in court, providing distinct advantages—and some disadvantages.  Inter Partes Review, Post-Grant Review and transitional programs specific for business method patents are quasi-litigation proceedings which are heard by a panel of USTPO administrative law judges.  Ex Parte Reexamination—which has been available since 1981—also remains to allow a patent challenge to be heard by a patent examiner, requiring little from the challenger other than filing required papers with some evidence of patent invalidity.  The cost for ex-parte reexamination has significantly increased, although it remains a far less expensive option than litigation with the courts.

·         (Finally) an international design patent application is available!  Design patents protect a product’s new, original and ornamental design.  Design patents present a smart option for investment in protecting a product, since they cost significantly less than utility patents and are generally granted at a much faster rate.  In addition to these benefits of filing design patents, changes in international design registration under the Hague Agreement may facilitate more effective international protection for your design inventions.  Effective December 18, 2013 a single international application designating a variety of countries for protection can be filed through the International Bureau of WIPO.  This is beneficially a single international application to be filed at one location, which will ultimately be examined by many different Offices thereafter to provide more prompt and cost effective options for design protection.  Over 60 countries and territories—including the European Union—are members of the Hague Agreement.  However, there are various countries that are excluded from this treaty (e.g. Australia, Canada, China, Mexico, Japan, India, and Brazil), which would require a separate application as has been done in the past for foreign design patents.  Nonetheless, the Hague Agreement provides significant improvements for international design protection.

·         (Some USPTO) Fees Decrease January 1, 2014.  In addition to the new classification of “micro-entity” status for Applicants to receive 75% reduction of some USPTO fees that took effect in 2013, the New Year also brings certain fee reductions.  Notably, Issue Fee payments for granted patents are substantially reduced (from $1,780 to $960 for large entity), along with the removal of publication fees and assignment recordation fees.  Reissue patent, design patent and plant patent issue fees are also decreasing.  In addition, in 2014 certain PCT fees will be eligible for payment under small and micro entity status.

·         The search continues for a test to determine patentable subject matter under §101.  The Supreme Court will hear CLS Bank v. Alice in 2014 after the Federal Circuit’s en banc decision in 2013 found many software patents to be ineligible.  The Supreme Court will again try to define an abstract idea in considering whether claims to a computerized method (using a computer-readable medium and a computer to implement instructions) is patentable subject matter.  Both the Federal Circuit and patentees are still searching for a test under §101 that is “consistent, cohesive, and accessible [to provide] guidance and predictability for patent applicants and examiners, litigants, and the courts.”

·         We may receive further guidance on Claim Indefiniteness.  The Supreme Court is expected to grant certiorari on Nautilus v. Biosig Instruments involving indefiniteness under §112, second paragraph to determine whether claims having multiple reasonable interpretations are too ambiguous and would render a patent unenforceable for lack of written description.

·         Protecting American from “Patent Trolls.”  As previously reported on FilewrapperÒ, there is legislative movement in the House and Senate to limit lawsuits which can be filed by non-practicing entities (NPEs or Patent Trolls).  There seems to be great energy around limiting “frivolous” lawsuits in our court system.  In early 2014, the Senate will consider a companion bill to Senate 1720 ("Patent Transparency and Improvements Act of 2013"), which is said to already have support from the White House.  If legislation passes the Senate, then the House and Senate bills will need to be reconciled before being sent to the President.

·         New Patent Director.  Stay tuned for further administrative changes at the USPTO as the new Director, Michelle Lee, takes office January 13, 2014. The former Google executive has been made deputy director of the USPTO, and in that capacity will take on the duties of acting director.  Lee has issued statements planning to “attack” the backlog of unexamined patents (remains at more than 500,000) and improve patent quality with improved inter partes review.

MVS Filewrapper® Blog: H.R. 3309 – The Innovation Act

On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, the "Innovation Act", with bipartisan support by an overwhelming margin of 325-91 votes.  H.R. 3309 was drafted to address the perceived growing problem of abusive patent litigation attributed to alleged “patent trolls.”  Early next year, the Senate will likely consider a companion bill, S. 1720, the "Patent Transparency and Improvements Act of 2013", previously introduced by Senator Leahy (D-VT).  While S. 1720 has similar goals of H.R. 3309, the bills have many provisions that are not shared or coextensive.  Thus, it remains to be seen what impact H.R. 3309's passage will have on Senate deliberations in light of the fact the bill enjoys support from the White House.  If legislation passes the Senate, then the House and Senate bills will need to be reconciled in conference committee and sent to the President's desk for signature.  In the meantime, the Senate Committee on the Judiciary will address the issue by holding a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse" on December 17, 2013.

 

Supporters of H.R. 3309 praised its passage as instituting important patent reforms made necessary after the passage of the America Invents Act (P.L. 112-29).  Particularly, the bill heightens pleading standards; requires patent plaintiffs to name anyone who has a financial interest in the patent being litigated; requires courts to delay the discovery process until after claim construction is determined; creates a voluntary process for small businesses to postpone patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiff; and, allows a manufacturer to intervene in a lawsuit against its customers and have the action stayed for the customer if both the customer and manufacturer agree.  The centerpiece of the legislation is a fee-shifting provision that requires courts (with some exceptions) to award prevailing parties reasonable attorneys' fees and other expenses when parties bring frivolous lawsuits or claims that have no reasonable basis in law or fact.  Proponents of this legislation include broad support from the technology sector, including internet companies such as Google, Microsoft, Amazon, and Apple.  H.R. 3309 is also favored by brick-and-mortar industries such as restaurants, retailers, realtors, hotels, casinos, airlines, and the auto industry.

 

On the other side, opponents of H.R. 3309 are concerned that the fee-shifting provision would likely favor wealthy parties while discouraging small inventors from pursuing legitimate patent infringement claims.  Opponents include members of the biotechnology and pharmaceutical industries, the Intellectual Property Owners' Association, patent attorneys, and even universities—which warned that the legislation would harm their patent-licensing revenues.  Notably, the Biotechnology Industry Organization ("BIO") believes that the Act will undermine biotech research and innovation, as it would ultimately make it more difficult for patent holders with legitimate claims to protect their intellectual property.  In a press release, BIO stated "[p]rovisions in the legislation would erect unreasonable barriers to access justice for innovators, especially small start-ups that must be able to defend their businesses against patent infringement in a timely and cost-effective manner, and without needless and numerous procedural hurdles or other obstacles."

 

Additional information about H.R. 3309 and S. 1720 will be available shortly from MVS. 

MVS Filewrapper® Blog: USPTO Proposes Rule Changes for International Design Applications

The U.S. Patent and Trademark Office is seeking comments on it proposed rules for implementing the provisions of Title I of the Patent Law Treaties Implementation Act of 2012.  The law is the implementing legislation for the 1999 Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (“the Hague Agreement”).  The rules proposed rule changes under the law will allow applicants to file a single international design application; U.S. applicants will be able to file a single application, potentially seeking protection of an industrial design in more than 40 territories.

Under the proposed rules, international design applications could be filed by U.S. applicants in the USPTO as an office of indirect filing, meaning that the USPTO would transmit the international design application to the International Bureau of the World Intellectual Property Organization (“WIPO”).  The International Bureau would review the application for compliance with the applicable formal requirements under the Hague Agreement. Where these requirements have been met, the International Bureau would register the industrial design in the International Register and, subsequently, publish the international registration and send a copy of the publication to each designated office. Since international registration would only occur after the International Bureau finds that the application conforms to the applicable formal requirements, examination before the Office would generally be limited to substantive matters.

According to the USPTO proposal, the “major changes to U.S. practice in title I of the PLTIA pertain to: (1) Standardizing formal requirements for international design applications; (2) establishing the USPTO as an office through which international design applications may be filed; (3) providing a right of priority with respect to international design applications; (4) treating an international design application that designates the United States as having the same effect from its filing date as that of a national design application; (5) providing provisional rights for published international design applications that designate the United States; (6) setting the patent term for design patents issuing from both national design applications under chapter 16 and international design applications designating the United States to 15 years from the date of patent grant; (7) providing for examination by the Office of international design applications that designate the United States; and (8) permitting an applicant's failure to act within prescribed time limits in an international design application to be excused as to the United States under certain conditions.”

Additional information, including the specific proposed rules and information on how to submit comments, is available here.

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