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Changes to the U.S. Patent System

Steven StegerSeptember 4, 2014

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Reasons for Change

• Combatting Patent Licensing Companies–NPEs, PAEs, Patent Trolls– Abusive Litigation Tactics

• Supreme Court Scrutiny/Tension with Federal Circuit

• Perceived Lack of Quality in Examining Patents/Poor Patents Issuing

• Robust Sales Market—Diversion of Resources from Innovation

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Sources of Change

• Legislative

• Judicial

• U.S. Patent and Trademark Office

• Industry

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Legislative Changes

• America Invents Act (September, 2011)– Change to First to File – Enhanced Opposition Procedures• Post Grant Review• Inter Partes Reexamination• Covered Business Method Review

– Prohibition on Joining Defendants in Single Patent Infringement Litigation

–Many Other Provisions

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Legislative Changes

• Proposed Legislation– Over 15 different bills proposed in

Congress• Innovation Act

– Most Comprehensive– Passed House, Stalled in Congress

• Transparency in Assertion of Patents Act• Trade Protection Not Troll Protection Act• Patent Transparency and Improvement Act• Patent Litigation Integrity Act• Patent Fee Integrity Act

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Legislative Changes

• Areas Addressed in Proposed Legislation– Expanding Covered Business Methods

Review to Additional Industries– Curbing Abusive Litigation Tactics used

by NPEs– Protecting End-Users of Technology– Adding Transparency to Litigation

Funding and Patent Transfers

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Judicial Changes

• Active Supreme Court– Limited Deference to Federal Circuit– Often Addressing Divisions within

Federal Circuit

• Addressing Fundamental Aspects of Patent Law– Patentable Subject Matter– Right to Injunction– Infringement Theories

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Sample Supreme Court Cases

• Alice v. CLS Bank (2014)– Defined scope of patentable subject

matter– Did not rule that software is not

patentable

• Octane Fitness v. ICON (2014) and Highmark v. Allcare (2014)–Made it easier for trial courts to award

attorneys fees and costs in frivolous cases

– Standard changed from “objectively baseless” litigation to unreasonableness standard in view of totality of circumstances

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Sample Supreme Court Cases

• Limelight v. Akamai (2014)– Limited ability to assert patents where

multiple parties perform steps of method

• Nautilus v. Biosig (2014)– Changed analysis for whether a claim is

invalid as indefinite– Old test— “insolubly ambiguous” is

invalid–New test– “sufficiently definite” is valid

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Sample Supreme Court Cases

• Bilski v. Kappos (2010)– Rejected “machine or transformation”

test for patentable subject matter– Laid groundwork for Alice decision

• MedImmune v. Genentech (2007)–Made it easier for targets of licensing

efforts to file declaratory judgment actions

• eBay v. MercExchange (2006)– Rejected per se rule for grant of

injunctions

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U.S. Patent and Trademark Office

• No Director since Kappos stepped down at the beginning of 2013– Strength and voice of PTO compromised

by lack of leadership and direction at PTO

– Critical juncture as patent reforms (both legislative and judicial) are being implemented

– Allowing many voices to drive debate– Kappos was strong voice in debate

around America Invents Act

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U.S. Patent and Trademark Office

• Post-Grant Procedures– IPRs now part of most litigations– Claim terms given broadest reasonable

interpretation vs ordinary and customary meaning

• Renewed Scrutiny on Section 101—Patentable Subject Matter

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Industry Changes

• The Patent Market Continues to Evolve– Cost of assertion of patents created

NPEs– Response to NPEs were defensive

aggregators– Greater competition for assets created

robust marketplace– Robust market and NPEs led to patent

reform making assertion more difficult– Assertion difficulties have cooled

market – Lack of sales opportunities have led to

more assertion and to litigation financing firms

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Key Aspects of the Patent System

• Patents still serve the dual purpose of encouraging disclosure of innovations and rewarding inventions very well

• Patents are the best, and often the only, way to protect investment in innovation

• The patent industry will continue to evolve to address challenges, including patent reform

• In spite of challenges, a robust patent acquisition strategy is key to long term success of business