PATENT REFORM 2016 - LAIPLA · © 2016 Andrew S. Baluch 1 PATENT REFORM 2016 A Comprehensive Guide to Current Patent Reform Developments in Congress, the Executive Branch, the Courts,

© 2016 Andrew S. Baluch 1

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PATENT REFORM 2016 A Comprehensive Guide to Current Patent Reform Developments in Congress, the Executive Branch, the Courts, and the States

September 1, 2016

BYANDREWS.BALUCH

TABLEOFCONTENTS

1. CongressionalProposals...............................................................................................................41.1. Loser-PaysFee-Shifting.............................................................................................................................41.2. JoinderofInterestedParties.....................................................................................................................51.3. OffersofJudgment...................................................................................................................................71.4. RealParty-in-Interest................................................................................................................................71.5. StayofCustomerSuits..............................................................................................................................91.6. StayofDiscovery.....................................................................................................................................121.7. PleadingInfringementinMoreDetail....................................................................................................121.8. FTCDemandLetterEnforcement...........................................................................................................141.9. Venue......................................................................................................................................................201.10. ITCDomesticIndustry.............................................................................................................................211.11. AttorneySanctions..................................................................................................................................221.12. DisciplinaryProceedings.........................................................................................................................221.13. PharmaCarve-Outs.................................................................................................................................231.14. Post-GrantClaimConstruction...............................................................................................................241.15. Post-GrantEstoppel................................................................................................................................241.16. SamePartyJoinderinIPR.......................................................................................................................241.17. PetitionerStandinginPost-GrantProceedings......................................................................................251.18. Post-GrantPatentOwnerEvidenceandClaimAmendments.................................................................251.19. DenialofPost-GrantPetitionsonSamePatent......................................................................................261.20. Post-GrantPresumptiononValidity.......................................................................................................271.21. Post-GrantPanelComposition................................................................................................................271.22. ChangestoExParteReexamination.......................................................................................................271.23. CoveredBusinessMethodReviewExpansion........................................................................................271.24. LimitingCBMReviewtoCBMClaims......................................................................................................281.25. Section101ChallengesinPost-GrantReview........................................................................................281.26. PrivyEstoppelinCBMReview................................................................................................................281.27. FilingDeadlineforCBMReview..............................................................................................................281.28. MicroEntityExpansion...........................................................................................................................281.29. DoublePatenting....................................................................................................................................301.30. Inventor’sOathinContinuingApplications............................................................................................301.31. PriorityClaimsinAssignee-FiledApplications........................................................................................301.32. FederalJurisdiction.................................................................................................................................311.33. DividedInfringement..............................................................................................................................31

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1.34. WillfulInfringement................................................................................................................................311.35. PriorUserDefense..................................................................................................................................311.36. PatentOfficeFundingandFee-SettingAuthority...................................................................................321.37. DeputyDirector......................................................................................................................................331.38. BankruptcyProtection............................................................................................................................331.39. Reverse-PaymentSettlements................................................................................................................331.40. PatentsForHumanity.............................................................................................................................331.41. Section145Repeal.................................................................................................................................331.42. FCCInfringementImmunity....................................................................................................................341.43. CarPartsImmunity.................................................................................................................................341.44. SeedPatentImmunity............................................................................................................................341.45. EndingPre-GATTPatentTerm................................................................................................................341.46. StudyonBusinessMethodPatentQuality.............................................................................................341.47. StudyonSecondaryPatentMarket........................................................................................................351.48. SmallBusinessOutreachandStudy........................................................................................................351.49. StudyonGovernmentOwnedPatents...................................................................................................351.50. StudyonPatentExaminationQuality.....................................................................................................361.51. StudyonDemandLetters.......................................................................................................................361.52. StudyonSmallClaimsPatentCourt.......................................................................................................361.53. Grace-PeriodExpansion..........................................................................................................................361.54. SecretPriorArt.......................................................................................................................................371.55. Patent-RelatedTaxDeduction................................................................................................................371.56. Pre-IssuanceSubmissions.......................................................................................................................371.57. InventorshipChallenges..........................................................................................................................371.58. Inventor’sOathinReissueApplications.................................................................................................371.59. Mandatory18-MonthPublicationofPatentApplications......................................................................38

2. ExecutiveAgencyProposals........................................................................................................382.1. ExecutiveAction1:AttributablePatentOwnership...............................................................................382.2. ExecutiveAction2:ClarityinPatentClaims...........................................................................................382.3. ExecutiveAction3:EmpoweringDownstreamUsers..............................................................................382.4. ExecutiveAction4:ExpandedOutreachandFocusedStudy..................................................................392.5. ExecutiveAction5:CrowdsourcingPriorArt..........................................................................................392.6. ExecutiveAction6:MoreRobustTechnicalTrainingandExpertise.......................................................392.7. ExecutiveAction7:PatentProBonoandProSeAssistance..................................................................392.8. ExecutiveAction8:StrengthenEnforcementofITCExclusionOrders...................................................392.9. ITCDomesticIndustry.............................................................................................................................402.10. FTCInvestigationsofPatentAssertionEntities......................................................................................402.11. FTC/DOJLicensingGuidelines.................................................................................................................402.12. DOJ/USPTOStandardEssentialPatents..................................................................................................412.13. USPTOReportonAIAImplementation...................................................................................................412.14. USPTOInternationalHarmonization.......................................................................................................422.15. USPTOPost-GrantRulemaking...............................................................................................................422.16. OIGReportonUSPTOExaminerTimeandAttendance..........................................................................422.17. GAOReportonPatentExaminationQuality...........................................................................................432.18. GAOStudyonNon-PracticingEntities....................................................................................................442.19. SBAReportonFirst-to-File......................................................................................................................44

3. JudicialDevelopments................................................................................................................443.1. Samsungv.AppleDesignPatents...........................................................................................................443.2. SCAHygieneLachesDefense..................................................................................................................453.3. LifeTechnologiesSingle-ComponentSupply..........................................................................................453.1. TCHeartlandVenue................................................................................................................................453.1. AquaProductsBurdenofProofforClaimAmendments........................................................................45

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3.2. Helsinnv.TevaSecretCommercialization..............................................................................................464. StateLawDevelopments............................................................................................................46

4.1. StateLegislation......................................................................................................................................464.1.1. Alabama.......................................................................................................................................................464.1.2. Arizona.........................................................................................................................................................464.1.3. California......................................................................................................................................................474.1.4. Colorado......................................................................................................................................................474.1.5. Connecticut..................................................................................................................................................474.1.6. Florida..........................................................................................................................................................474.1.7. Georgia........................................................................................................................................................474.1.8. Idaho............................................................................................................................................................474.1.9. Illinois...........................................................................................................................................................474.1.10. Indiana.........................................................................................................................................................484.1.11. Iowa..............................................................................................................................................................484.1.12. Kansas..........................................................................................................................................................484.1.13. Kentucky.......................................................................................................................................................484.1.14. Louisiana......................................................................................................................................................484.1.15. Maine...........................................................................................................................................................484.1.16. Maryland......................................................................................................................................................484.1.17. Massachusetts..............................................................................................................................................494.1.18. Michigan.......................................................................................................................................................494.1.19. Minnesota....................................................................................................................................................494.1.20. Mississippi....................................................................................................................................................494.1.21. Missouri........................................................................................................................................................494.1.22. Montana.......................................................................................................................................................494.1.23. Nebraska......................................................................................................................................................504.1.24. NewHampshire............................................................................................................................................504.1.25. NewJersey...................................................................................................................................................504.1.26. NorthCarolina..............................................................................................................................................504.1.27. NorthDakota................................................................................................................................................504.1.28. Ohio..............................................................................................................................................................514.1.29. Oklahoma.....................................................................................................................................................514.1.30. Oregon.........................................................................................................................................................514.1.31. Pennsylvania................................................................................................................................................514.1.32. RhodeIsland.................................................................................................................................................514.1.33. SouthCarolina..............................................................................................................................................514.1.34. SouthDakota................................................................................................................................................514.1.35. Tennessee....................................................................................................................................................524.1.36. Texas............................................................................................................................................................524.1.37. Utah..............................................................................................................................................................524.1.38. Vermont.......................................................................................................................................................524.1.39. Virginia.........................................................................................................................................................524.1.40. Washington..................................................................................................................................................534.1.41. Wisconsin.....................................................................................................................................................534.1.42. Wyoming......................................................................................................................................................53

4.2. StateExecutiveActions...........................................................................................................................534.2.1. Minnesota....................................................................................................................................................534.2.2. Nebraska......................................................................................................................................................544.2.3. NewYork......................................................................................................................................................54

ABOUTTHEAUTHOR..........................................................................................................................56DISCLAIMER.......................................................................................................................................56ACKNOWLEDGMENT..........................................................................................................................56COPYRIGHTNOTICE...........................................................................................................................56

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1 . Congressional Proposals

1.1. Loser-Pays Fee-Shifting U.S.patent litigationhas followedthe“AmericanRule”underwhicheachparty toa litigationpays itsownlegalfeesandcosts,regardlesswhetherthepartywinsorlosesthelitigation.Anexceptionexistsinthe Patent Act that allows fees and costs to be shifted to the nonprevailing party in patent casesdeemed“exceptional”under35U.S.C.§285.

TheWhiteHouse’s June2013“factsheet”containsa“legislativerecommendation”to“[p]ermitmorediscretion inawarding feesto theprevailingparties inpatentcases, [by]providingdistrictcourtswithmorediscretiontoawardattorney’sfeesunder35USC285asasanctionforabusivecourtfilings(similartothelegalstandardthatappliesincopyrightinfringementcases).”

InApril2014,theSupremeCourt,inOctaneFitness,LLCv.ICONHealth&Fitness,Inc.,134S.Ct.1749,1751(2014),reversedtheFederalCircuit’snarrowinterpretationof§285bygivingdistrictcourtsmorediscretiontoawardfees,explainingthat“inthecomparablecontextoftheCopyrightAct,[t]hereisnoprecise rule or formula for making these determinations, but instead equitable discretion should beexercised‘in lightoftheconsiderationswehaveidentified.”(quotingFogertyv.Fantasy, Inc.,510U.S.517,534 (1994)) (internalquotationsomitted) (considering factors suchas “frivolousness,motivation,objective unreasonableness (both in the factual and legal components of the case) and the need inparticularcircumstancestoadvanceconsiderationsofcompensationanddeterrence”).

InJuly2015,Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)wasreportedoutoftheHouseJudiciaryCommittee. H.R. 9 contains a fee-shifting provision that wouldmake fee-shifting the default rule inpatentcases,with twoexceptions. First, feeswouldnotbeshifted if thepositionandconductof thenonprevailing party were reasonably justified in law and fact. Second, fees would not be shifted ifspecial circumstances (suchassevereeconomichardship toanamed inventor)wouldmakeanawardunjust.

In September 2015, Sen. Grassley (R-IA)’s S.1137 (“PATENT Act”) was reported out of the SenateJudiciaryCommittee. S.1137alsocontainsafee-shiftingproposalbutrequirestheprevailingpartytofileamotionforattorneysfeesandplacestheburdenofproofontheprevailingpartytodemonstratethat it is entitled to the fees because the position of the non-prevailing party was not objectivelyreasonable in lawor factor if theconductof thenon-prevailingpartywasnotobjectivelyreasonable.An exception is made if “special circumstances . . . would make an award unjust,” such as undueeconomichardshiptoanamedinventororaninstitutionofhighereducation.

Acomparisonofthefee-shiftingprovisionsofH.R.9andS.1137isshownbelow.

Goodlatte–H.R.9[asreported] Grassley–S.1137[asreported]

“Thecourtshallaward,toaprevailingparty,reasonablefees and other expenses incurred by that party inconnectionwithacivilactioninwhichanypartyassertsa claim for relief arising under any Act of Congress

“In connection with a civil action in which any partyasserts a claim for relief arising under any Act ofCongress relating to patents, upon motion by aprevailingparty,thecourtshalldeterminewhetherthe

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relating to patents, unless the court finds that theposition and conduct of the nonprevailing party orpartieswerereasonablyjustifiedinlawandfactorthatspecial circumstances (such as severe economichardshiptoanamedinventor)makeanawardunjust.”

position of the non-prevailing party was objectivelyreasonableinlawandfact,andwhethertheconductofthe non-prevailing partywas objectively reasonable. Ifthe court finds that theposition of the non-prevailingpartywas not objectively reasonable in law or fact orthat the conduct of the non-prevailing party was notobjectively reasonable, the court shall awardreasonableattorney fees to theprevailingpartyunlessspecial circumstances, such as undue economichardshiptoanamedinventororaninstitutionofhighereducation (as defined in section 101(a) of the HigherEducationActof1965(20U.S.C.1001(a))),wouldmakean award unjust. The prevailing party shall bear theburden of demonstrating that the prevailing party isentitledtoanaward.”

Makes fees recoverable against an interested joinedparty if the nonprevailing party is unable to pay theawardunderthissection.

Makes fees recoverable against an interested joinedparty if the nonprevailing party is unable to pay theawardunderthissection.

A party cannot escape a fee award by unilaterallyseekingtodismisstheactionwithouttheconsentoftheother party and extending to such other party acovenantnottosueforinfringement.

A party cannot escape a fee award by unilaterallyseekingtodismisstheactionwithouttheconsentoftheother party and extending to such other party acovenantnottosueforinfringement.

[Nosuchprovision] Exemptsanycivilactionthat includesaclaimfor reliefarising under 35 U.S.C. §271(e). In a civil action thatincludes a claim for relief arising under §271(e), thecourt may in exceptional cases award reasonableattorneyfeestotheprevailingparty.

1.2. Joinder of Interested Parties Rep.Goodlatte’sH.R.9(InnovationAct)(asreported)providesforthejoinderofinterestedpartiesinapatentsuitinwhichfeesandotherexpenseshavebeenawardedundersection285toaprevailingpartydefendingagainstanallegationofpatentinfringement. Ifthenonprevailingpartyisunabletopaytheaward of fees and expenses, then the court shall grant a motion by the prevailing party to join an“interested party” to the suit. The prevailing partymust show that the nonprevailing party has “nosubstantialinterestinthesubjectmatteratissueotherthanassertingsuchpatentclaiminlitigation.”

Sen. Grassley (R-IA)’s S.1137 (“PATENT Act”) (as reported) provides that a party defending against aclaimof infringementmay file a statement that suchpartyholds a good faithbelief that theprimarybusiness of the party alleging infringement is the assertion of patents or the licensing resultingtherefrom.Thepartyalleginginfringementmust,within45daysofthestatement,establishandcertifythatitwillhavesufficientfundstosatisfyanawardoffeesifassessed,ordemonstratethatitsprimarybusiness is not the assertion and enforcement of patents or licensing therefrom, or identify any“interestedparties,”orstatethatithasnosuchinterestedparties.

AcomparisonofthejoinderprovisionsofH.R.9andS.1137isshownbelow.

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Goodlatte–H.R.9[reported] Grassley–S.1137[reported]

Courtshall joinan“interestedparty”upondefendant’smotion if the prevailing party shows that thenonprevailing party has “no substantial interest in thesubjectmatteratissueotherthanassertingsuchpatentclaiminlitigation.”A“substantialinterest”includes(A)inventing the subject matter or (B) commerciallypracticing or implementing, or making substantialpreparations directed particularly to commerciallypracticingor implementing,orengaging inR&D in, thefieldofthesubjectmatter.

Apartydefendingagainstaclaimof infringementmayfile, not later than 14 days before a schedulingconferenceorschedulingorderisdue,astatementthatsuch party holds a good faith belief that the primarybusiness of the party alleging infringement is theassertion of patents or the licensing resultingtherefrom.

Defines “interestedparty” as aperson, other than thepartyalleging infringement, that—(A) is anassigneeofthepatent,(B)hasaright,includingacontingentright,toenforceorsublicensethepatent,or(C)hasa“directfinancial interest” in the patent, including the right toany part of an award of damages or any part oflicensingrevenue.

Defines “interested party” as a person who has asubstantial financial interest related to the proceedsfrom any settlement, license, or damages awardresultingfromtheenforcementofthepatent.

Excludes from “direct financial interest” category—(i) an employee of the party alleging infringement,(I) whose sole principal source of income oremployment is employment with the party alleginginfringement,or(II)whosesolefinancialinterestinthepatent is a salary or hourly wage paid by the partyalleginginfringement;

(ii) an attorney or law firm providing legalrepresentationinthecivilactionifthesolebasisforthefinancial interest of the attorney or law firm in thepatent or patents at issue arises from the attorney orlaw firm’s receipt of compensation reasonably relatedtotheprovisionofthelegalrepresentation;or

(iii)apersonwhosesolefinancialinterestinthepatentorpatentsatissueisownershipofanequityinterestinthepartyalleginginfringement,unlesssuchpersonalsohas the right or ability to influence, direct, or controlthecivilaction.

Excludesfrom“interestedparty”definition—

(B) attorneyor law firmproviding legal representationintheactionifthesolebasisforthefinancialinterestofthe attorney or law firm in the outcomeof the actionarises from the attorney or law firm’s receipt ofcompensation reasonably related to the provision ofthelegalrepresentation;

(C) a person who has assigned all right, title, andinterest in a patent, except for passive receipt ofincome, to an institution of higher education, or whohas a right to receive any portion of such passiveincome;

(D)apersonwhosefinancial interestisbasedsolelyonan equity or security interest established when thepartyalleging infringement’sprimarybusinesswasnotthe assertion and enforcement of patents or thelicensingresultingtherefrom;

(E) a depository institution as defined in section19(b)(1)(A) of the Federal Reserve Act (12 U.S.C.461(b)(1)(A)) if the sole basis for the financial interestarisesfromaloanorotherdebtobligation.

Court may deny motion to join if—(i) the interestedparty isnotsubjecttoserviceofprocess,or(ii) joinderwould deprive the court of subjectmatter jurisdictionormakevenueimproper.

Courtmay exempt a party identified as an interestedparty from the applicability of this subsection “as theinterestofjusticerequires”.

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Court shall deny motion to join if—(i) the interestedpartydidnot timely receive the requirednotice;or (ii)within30daysafterreceivingthenoticetheinterestedpartyrenounces,inwritingandwithnoticetothecourtand theparties to the action, anyownership, right, ordirectfinancial interestthattheinterestedpartyhasinthepatentorpatentsatissue.

Any recipient of a notice may submit a statement ofrenunciation of interest in a binding document withnotice to the court and parties in the action not laterthan90daysafterreceiptofthenotice.Thestatementshall be required to renounce only such interest aswouldqualifytherecipientasaninterestedparty.

Joinder shall not apply to a technology transferorganizationwhoseprimarypurpose is to facilitatethecommercializationoftechnologiesdevelopedbyoneormore institutions of higher education (as defined insection101(a)of theHigherEducationActof1965(20U.S.C.1001(a)))ifsuchtechnologytransferorganizationis alleging infringement on behalf of an entity thatwouldnotbesubjecttothissubsection.

Any institution of higher education (as defined insection101(a)of theHigherEducationActof1965(20U.S.C. 1001(a)) or under equivalent laws in foreignjurisdictions), or a non-profit technology transferorganizationwhoseprimarypurpose is to facilitatethecommercialization of technologies developed by 1 ormore institutions of higher education, may exemptitselffromtheapplicabilityofthissubsectionbyfilingacertificationthat itqualifiesfortheexceptionprovidedfor in this subparagraph with the court and providingnoticetotheparties.

[Nosuchprovision] Exemptsanycivilactionthat includesaclaimfor reliefarisingunder35U.S.C.§271(e).

1.3. Offers of Judgment NeitherRep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported)norSen.Grassley(R-IA)’sS.1137(“PATENTAct”) (asreported)containsanoffer-of-judgmentprovisiontoencouragetheacceptanceofsettlementoffers.SuchaprovisionwasoriginallyincludedinRep.Goodlatte’sfirstdiscussiondraftbillreleasedinMay2013.Theproposalwouldshiftfeesagainstapartywhorejectsasettlementofferandlater fails to improve on the offer at trial. Specifically, if the judgment finally rendered is not “morefavorable”totheoffereethanthelastsettlementofferreceived,thentheoffereewouldberequiredtopaytheofferor’s“costsandexpenses,includingattorney’sfees”incurredbytheofferorfromthetimeofthelastoffer.ThisproposalissimilartoFederalRuleofCivilProcedure68,whichappliestoallfederalcivil litigation (notonlypatentcases),butdiffers in thatRule68doesnot include“attorney’s fees”aspartofpayablecosts.Asimilaroffer-of-judgmentprovisionwascontainedinabillthatRep.Goodlatteco-sponsoredin1995(H.R.988,“AttorneyAccountabilityActof1995”).

1.4. Real Party-in-Interest Whensuingincourt.Currently,underFederalRuleofCivilProcedure7.1,allpartiesinacivillitigationmust identify “any parent corporation and any publicly held corporation owning 10% ormore of itsstock.”

• Rep. Goodlatte’s H.R. 9 (“Innovation Act”) (as reported) would require a patent plaintiff toidentify: (A) the assigneeof thepatent; (B) any entitywith a right to sublicense or enforce thepatent; (C) any entity, other than the plaintiff, that the plaintiff knows to have a “financialinterest” in the patent or plaintiff (defined as having at least 5% ownership or control of theplaintiff,oranyrighttoreceiveproceedsfromtheaction);(D)anyultimateparententity(defined

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in16CFR801.1asanentitywhich isnotcontrolledbyanyotherentity); (E)aclearandconcisedescriptionoftheprincipalbusinessofthepartyalleginginfringement;(F)alistofeachcomplaintasserting infringementofthepatent;and(G)whetherathepatenthasbeendeclaredstandard-essential or the US Government or foreign government has imposed specific licensingrequirementswith respect to suchpatent. Failure toupdate this informationwithin90daysofany change would result in the inability to receive attorneys fees under §285 and enhanceddamages under §284 for patent infringement occurring during that period, and the defendantwouldbeentitledtoattorney’sfeesincurredtodiscoverthemissinginformation.

• Sen. Grassley’s S. 1137 (“PATENT Act”) (as reported) largely tracks the court disclosurerequirementsinH.R.9,describedabove.

Before the Patent Office. Except in limited circumstances, there is currently no requirement in thePatentOfficetodiscloseapatentowner’s“realparty-in-interest.”

• Rep.Goodlatte’sH.R.9(“InnovationAct”)(asreported)wouldimposeonanypatentplaintiffwhoasserted a patent in court an ongoing duty to continually update that information, describedabove,tothePatentOfficeforthelifeofthepatent.

• Sen.Grassley’sS.1137(“PATENTAct”)(asreported)containsarequirementforallpatentownerstodiscloseownershipinformationtothePatentOffice,evenifthepatenthadnotbeenassertedincourt. Specifically,S.1137wouldrequireallpatentownerstorecord,inthePatentOffice,anassignmentofallsubstantialrightsinanissuedpatent,includingthenameoftheassigneeandtheassignee’s “ultimate parent entity” (as defined in 16 CFR 801.1(a)(3)) at each of the followingtimes:(1)notlaterthanthedatethepatentisissued,and(2)within3monthsofanysubsequentassignmentthatchangestheultimateparententity.Failuretodosowouldresultintheinabilitytoreceiveattorneysfeesunder§285andenhanceddamagesunder§284forpatentinfringementoccurringduringthatperiod,andthedefendantwouldbeentitledtoattorney’sfees incurredtodiscoverthemissinginformation.

• Rep. Deutch (D-FL)’s H.R. 2370 (“End Anonymous Patents Act”) (introduced) would requiredisclosuretothePatentOfficeoftheidentityoftheownerandanyrealpartyininterest,(1)upontheissuanceofthepatent,(2)uponallpaymentsofmaintenancefees,and(3)within90daysafterthesale,grant,orconveyanceofthepatent,application,oranyinteresttherein.Thebilldefinesa“realpartyininterest”asanyentitythathastherighttoenforcethepatent,suchentity’sultimateparent,andanyentitywithacontrollinginterestintheenforcementofthepatent.Failuretodosowouldresultintheinabilitytocollectanydamagesduringtheperiodofnoncompliance.

Whensendingdemandletters.Nofederalstatutecurrentlyrequiresapersontoidentifyits“realparty-in-interest”whensendingdemand letters topotentialpatent infringers. TheWhiteHouse June2013“factsheet”saysitsupportslegislationthatwouldrequirepartieswhosenddemandletterstoidentifytheirrealparty-in-interest.

• Rep.Goodlatte’sH.R.9(“InnovationAct”),asreported,wouldrequireanyonesendingademandlettertoidentify,amongotherthings,“theultimateparententityoftheclaimant”.Failuretodoso would result in the inability to rely on the letter as evidence of pre-suit notification forpurposesofwillfulinfringement.

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• Sen. Grassley’s S. 1137 (“PATENT Act”), as reported, would require anyone sending a demandletterto identify,amongotherthings,“theidentityofanypersonwiththerighttoenforceeachpatent.”Failuretodosowouldresultintheinabilitytorelyontheletterasevidenceofpre-suitnotificationforpurposesofwillfulinfringement.

1.5. Stay of Customer Suits TheWhiteHouse’sJune2013“factsheet”supportsgivingcourtstheabilitytostayaninfringementsuitagainstaconsumerwhenasuithasalsobeenbroughtagainstavendor,retailer,ormanufacturer.

BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)containacustomer-suitprovision,withslightdifferencesbetweenthetwobills. Thedefinitionofa“coveredproduct” inH.R.9 includesa“material”and“apparatus”,whichareabsentfromthedefinitioninS.1137.Moreover,S.1137expresslydefinestheterms“use”and“sale”consistentwithinfringingusesandsalesunder§271,whereasH.R.9doesnot.Thedeadlineforfilingamotiontostay,followingthedateofserviceofaninfringementcomplaint,islongerinH.R.9(providingfor120days)thaninS.1137(providingfor90days).

Acomparisonofthecustomer-stayprovisionsinH.R.9andS.1137isshownbelow.


“Coveredcustomer”meansaretailerorenduserthatisaccusedofinfringingapatentorpatentsindisputebasedon—(A)thesale,orofferforsale,ofacoveredproductorcoveredprocesswithoutmaterialmodificationoftheproductorprocessinamannerthatisallegedtoinfringeapatentorpatentsindispute;or(B)theusebysuchretailer,theretailer’sendusercustomer,oranenduserofacoveredproductorcoveredprocesswithoutmaterialmodificationoftheproductorprocessinamannerthatisallegedtoinfringeapatentorpatentsindispute.

“Coveredcustomer”meansaretailerorenduserthatisaccusedofinfringingapatentorpatentsindisputebasedon—(A)thesale,orofferforsale,ofacoveredproductorcoveredprocesswithoutmaterialmodificationoftheproductorprocessinamannerthatisallegedtoinfringeapatentorpatentsindispute;or(B)theusebysuchretailer,theretailer’sendusercustomer,oranenduserofacoveredproductorcoveredprocesswithoutmaterialmodificationoftheproductorprocessinamannerthatisallegedtoinfringeapatentorpatentsindispute.

“Covered manufacturer” means a person thatmanufacturesorsupplies,orcausesthemanufactureorsupply of, a covered product or covered process, or arelevantpartthereof.

“Covered manufacturer” means a person whomanufacturesorsupplies,orcausesthemanufactureorsupply of, a covered product or covered process, or arelevantpartthereof.

“Covered process” means a process, method, or arelevantpartthereof,thatisallegedtoinfringeapatentor patents in disputewhere such process,method, orrelevantpart thereof is implementedbyanapparatus,material, system, software, or other instrumentalitythatisprovidedbythecoveredmanufacturer.

“Covered process” means a process, method, or arelevant part thereof, that is alleged to infringe thepatent or patents in dispute where such process,method,orrelevantpartthereofisimplementedbyanapparatus, material, system, software or otherinstrumentality that is provided by the coveredmanufacturer.

“Coveredproduct”meansaproduct,system,service,component,material,orapparatus,orrelevantpart

“Coveredproduct”meansacomponent,product,system,service,orarelevantpartthereof,that—

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thereof,that—(A)isallegedtoinfringeapatentorpatentsindispute;or(B)implementsaprocessallegedtoinfringethepatentorpatentsindispute.

(A)isallegedtoinfringethepatentorpatentsindispute;or(B)implementsaprocessallegedtoinfringethepatentorpatentsindispute.

“Enduser”includesanaffiliateofanenduser,butdoesnot includeanentity thatmanufacturersorcausesthemanufactureofa coveredproductor coveredprocess,orarelevantpartthereof.

“Enduser”shallincludeanaffiliateofsuchanenduser,but shall not include an entity that manufactures orcauses the manufacture of a covered product orcoveredprocessorarelevantpartthereof.

“Retailer” means an entity that generates revenuespredominately through the sale to the public ofconsumer goods or services, or an affiliate of suchentity, but does not include an entity thatmanufacturersorcausesthemanufacturerofacoveredproductorcoveredprocess,orarelevantpartthereof.

“Retailer”meansanentity thatgenerates its revenuespredominately through the sale to the public ofconsumer goods or services, or an affiliate of suchentity,butshallnotincludeanentitythatmanufacturesor causes the manufacture of a covered product orcoveredprocessorarelevantpartthereof;

[Nosuchprovision] “Use” and “sale” mean the use and the sale,respectively, within the meanings given those termsundersection271.

StayofActionAgainst Customer.—Exceptasprovidedin subsection (d), in any civil action in which a partyasserts a claim for relief arising under any Act ofCongress relating to patents, the court shall grant amotiontostayatleasttheportionoftheactionagainstacoveredcustomerrelatedtoinfringementofapatentinvolving a covered product or covered process if thefollowingrequirementsaremet:

(1)PartytotheAction.—Thecoveredmanufacturerisapartytotheactionortoaseparateaction(inwhichapartyassertsaclaimforreliefarisingunderanyActofCongressrelatingtopatents)involvingthesamepatentor patents related to the same covered product orcoveredprocess.

(2) Agreement to be Bound By IssuesDetermined.—The covered customer agrees to beboundastoissuesdeterminedinanactiondescribedinparagraph (1) without a full and fair opportunity toseparately litigate any such issue,butonly as to thoseissuesforwhichallotherelementsofthecommonlawdoctrineofissuepreclusionaremet.

(3) Deadline to File Motion.—The motion is filedafter the firstpleading in theactionbutnot later thanthelaterof—

(A) the 120th day after the date on which thefirst pleading or paper in the action is served thatspecificallyidentifiesthecoveredproductorcoveredprocessasabasisforthecoveredcustomer’sallegedinfringement of the patent and that specifically

Motion For Stay.—In a civil action in which a partyasserts a claim for relief arising under any Act ofCongressrelatingtopatents (otherthananactionthatincludesacauseofactiondescribed insection271(e)),the court shall grant a motion to stay at least theportion of the action against a covered customer thatrelatesto infringementofapatent involvingacoveredproductorcoveredprocessif—

(1) the covered manufacturer is a party to theaction or a separate action in a Federal court of theUnited States involving the same patent or patentsrelating to the same covered product or coveredprocess;

(2)thecoveredcustomeragreestobeboundasto

issues determined in an action described in paragraph(1) without a full and fair opportunity to separatelylitigate any such issue, but only as to those issues forwhichallotherelementsofthecommonlawdoctrineofissuepreclusionaremet;and

(3)themotionisfiledafterthefirstpleadingintheactionbutnotlaterthanthelaterof—

(A)90daysafterserviceof the firstpleadingorpaper in the action that specifically identifies thecovered product or covered process as a basis forthe alleged infringement of the patent by thecoveredcustomer,andspecificallyidentifieshowthecovered product or covered process is alleged toinfringethepatent;or

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identifies how the covered product or coveredprocessisallegedtoinfringethepatent;or

(B)thedateonwhichthefirstschedulingorderinthecaseisentered.(4) Manufacturer Consent In Certain Cases.—In a

caseinwhichthecoveredmanufacturerhasbeenmadea party to the action on motion by the coveredcustomer, the covered manufacturer and the coveredcustomerconsentinwritingtothestay.

(B)thedateonwhichthefirstschedulingorderinthecaseisentered.(c)ManufacturerConsent InCertainCases.—If the

covered manufacturer has been made a party to theaction on motion by the covered customer, then amotionundersubsection(b)mayonlybegrantedifthecoveredmanufacturerandthecoveredcustomeragreeinwritingtothestay.

LiftOfStay.—(1) In General.—A stay entered under this section

may be lifted upon grant of a motion based on ashowingthat—

(A) the action involving the coveredmanufacturer will not resolve a major issue in thesuitagainstthecoveredcustomer(suchasacoveredproductorcoveredprocess identified inthemotionto lift the stay isnotamaterialpartof theclaimedinvention or inventions in the patent or patents indispute);or

(B)thestayunreasonablyprejudicesorwouldbemanifestlyunjusttothepartyseekingtoliftthestay.(2)SeparateManufacturerActionInvolved.—Inthe

caseofastayenteredunder thissectionbasedontheparticipationofthecoveredmanufacturerinaseparateaction described in subsection (b)(1), a motion underparagraph (1)mayonlybegranted if thecourt insuchseparate action determines that the showing requiredunderparagraph(1)hasbeenmade.

LiftOfStay.—(1) In General.—A stay entered under this section

may be lifted upon grant of a motion based on ashowingthat—

(A) the action involving the coveredmanufacturerwillnotresolvemajorissuesinthesuitagainst the covered customer, such as that acoveredproductorcoveredprocessidentifiedinthemotion to lift the stay is not amaterial part of theclaimed invention or inventions in the patent orpatentsindispute;or

(B)thestayunreasonablyprejudicesorwouldbemanifestlyunjusttothepartyseekingtoliftthestay.(2)SeparateActions.—Inthecaseofastayentered

under this section based on the participation of thecoveredmanufacturerinaseparateactiondescribedinsubsection (b)(1), a motion under paragraph (1) mayonly be granted if the court in such separate actiondeterminesthattheshowingrequiredunderparagraph(1)hasbeenmade.

Waiver Of Estoppel Effect.—The court may, uponmotion, determine that a consent judgment or anunappealed final order shall not be binding on thecovered customerwith respect to one ormore of theissuesthatgaverisetothestaybasedonashowingthatsuchconsentjudgmentorunappealedfinalorderwouldunreasonably prejudice or bemanifestly unjust to thecovered customer in light of the circumstances of thecase if, following the grant of amotion to stay underthis section, the covered manufacturer described insubsection(b)(1)—

(1) obtains or consents to entry of a consentjudgment relating to such issue that gave rise to thestay;or

(2) fails to prosecute to a final, non-appealablejudgmentsuchissuethatgaverisetothestay.

WaiverOfEstoppelEffect.—If,followingthegrantofamotion to stay under this section, the coveredmanufacturer in an action described in subsection(b)(1)—

(1) obtains or consents to entry of a consentjudgmentinvolvingoneormoreoftheissuesthatgaverisetothestay;or

(2) fails to prosecute to a final, non-appealablejudgment a final decision as to one or more of theissuesthatgaverisetothestay,the court may, upon motion, determine that suchconsentjudgmentorunappealedfinaldecisionshallnotbebindingonthecoveredcustomerwithrespecttooneormoreoftheissuesthatgaverisetothestaybasedona showing that such an outcome would unreasonablyprejudice or be manifestly unjust to the coveredcustomerinlightofthecircumstancesofthecase.

Exemption.—This section shall not apply to an actionthatincludesacauseofactiondescribedundersection

Exempts “an action that includes a cause of actiondescribedinsection271(e)”

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271(e)(2).

Rule of Construction.—Nothing in this section shallbeconstrued to limit the ability of a court to grant anystay, expand any stay granted under this section, orgrant anymotion to intervene, if otherwise permittedbylaw.

RuleOfConstruction.—Nothing inthissectionshallbeconstrued to limit the ability of a court to grant anystay,expandanystaygrantedpursuanttothissection,or grant any motion to intervene, if otherwisepermittedbylaw.

1.6. Stay of Discovery BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) contain a provision that would stay discovery pending a preliminarymotion.ThetypesofpreliminarymotionsthatwouldtriggerastayinH.R.9are:(A)motiontoseveraclaimordropapartyformisjoinderunderRule21oftheFederalRulesofCivilProcedure;(B)motiontotransfertheactionundersection1404(a)oftitle28;(C)motiontotransferordismisstheactionundersection 1406(a) of title 28; or (D) motion to dismiss the action pursuant to Federal Rule of CivilProcedure 12(b). By contrast, the preliminarymotions subject to stay in S. 1137 are: (A)motion todismiss; (B)motion to transfer venue; and (C)motion to sever accused infringers. Thus, amotion tosevera“claim”(asopposedtoa“party”)wouldbesubjecttoastayunderH.R.9butnotunderS.1137.Moreover, the timing of the preliminary motions that trigger a stay differs in the two bills: H.R. 9requiresthemotiontobefiled“within90daysafterserviceofthecomplaint”;whereasS.1137requiresthemotiontobefiled“priortothefirstresponsivepleading.”Bothbillscontainanexemptionforsuitsbroughtunder§271(e).

1.7. Pleading Infringement in More Detail AsofDecember1,2015,theFederalRulesofCivilProcedurenolongercontaina“form”complaintforpleading patent infringement (formerly known as Form 18). The U.S. Judicial Conference eliminatedForm18 as part of a rulemaking process that began several years ago. Although Form18 no longerexists,severalbillsinCongresscontinuetocallfortheeliminationofForm18:Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported),Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported),andSen. Coons (D-DE)’s S. 631 (“STRONG Patents Act of 2015”) (introduced) would each require theSupremeCourttoeliminateForm18.

BeyondeliminatingForm18,bothH.R.9andS.1137would imposeadditionalpleadingrequirementsforpatentcomplaints,asshowninthechartbelow.


Appliestoanycivilactioninwhichapartyassertsaclaim for relief arising under any Act of Congressrelatingtopatents.

Appliestoanycivilactioninwhichapartyassertsaclaim for relief arising under any Act of Congressrelatingtopatents.

Does not apply to any civil action that includes aclaimforreliefarisingunder35U.S.C.§271(e)(2).

Does not apply to a civil action that includes aclaimforreliefarisingundersection271(e).

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(1) Requires an identification of each patentallegedlyinfringed.

(1) Requires an identification of each patentallegedlyinfringed.

(2) Requires an identification of all claimsnecessary to produce the identification (underparagraph (3)) of each process, machine,manufacture, or composition of matter (referredto in this section as an ‘accused instrumentality’)thatisallegedtoinfringeanyclaimofeachpatentthatisidentifiedunderparagraph(1).

(2)Requiresanidentificationofeachclaimofeachpatent identified under paragraph (1) that isallegedlyinfringed.

(3) Requires an identification of each accusedinstrumentalityallegedtoinfringetheclaim.

(3) Requires an identification of each accusedprocess,machine,manufacture,orcompositionofmatter (referred to in this section as an ‘accusedinstrumentality’)allegedtoinfringetheclaim.

(4) Requires an identificationwith particularity, ifknown,of—

(A) the name or model number (or arepresentative model number) of each accusedinstrumentality;or

(B) if there is no name or model number, adescriptionofeachaccusedinstrumentality.

(4) Requires an identificationwith particularity, ifknown,of—

(A) the name or model number (or arepresentative model number) of each accusedinstrumentality;or

(B) if there is no name or model number, adescriptionofeachaccusedinstrumentality.

(5)Requiresaclearandconcisestatementof—(A) where each element of each claim

identifiedunderparagraph(2) is foundwithintheaccusedinstrumentality;and

(B) with detailed specificity, how eachlimitationofeachclaimidentifiedunderparagraph(2)ismetbytheaccusedinstrumentality.

(5)Requiresadescriptionoftheelementsthereofthat are alleged to be infringed by the accusedinstrumentality and how the accusedinstrumentality is alleged to infringe thoseelements.

(6)Requiresadescriptionoftheactsoftheallegedindirectinfringerthatcontributetoorareinducingthedirectinfringement.

(6)Requiresadescriptionoftheactsoftheallegedinfringer that are alleged to contribute to orinducethedirectinfringement.

(7) Requires description of the authority of theparty alleging infringement to assert each patentidentifiedunderparagraph(1)andofthegroundsforthecourt’sjurisdiction.

[Nosuchprovision]

[Nosuchprovision] Dismissal For Failure To Meet PleadingRequirements.—Thecourtshall,onthemotionofany party, dismiss any count or counts of thecomplaint,counterclaim,orcross-claimforpatentinfringementiftherequirementsofparagraphs(1)through (6) of subsection (a) are not met withrespect to such count or counts. The fact that a

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party pleads in accordance with subsection (c)shall not be a basis for dismissal if the partynonetheless states a plausible claim for reliefsufficient under the Federal Rules of CivilProcedure.

Information Not Readily Accessible.—Ifinformation required to be disclosed undersubsection (a) is not readily accessible to a partyafter an inquiry reasonable under thecircumstances, as required by Rule 11 of theFederal Rules of Civil Procedure, that informationmayinsteadbegenerallydescribed,alongwithanexplanation of why such undisclosed informationwasnotreadilyaccessible,andofanyeffortsmadebysuchpartytoaccesssuchinformation.

Information Not Accessible.—If some subset ofinformationrequiredtocomplywithsubsection(a)is not accessible to a party after an inquiryreasonable under the circumstances, consistentwith rule 11 of the Federal Rules of CivilProcedure, an allegation requiring thatinformation may be based upon a generaldescription of that information, along with astatement as to why the information is notaccessible.

AmendmentofPleadings.—Nothinginthissectionshall be construed to affect a party’s ability toamendpleadingsasspecified in theFederalRulesofCivilProcedure.Amendmentspermittedbythecourtaresubjecttothepleadingrequirementssetforthinthissection.

Amendment of Pleadings.—Nothing in thisprovision shall be construed to affect a party'sleave to amend pleadings as specified in theFederal Rules of Civil Procedure. Amendmentspermittedbythecourtaresubjecttothepleadingrequirementssetforthinthissection.

Confidential Information.—A party required todisclose information described under subsection(a)mayfile,underseal,informationbelievedtobeconfidential, with a motion setting forth goodcauseforsuchsealing.Ifsuchmotionisdeniedbythecourt, thepartymayseek to fileanamendedcomplaint.

Confidential Information.—A party required todisclose information described under subsection(a)mayfileinformationbelievedtobeconfidentialunderseal,withamotionsettingforthgoodcausefor such sealing. If such motion is denied by thecourt, the party may seek to file an amendedpleading.

1.8. FTC Demand Letter Enforcement ThreebillspendinginCongresswoulddefinetheactofsendingbad-faithdemandlettersasan“unfairordeceptiveactorpractice”undertheFederalTradeCommissionAct.

BothSen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)andRep.Burgess(R-TX)’sH.R. 2045 (“TargetingRogueandOpaque LettersActof 2015”) (introduced)wouldpreemptall statelawsexpressly relating to the transmissionorcontentsofcommunications relating to theassertionofpatentrights,andbothbillswouldempowerstatesattorneysgeneraltobringacivilactiontoenforcethisnewprovisioninfederaldistrictcourtonbehalfofresidentsoftheirstates.

Bycontrast,Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)doesnotexpresslypreemptstatelaws and does not authorize states attorneys general to bring enforcement actions; rather, S. 1137providesforenforcementonlybytheFTC.

AcomparisonoftheFTCdemand-letterprovisionsofS.1137,S.632andH.R.2045isshownbelow.

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Grassley–S.1137[reported]

Coons–S.632[introduced]

Burgess–H.R.2045[introduced]

Applies to thewidespreadsendingof written communicationsrepresenting that the intendedrecipients,oranypersonsaffiliatedwith those recipients, are or maybe infringing,orhaveormayhaveinfringed, a patent and may bearliability or owe compensation toanother.

Appliestoapatternorpracticeofsending written communicationsthat state or represent that therecipients are or may beinfringing, or have or may haveinfringed, the patent and bearliability or owe compensation toanother.

Applies to apatternorpracticeofsending written communicationsthat state or represent that therecipientsareormaybeinfringing,orhaveormayhaveinfringed,thepatent and bear liability or owecompensationtoanother.

Defines “affiliated person” as apersonaffiliatedwiththeintendedrecipient of a writtencommunication.

[Nosuchprovision] [Nosuchprovision]

[Nosuchprovision] Theterm“badfaith”meansthatthesender—(A)madeknowinglyfalseor

knowinglymisleadingstatements,representations,oromissions;(B)madestatements,

representations,oromissionswithrecklessindifferenceastothefalseormisleadingnatureofsuchstatements,representations,oromissions;or(C)madestatements,

representations,oromissionswithawarenessofthehighprobabilityofthestatements,representations,oromissionstodeceiveandthesenderintentionallyavoidedthetruth.

Theterm"badfaith"meansthatthesender—(A)madeknowinglyfalseor

knowinglymisleadingstatements,representations,oromissions;(B)madestatements,

representations,oromissionswithrecklessindifferenceastothefalseormisleadingnatureofsuchstatements,representations,oromissions;or(C)madestatements,

representations,oromissionswithawarenessofthehighprobabilityofthestatements,representations,oromissionstodeceiveandthesenderintentionallyavoidedthetruth.

Requires the FTC to promulgaterules establishing that a writtencommunicationmust contain thepatentnumber,thepatentclaimsallegedly infringed, a descriptionof the manufacturer and modelnumber of each accused productor service, notice that therecipient may have the right tohave the manufacturer defendagainst the infringement, theidentity of the person with theright to enforce (including eachowner, co-owner, assignee,exclusivelicensee,andentitywith

[Nosuchprovision]

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the authority to enforce thepatent, and the ultimate parententity), any FRAND licensingcommitments, any basis for aspecificlicenseamount,andeachPTO proceeding or litigationinvolvingthepatent.

An unfair or deceptive act orpractice within the meaning ofsection5(a)(1)oftheFederalTradeCommission Act (15 U.S.C.45(a)(1)), in connection with thewidespread sending of writtencommunications representing thatthe intended recipients, or anypersons affiliated with thoserecipients, are or may beinfringing, or have or may haveinfringed, a patent and may bearliability or owe compensation toanother, shall be treated as aviolation of a rule defining anunfairordeceptiveactorpracticedescribedundersection18(a)(1)(B)of the Federal Trade CommissionAct(15U.S.C.57a(a)(1)(B))if—

Itshallbeanunfairordeceptiveact or practice within themeaningof section5(a)(1)of theFederalTradeCommissionAct(15U.S.C. 45(a)(1)) for a person, inconnectionwiththeassertionofaUnited States patent, to engageinapatternorpracticeofsendingwritten communications thatstate or represent that therecipients are or may beinfringing, or have or may haveinfringed, the patent and bearliability or owe compensation toanother,if—

It shall be an unfair or deceptiveactorpracticewithinthemeaningof section 5(a)(1) of the FederalTrade Commission Act (15 U.S.C.45(a)(1)) for a person, inconnectionwith theassertionofaUnitedStatespatent, toengage ina pattern or practice of sendingwrittencommunications thatstateorrepresentthattherecipientsareor may be infringing, or have ormayhaveinfringed,thepatentandbearliabilityorowecompensationtoanother,if—

(1)(A)thecommunicationsfalsely—

(i)representthatadministrativeorjudicialreliefhasbeensoughtagainsttherecipientorothers;or(ii)threatenlitigationif

compensationisnotpaid,theinfringementissueisnototherwiseresolved,orthecommunicationisnotrespondedto;and

(B)thereisapatternoffalserepresentationsorthreatsdescribedinsubparagraph(A)havingbeenmadewithoutlitigationorotherreliefthenhavingbeenpursued;

(1)thesenderofthecommunications,inbadfaith,statesorrepresentsinthecommunicationsthat—

(A)thesenderisapersonwiththerighttolicenseorenforcethepatentatthetimethecommunicationsaresent,andthesenderisnotapersonwithsucharight;(B)acivilactionassertinga

claimofinfringementofthepatenthasbeenfiledagainsttherecipient;(C)acivilactionassertinga

claimofinfringementofthepatenthasbeenfiledagainstotherpersons;(D)legalactionfor

infringementofthepatentwillbetakenagainsttherecipient;(E)thesenderisthe

exclusivelicenseeofthepatentassertedinthe

(1)thesenderofthecommunications,inbadfaith,statesorrepresentsinthecommunicationsthat—

(A)thesenderisapersonwiththerighttolicenseorenforcethepatentatthetimethecommunicationsaresent,andthesenderisnotapersonwithsucharight;(B)acivilactionassertinga

claimofinfringementofthepatenthasbeenfiledagainsttherecipient;(C)acivilactionassertinga

claimofinfringementofthepatenthasbeenfiledagainstotherpersons;(D)legalactionfor

infringementofthepatentwillbetakenagainsttherecipient;(E)thesenderistheexclusive

licenseeofthepatentassertedinthecommunications;

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communications;(F)personsotherthanthe

recipientpurchasedalicenseforthepatentassertedinthecommunications;(G)personsotherthanthe

recipientpurchasedalicense,andthesenderdoesnotdisclosethatsuchlicenseisunrelatedtotheallegedinfringementorthepatentassertedinthecommunications;(H)aninvestigationofthe

recipient’sallegedinfringementoccurred;or(I)thesenderoranaffiliate

ofthesenderpreviouslyfiledacivilactionassertingaclaimofinfringementofthepatentbasedontheactivitythatisthesubjectofthewrittencommunicationwhenthesenderknewsuchactivitywasheld,inafinaldetermination,nottoinfringethepatent;[or]

(F)personsotherthantherecipientpurchasedalicenseforthepatentassertedinthecommunications;(G)personsotherthanthe

recipientpurchasedalicense,andthesenderdoesnotdisclosethatsuchlicenseisunrelatedtotheallegedinfringementorthepatentassertedinthecommunications;(H)aninvestigationofthe

recipient’sallegedinfringementoccurred;or(I)thesenderoranaffiliateof

thesenderpreviouslyfiledacivilactionassertingaclaimofinfringementofthepatentbasedontheactivitythatisthesubjectofthewrittencommunicationwhenthesenderknewsuchactivitywasheld,inafinaldetermination,nottoinfringethepatent;[or]

(2)theassertionscontainedinthecommunicationslackareasonablebasisinfactorlaw,because—

(A)thepersonassertingthepatentisnotaperson,ordoesnotrepresentaperson,withthecurrentrighttolicensethepatentto,ortoenforcethepatentagainst,theintendedrecipientsoranyaffiliatedpersons;(B)thecommunicationsseek

compensationonaccountofactivitiesundertakenafterthepatenthasexpired;(C)thecommunicationsseek

compensationforapatentthathasbeenheldtobeinvalidorunenforceableinafinaljudicialoradministrativeproceedingthatisunappealableorforwhichanyopportunityforappealisnolongeravailable;(D)thecommunicationsseek

compensationforactivitiesby

(2)thesenderofthecommunications,inbadfaith,seekscompensationfor—

(A)apatentclaimthathasbeenheldtobeunenforceableduetoinequitableconduct,invalid,orotherwiseunenforceableagainsttherecipient,inafinaldetermination;(B)activitiesundertakenby

therecipientafterexpirationofthepatentassertedinthecommunications;or(C)activityoftherecipient

thatthesenderknewwasauthorized,withrespecttothepatentclaimorclaimsthatarethesubjectofthecommunications,byapersonwiththerighttolicensethepatent;or

(2)thesenderofthecommunications,inbadfaith,seekscompensationfor—

(A)apatentclaimthathasbeenheldtobeunenforceableduetoinequitableconduct,invalid,orotherwiseunenforceableagainsttherecipient,inafinaldetermination;(B)activitiesundertakenby

therecipientafterexpirationofthepatentassertedinthecommunications;(C)activityoftherecipient

thatthesenderknewwasauthorized,withrespecttothepatentclaimorclaimsthatarethesubjectofthecommunications,byapersonwiththerighttolicensethepatent;or

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therecipientthatthesenderknowsdonotinfringethepatentbecausesuchactivitiesareauthorizedbythepatentee;(E)thecommunications

falselyrepresentthataninvestigationoftherecipient’sallegedinfringementhasoccurred;or(F)thecommunications

falselyrepresentthatlitigationhasbeenfiledagainst,oralicensehasbeenpaidby,personssimilarlysituatedtotherecipient;or

(3)thecontentofthewrittencommunicationsislikelytomateriallymisleadareasonablerecipientbecausethecontentfailstoincludefactsreasonablynecessarytoinformtherecipient—

(A)oftheidentityofthepersonassertingarighttolicensethepatentto,orenforcethepatentagainst,theintendedrecipientoranyaffiliatedperson;(B)ofthepatentissuedbythe

UnitedStatesPatentandTrademarkOfficeallegedtohavebeeninfringed;and(C)ifinfringementorthe

needtopaycompensationforalicenseisalleged,ofanidentificationofatleastoneproduct,service,orotheractivityoftherecipientthatisallegedtoinfringetheidentifiedpatentorpatentsand,unlesstheinformationisnotreadilyaccessible,anexplanationofthebasisforsuchallegation.

(3)thesenderofthecommunications,inbadfaith,failstoinclude—

(A)theidentityofthepersonassertingarighttolicensethepatentto,orenforcethepatentagainst,therecipient,includingtheidentityofanyparententityandtheultimateparententityofsuchperson,unlesssuchpersonisapubliccompanyandthenameofthepubliccompanyisidentified;(B)anidentificationofat

leastonepatentissuedbytheUnitedStatesPatentandTrademarkOfficeallegedtohavebeeninfringed;(C)anidentification,tothe

extentreasonableunderthecircumstances,ofatleastoneproduct,service,orotheractivityoftherecipientthatisallegedtoinfringetheidentifiedpatent;(D)adescription,tothe

extentreasonableunderthecircumstances,ofhowtheproduct,service,orotheractivityoftherecipientinfringesanidentifiedpatentandpatentclaim;or(E)anameandcontact

informationforapersontherecipientmaycontactabouttheassertionsorclaimsrelatingtothepatent

(3)thesenderofthecommunications,inbadfaith,failstoinclude—

(A)theidentityofthepersonassertingarighttolicensethepatentto,orenforcethepatentagainst,therecipient,includingtheidentityofanyparententityandtheultimateparententityofsuchperson,unlesssuchpersonisapubliccompanyandthenameofthepubliccompanyisidentified;(B)anidentificationofatleast

onepatentissuedbytheUnitedStatesPatentandTrademarkOfficeallegedtohavebeeninfringed;(C)anidentification,tothe

extentreasonableunderthecircumstances,ofatleastoneproduct,service,orotheractivityoftherecipientthatisallegedtoinfringetheidentifiedpatent;(D)adescription,tothe

extentreasonableunderthecircumstances,ofhowtheproduct,service,orotheractivityoftherecipientinfringesanidentifiedpatentandpatentclaim;or(E)anameandcontact

informationforapersontherecipientmaycontactabouttheassertionsorclaimsrelatingtothepatentcontainedinthe

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containedinthecommunications.

communications.

[Nosuchprovision] Affirmative Defense.—Withrespect to subsection (a), thereshall be an affirmative defensethat statements, representations,or omissions were not made inbad faith (as defined insubparagraphs (B) and (C) ofsection 201(1)) if the sender candemonstrate that suchstatements, representations, oromissionsweremistakesmadeingood faith. Evidence that thesender in the usual course ofbusiness sends writtencommunications that do notviolate theprovisionsof this titleshallbesufficienttodemonstrategood faith. Good faith may alsobe demonstrated by otherevidence.

Affirmative Defense.—Withrespect to subsection (a), thereshallbeanaffirmativedefensethatstatements, representations, oromissions were not made in badfaith (as defined in subparagraphs(B) and (C) of section 5(1)) if thesender candemonstrate that suchstatements, representations, oromissions were mistakes made ingood faith, which may bedemonstratedbyapreponderanceof evidence that the violationwasnotintentionalandresultedfromabona fide error notwithstandingthe maintenance of proceduresreasonably adapted to avoid anysucherror.

Enforcement By Federal TradeCommissionThe Federal Trade Commissionshall enforce this section in thesamemanner,bythesamemeans,and with the same jurisdiction,powers, and duties as though allapplicable termsandprovisionsofthe Federal TradeCommissionAct(15 U.S.C. 41 et seq.) wereincorporatedintoandmadeapartof this section. Any person whoengages in an act or practicedescribedinsubsection(b)shallbesubject to the penalties andentitled to the privileges andimmunitiesprovidedintheFederalTrade Commission Act (15 U.S.C.41etseq.).

Enforcement By Federal TradeCommissionTheCommissionshallenforcethistitle in the samemanner, by thesamemeans, and with the samejurisdiction,powers,anddutiesasthough all applicable terms andprovisions of the Federal TradeCommission Act (15 U.S.C. 41 etseq.)were incorporated into andmade a part of this title. Anyperson who violates section 202shall be subject to the penaltiesandentitledtotheprivilegesandimmunities provided in theFederalTradeCommissionAct.

Enforcement By Federal TradeCommissionThe Commission shall enforce thisAct in the same manner, by thesame means, and with the samejurisdiction, powers, and duties asthough all applicable terms andprovisions of the Federal TradeCommission Act (15 U.S.C. 41 etseq.) were incorporated into andmadeapartofthisAct.Anypersonwho violates section 2 shall besubject to the penalties andentitled to the privileges andimmunitiesprovidedintheFederalTradeCommissionAct.

[Nosuchprovision] PreemptionofStateLawsonPatentDemandLettersandEnforcementByStateAttorneysGeneralThistitlepreemptsanylaw,rule,regulation,requirement,standard,orotherprovisionhavingtheforceandeffectoflawofanyState,orpoliticalsubdivisionofaState,expresslyrelatingtothetransmissionor

PreemptionofStateLawsonPatentDemandLettersandEnforcementByStateAttorneysGeneralThisActpreemptsanylaw,rule,regulation,requirement,standard,orotherprovisionhavingtheforceandeffectoflawofanyState,orpoliticalsubdivisionofaState,expresslyrelatingtothetransmissionorcontentsof

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contentsofcommunicationsrelatingtotheassertionofpatentrights.InanycaseinwhichtheattorneygeneralofaStatehasreasontobelievethataninterestoftheresidentsofthatStatehasbeenadverselyaffectedbyanypersonwhoviolatessection202,theattorneygeneraloftheState,maybringacivilactiononbehalfofsuchresidentsoftheStateinadistrictcourtoftheUnitedStatesofappropriatejurisdiction—(A)toenjoinfurthersuchviolationbythedefendant;or(B)toobtaincivilpenaltiesonbehalfofrecipientswhosufferedactualdamagesasaresultofsuchviolation.

communicationsrelatingtotheassertionofpatentrights.InanycaseinwhichtheattorneygeneralofaStatehasreasontobelievethataninterestoftheresidentsofthatStatehasbeenadverselyaffectedbyanypersonwhoviolatessection2,theattorneygeneraloftheState,maybringacivilactiononbehalfofsuchresidentsoftheStateinadistrictcourtoftheUnitedStatesofappropriatejurisdiction—(A)toenjoinfurthersuchviolationbythedefendant;or(B)toobtaincivilpenalties.

1.9. Venue BothRep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported)andSen.JeffFlake(R-AZ)’sS.2733(“VenueEquityandNon-UniformityElimination (“VENUE”)Actof2016) (introduced)would limitthevenue where a civil action for patent infringement may be brought. A comparison of the venueprovisionsisshownbelow.

Goodlatte–H.R.9[asreported] Flake–S.2733[introduced]

Notwithstandingsubsections(b)and(c)ofsection1391of this title, any civil action forpatent infringementorany action for a declaratory judgment that a patent isinvalidornotinfringedmaybebroughtonlyinajudicialdistrict—

(1) where the defendant has its principal place ofbusinessorisincorporated;

(2) where the defendant has committed an act ofinfringement of a patent in suit andhas a regular andestablishedphysical facilitythatgivesrisetotheactofinfringement;

(3)wherethedefendanthasagreedorconsentedtobesuedintheinstantaction;

(4)where an inventor named on the patent in suitconducted research or development that led to theapplicationforthepatentinsuit;

(5) where a party has a regular and establishedphysical facility that such party controls and operates,not primarily for the purpose of creating venue, and

Notwithstanding subsections (b) and (c) of section1391, any civil action for patent infringement or anyaction for a declaratory judgment that a patent isinvalidornotinfringedmaybebroughtonlyinajudicialdistrict—

(1) where the defendant has its principal place ofbusinessorisincorporated;

(2) where the defendant has committed an act ofinfringement of a patent in suit andhas a regular andestablishedphysical facilitythatgivesrisetotheactofinfringement;

(3)wherethedefendanthasagreedorconsentedtobesuedintheinstantaction;

(4)where an inventor named on the patent in suitconducted research or development that led to theapplicationforthepatentinsuit;

(5) where a party has a regular and establishedphysical facility that such party controls and operates,not primarily for the purpose of creating venue, and

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has—(A) engaged in management of significant

research and development of an invention claimedinapatentinsuitpriortotheeffectivefilingdateofthepatent;

(B) manufactured a tangible product that isallegedtoembodyan inventionclaimed inapatentinsuit;or

(C) implemented a manufacturing process for atangible good in which the process is alleged toembodyaninventionclaimedinapatentinsuit;or(6) for foreign defendants that do not meet the

requirements of paragraphs (1) or (2), according tosection1391(d)ofthistitle.

has—(A) engaged in management of significant

research and development of an invention claimedinapatentinsuitpriortotheeffectivefilingdateofthepatent;

(B) manufactured a tangible product that isallegedtoembodyan inventionclaimed inapatentinsuit;or

(C) implemented a manufacturing process for atangible good in which the process is alleged toembodyaninventionclaimedinapatentinsuit;or(6) inthecaseofa foreigndefendantthatdoesnot

meet the requirements of paragraph (1) or (2), inaccordancewithsection1391(c)(3).

Mandamus Relief.—For the purpose of determiningwhetherreliefmayissueundersection1651oftitle28,United States Code, a clearly and indisputablyerroneousdenialofamotionunder section1406(a)ofsuch title to dismiss or transfer a case on the basis ofsection1400(b)of such title shall bedeemed to causeirremediableinterimharm.

Mandamus Relief.—For the purpose of determiningwhetherreliefmayissueundersection1651oftitle28,United States Code, a clearly and indisputablyerroneousdenialofamotionunder section1406(a)ofsuch title to dismiss or transfer a case on the basis ofsection1400(b)of such title shall bedeemed to causeirremediableinterimharm.

Retailers Not Eligible For Customer Stay.—If adefendant does not meet the definition of a retailerundersection296(a)(6)oftitle35,UnitedStatesCode,as added by section 5, solely because the defendantmanufacturers or causes the manufacture of thecoveredproductorprocessinsuit,theretailfacilitiesofsuch defendant shall not constitute a regular andestablished physical facility for purposes of section1400(b)(2) of title 28, United Code, as added byparagraph(1).

[Nosuchprovision]

(4) Teleworkers.—The dwelling or residence of anemployee or contractor of a defendant who works atsuchdwellingorresidenceshallnotconstitutearegularand established physical facility of the defendant forpurposesofsection1400(b)(2)oftitle28,UnitedCode,asaddedbyparagraph(1).

Teleworkers.—The dwelling or residence of anemployee or contractor of a defendant who works atsuchdwellingorresidenceshallnotconstitutearegularand established physical facility of the defendant forpurposesofsection1400(b)(2)oftitle28,UnitedStatesCode,asaddedbysubsection(a).

Effective Date.—Except as otherwise provided in thissection, the amendments made by this section shalltakeeffectonthedateoftheenactmentofthisActandshall apply toanyaction forwhicha complaint is filedonorafterthatdate.

[Nosuchprovision]

1.10. ITC Domestic Industry TheWhiteHouse’sJune2013“factsheet”expressessupportforlegislationthatwouldchangetheITCstandard for granting an exclusion order. Specifically, the “fact sheet” states that the ITC should berequiredtoapplythefour-factortestsetforthineBayInc.v.MercExchangethatdistrictcourtscurrentlyapplywhengrantinganinjunctioninpatentcases.

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Rep.Cárdenas(D-CA)’sH.R.4829 (“TradeProtectionNotTrollProtectionAct”) (introduced)amendsSection 337 of the Tariff Act so that any “licensing activities” relied upon by a complainant forestablishing a domestic industry in the United States must be “licensing activities that leads to theadoptionanddevelopmentofarticlesthatincorporatethepatent,copyright,trademark,maskwork,ordesign.”Moreover,thebillprovidesthat“thecomplainantmaynotrelyuponactivitiesbyitslicenseesunless the license leads to the adoption and development of articles that incorporate the claimedpatent, copyright, trademark,maskwork,ordesign for sale in theUnitedStates.” Further, if the ITCidentifies the domestic industry issue as being dispositive in the case, the ITC shall direct theadministrative law judge toexpedite fact findingon the issueandmakean initialdeterminationon itwithin100daysafterthestartoftheinvestigation.ThedeterminationonthatissueisappealabletotheFederalCircuit,duringwhichtimetheITCinvestigationwillbestayeduntilallappealsarefinal.

1.11. Attorney Sanctions Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)wouldrequiretheUSPTOtoissueregulationsto “make clear that an attorney or unrepresented party presenting a statement, petition, or othersubmissiontotheOfficedoessounderanobligationsubstantiallysimilartotheobligationscontainedinrule11oftheFederalRulesofCivilProcedure.”

Inthe113thCongress,Rep.Jeffries(D-NY)’sH.R.2639(“PatentLitigationandInnovationActof2013”)would have required the court, upon final adjudication of any civil action arising under an Act ofCongress relating to patents, to make specific findings regarding each party’s and each attorney’scompliance with Federal Rule of Civil Procedure 11(b) as to any complaint, responsive pleading, ordispositivemotion.ViolationsofthisrulewouldresultinsanctionsinaccordancewithRule11.

1.12. Disciplinary Proceedings BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) would extend the time limit for the USPTO to commence misconductproceedingsagainstanattorneyoragentwhoviolatestheUSPTO’srulesofprofessionalresponsibility.Bothbillsaddanadditional6months(foratotalof18months)tothetimebywhichtheUSPTOmustcommenceamisconductproceedingonceawrittengrievancehasbeenreceived.H.R.9wouldalsotollthe deadline until any court or administrative-agency proceeding involving the misconduct becomesfinalandnon-appealable,whereasS.1137wouldnot.

In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudyandReportontheImplementationoftheLeahy-SmithAmericaInventsAct.Thereportincludesarecommendationto:“Allowdisciplinaryproceedingstocommence18monthsaftermisconductwasfirstmadeknowntoUSPTOrather thanoneyear,andclarify timing related toconcurrentlypendingcourtcases.”

InSeptember2013, theUSPTO issueda report titledReportonCompliancewith theProvisionsof theAmericaInventsActforTimelyFilingDisciplinaryProceedings.Thereportstated:“TheUSPTOispleasedto report that after the AIA was enacted, OED was not made aware of any incidents that weresubsequentlybarredfromadisciplinaryproceedingbasedonthenewtimelimits[i.e.,the1-yeartimelimitundertheAIA].”

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1.13. Pharma Carve-Outs BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)expresslyexemptpharmaceuticallitigationundertheHatch-WaxmanandBiologics Acts (35 U.S.C. §271(e)) from the various litigation-related provisions in the bills. Theexemptedprovisionsareshowninthechartbelow.

Provision Goodlatte–H.R.9[reported] Grassley–S.1137[reported]

Loser-PaysFee-ShiftingandJoinderofInterestedParty

[Nosuchprovision] ClaimsUnderSection271(e).—(1)Applicability.—Subsections(a),(b),and

(c)shallnotapplytoacivilactionthatincludesaclaimforreliefarisingundersection271(e).

(2)AwardinCertainClaimsUnderSection271(e).—Inacivilactionthatincludesaclaimforreliefarisingundersection271(e),thecourtmayinexceptionalcasesawardreasonableattorneyfeestotheprevailingparty.

PleadingRequirementsinPatentInfringementComplaints

Exemption.—Acivilactionthatincludesaclaimforreliefarisingundersection271(e)(2)shallnotbesubjecttotherequirementsofsubsection(a).

Exemption.—Subsection(a)shallnotapplytoacivilactionthatincludesaclaimforreliefarisingundersection271(e).

DiscoveryStay FDAandBiologicalProductApplication.—Subsections(a)and(c)shallnotapplytoanactionthatincludesacauseofactiondescribedundersection271(e)(2).

ClaimsunderSection271(e).—Thissectionshallnotapplytoacivilactionthatincludesaclaimforreliefarisingundersection271(e).

TransparencyofPatentOwnership

Exemption.—Therequirementsofparagraph(1)shallnotapplywithrespecttoacivilactionfiledundersubsection(a)thatincludesacauseofactiondescribedundersection271(e)(2).

[Nosuchprovision]

StayofActionAgainstManufacturerandCustomers

Exemption.—Thissectionshallnotapplytoanactionthatincludesacauseofactiondescribedundersection271(e)(2).

MotionForStay.—InacivilactioninwhichapartyassertsaclaimforreliefarisingunderanyActofCongressrelatingtopatents(otherthananactionthatincludesacauseofactiondescribedinsection271(e)),thecourtshallgrantamotiontostayatleasttheportionoftheactionagainstacoveredcustomerthatrelatestoinfringementofapatentinvolvingacoveredproductorcoveredprocessif….

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1.14. Post-Grant Claim Construction TheUSPTO’sregulations(codifiedat37C.F.R.§42.100(b)and§42.200(b))providethat,duringaninterpartes review (“IPR”) or post grant review (“PGR”), a claim in an unexpired patent shall be given its“broadest reasonable construction in light of the specification.” This standard is broader than thestandardthatdistrictcourtsapply in infringement litigation. InApril2016,theSupremeCourtupheldtheseregulationsasavalidexerciseoftheUSPTO’srulemakingauthorityinCuozzoSpeedTechs.,LLCv.Lee, 136 S. Ct. 2131 (2016). Several bills pending in Congress would legislatively overrule theseregulationsandrequiretheUSPTOtoconstrueclaimsusingthesamestandardthatdistrictcourtsapply.

Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported),Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported),andSen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)wouldeachrequiretheUSPTOtoconstruepatentclaimsassuchclaimswouldbeconstruedinacivilactiontoinvalidateapatentunder section282(b), including construingeach claimof thepatent in accordancewiththe“ordinaryandcustomarymeaning”asunderstoodbyapersonskilledintheart,andinlightofthe“prosecutionhistorypertainingtothepatent.”Eachbillalsoprovidesthatifacourthaspreviouslyconstruedtheclaiminacivilactioninwhichthepatentownerwasaparty,theUSPTO“shallconsider”such construction. H.R. 9 is the only bill among these three that would exempt covered businessmethod (“CBM”) proceedings from these changes; specifically, H.R. 9 contains a “technical andconformingamendment”thataddsthisclaim-constructionprovisiontoalistofPGRproceduresthatdonotapplytoCBM(seeSection18(a)(1)(A)oftheLeahy-SmithAmericaInventsAct).Bycontrast,S.1137andS.631donotexemptCBMfromthechangethatwouldapplytoPGR’sclaim-constructionstandard.

1.15. Post-Grant Estoppel BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) would amend the post-grant review “estoppel” provision of 35 U.S.C.§325(e)(2) that currently precludes a PGRpetitioner from raising in a district court of ITC action anygroundofunpatentabilitythatthepetitioner“raisedorreasonablycouldhaveraised”duringthePGR.BothH.R.9andS.1137wouldstrikethewords“orreasonablycouldhaveraised.”Thus,estoppelunder§325(e)(2)wouldbe limited togrounds that thePGRpetitioneractually “raised” in thePGR, therebyallowingthepetitioner,afterfailingtoinvalidateapatentclaimintheUSPTO,tochallengetheidenticalclaim inasubsequentcivilactionusingevidenceandargumentsthat thepetitioner“reasonablycouldhaveraised”duringthePGR.

1.16. Same Party Joinder in IPR BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”) (as reported)wouldamend the IPR“joinder”provisionof35U.S.C.§315(c) toclarifythat same-party joinder is permitted. Thebills, however, use different language. H.R. 9 states: “Forgoodcauseshown, theDirectormayallowapartywho filesapetition thatmeets the requirement…andconcernsthepatentofapendinginterpartesreviewtojointhepetitiontothependingreview.”Bycontrast,S.1137states:“Apetitionermaypetitiontoaddadditionalpatentclaimsinaninstitutedinterpartesreviewinwhichthepetitionerisaparty,ifsuchpetitionismadewithin1yearafterthedateonwhichthatpetitioner,ortherealpartyininterestorprivyofthatpetitioner,isservedwithanamended

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complaintorotherpaperinapendinglitigationforthefirsttimealleginginfringementbyoneormoreofthemofthosepatentclaimstobeadded.”

In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudy and Report on the Implementation of the Leahy-Smith America Invents Act. The reportrecommends that Congress “[c]larify the joinder provisions to state that same party joinder ispermitted.” As the report explains, “Absent the change, a party couldpotentially beprecluded fromchallengingnewly-assertedclaimsfromrelateddistrictcourtlitigation.”

InFebruary2015,anexpanded7-judgepanelofthePTABheldthatthephrase“anyperson”in35U.S.C.§315(c)allowsthesamepetitionerofanearlier-institutedIPRproceedingtofileasecondIPRpetition(challenging additional patent claims) and be joined as a party to the earlier-instituted proceeding.TargetCorp.v.DestinationMaternityCorp.,IPR2014-00508,PaperNo.28(PTABFeb.12,2015),

1.17. Petitioner Standing in Post-Grant Proceedings Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported)wouldrequirethepetitionerofanIPRorPGRtocertifythatthepetitioneranditsrealpartiesininterest—

• (A)donotownandwillnotacquireafinancialinstrument(includingaprepaidvariableforwardcontract,equityswap,collar,orexchangefund)thatisdesignedtohedgeoroffsetanydecreaseinthemarketvalueofanequitysecurityofthepatentowneroranaffiliateofthepatentowner,duringaperiodfollowingthefilingofthepetitiontobedeterminedbytheDirector;and

• (B)havenotdemandedpayment,monetaryorotherwise,fromthepatentowneroranaffiliateofthepatentownerinexchangeforacommitmentnottofileapetitionundersection311withrespecttothepatentthatisthesubjectofthepetition,unlessthepetitionerortherealpartyininterestofthepetitionerhasbeensuedfororchargedwithinfringementofthepatent,duringaperiodtobedeterminedbytheDirector.

Sen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)wouldlimitwhocanfileanIPRorPGRpetition.AnIPRpetitioncouldonlybefiledifthepetitioneroritsrealpartyininterestorprivyhas been sued for infringement or “charged with infringement” (defined as a “real and substantialcontroversyregardinginfringementofapatentsuchthatthepetitionerwouldhavestandingtobringadeclaratoryjudgmentactioninFederalcourt”).APGRpetitioncouldonlybefiledifthepetitioneroritsrealparty in interestorprivydemonstratesa reasonablepossibilityofbeing sued for infringementorchargedwithinfringement,ordemonstratesacompetitiveharmrelatedtothevalidityofthepatent.

1.18. Post-Grant Patent Owner Evidence and Claim Amendments Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported),Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported),andSen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)wouldeachgivepatentownersagreaterabilitytofileevidenceinthepreliminarystageofanIPRorPGR,aswellasgreaterflexibilitywithrespecttomotionstoamendclaims.

• Preliminary Evidence and Reply. All three bills would allow a patent owner, as part of itspreliminary patent owner response, to file supporting evidence in the form of affidavits ordeclarations.S.1137,unliketheothertwobills,wouldalsoallowthepatentownertofile“suchother information as the Director may require by regulation.” All three bills give the Board

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discretion to allow the petitioner to file a reply to the patent owner’s preliminary response.OnlyS.632providesforapatentownertofileasurreplytothepetitioner’sreply.

• ClaimAmendments. S.1137andS.631expresslyaddressapatentowner’smotiontoamendclaims.S.1137statesthatapatentowner’smotiontoamendclaimsmust(A)bemadeinthepatent holder’s first paper following institution (other than a request for rehearing) and notlater than 30 days after the institution of the proceeding, unless otherwise agreed to by theparties;(B)narrowthescopeofthecancelledclaimandmaynotintroducenewsubjectmatter;and (C) respond to a ground of unpatentability involved in the trial. If these conditions (A)through(C)aremet,thenS.1137statesthatthepetitionershallbeartheburdenofprovingaproposition of unpatentability of the substitute claim by a preponderance of the evidence.S.631provides thatapatentowner’s firstmotion toamendclaims“shallbegranted if theproposed number of substitute claims is reasonable.” S.631 allows additional motions toamend to be granted upon the joint request of the petitioner and the patent owner tomateriallyadvancethesettlementofaproceeding,orupontherequestofthepatentownerforgoodcauseshown.S.631placesonthepetitionertheburdenofprovingtheunpatentabilityofa proposed amended claim by a preponderance of the evidence.H.R.9doesnotexpresslyaddressmotionstoamendclaims;however,H.R.9wouldrequirethe USPTO to additionally consider “the rights to due process of the patent owner and thepetitioner”whenpromulgating rules governing IPR andPGR,which is seenby someas a nodtowardsliberalizingmotionstoamendclaims.

1.19. Denial of Post-Grant Petitions on Same Patent Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported),Sen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported),andSen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)eachaddresstheissueoffollow-onpetitionsormultipleUSPTOproceedingsinvolvingthesamepatent.

H.R.9wouldrequiretheUSPTOtodesignateas“precedential”variousdecisionsofthePTABinwhichfollow-onpetitionsforIPRorCBMweredeniedunder35U.S.C.§325(d)-(e):DellInc.v.ElectronicsandTelecomms. Research Inst., IPR2015–00549, Paper 10 (PTABMar. 26, 2015); Zimmer Holdings, Inc. v.BonuttiSkeletalInnovationsLLC,IPR2014–01080,Paper17(PTABOct.31,2014);PrismPharmaCo.,Ltd.v.ChoongwaePharmaCorp.,IPR2014–00315,Paper14(PTABJuly8,2014);Unilever,Inc.v.TheProcter&GambleCo.,IPR2014–00506,Paper17(PTABJuly7,2014).

S.1137would specify that theUSPTOmaydenyapetition for IPRorPGR“if theDirectordeterminesthatinstitutionwouldnotservetheinterestsofjustice,”takingintoaccountfactorsincluding“whetherthe grounds of unpatentability on prior art or arguments set forth in the petition are the same orsubstantially the same as those considered and decided in a prior judicial proceeding, or in a priorproceedingbeforetheOfficeinvolvingthesameclaimorclaims(includingadecisionbytheDirectornotto institute a proceeding under this chapter), and whether there is another proceeding or matterinvolvingthesamepatentpendingbeforetheOffice.”

S.632wouldpreventtheUSPTOfrominstitutinganIPRofapatentwhilethepatentisthesubjectofareissueproceedingorreexaminationproceeding.

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1.20. Post-Grant Presumption on Validity Both Sen. Grassley (R-IA)’s S.1137 (“PATENT Act”) (as reported), and Sen. Coons (D-DE)’s S. 631(“STRONGPatentsActof2015”)(introduced)providethatthepresumptionofvalidityshallapplytoapatent challenged in an IPR or PGR. However, only S.631 would change the burden of proof, byrequiring thepetitioner toproveapropositionofunpatentabilityofapreviously issuedclaimbyclearandconvincingevidence.

1.21. Post-Grant Panel Composition Both Sen. Grassley (R-IA)’s S.1137 (“PATENT Act”) (as reported), and Sen. Coons (D-DE)’s S. 631(“STRONG Patents Act of 2015”) (introduced) address the issue ofwhowithin theUSPTO should beinvolved in the institution decision of an IPR and PGR and who should adjudicate the trial afterinstitution. S.1137 requires the USPTO to prescribe a regulation that provides for notmore than 1individual who participated in the institution decision to be permitted to adjudicate the IPR or PGR.S.1137 also states that the individual involved in the institution decision may be a designee of theDirectorwhoisnototherwiseamemberofthePTAB.S.632providesthatamemberofthePTABwhoparticipatesinthedecisiontoinstituteanIPRorPGRshallbeineligibletohearthereview.

1.22. Changes to Ex Parte Reexamination Sen. Coons (D-DE)’s S. 631 (“STRONG Patents Act of 2015”) would make two changes to ex partereexamination. First,apersonrequestingexpartereexaminationwouldneedto identifyallof itsrealpartiesininterest.Thischangewouldpreventreexamrequestsfrombeingfiledanonymously.Second,thebillwouldadda1-yeardeadlinesuchthatarequesterwouldneedtofileitsreexamrequestwithin1yearoftherequesteroritsrealpartyininterestorprivybeingservedwithaninfringementcomplaint.

1.23. Covered Business Method Review Expansion TheWhiteHouseJune2013“factsheet”expressessupportforexpandingtheCBMprogramtoincludea“broadercategoryofcomputer-enabledpatents.”

Noneof the currentbillspending inCongress containaprovision toexpand theCBMprogram,otherthan tomakea technical correction tobroaden the“ScopeofPriorArt”available inCBM. BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137 (“PATENTAct”)(asreported)wouldaddpre-AIA§102(e)priorarttothecategoriesofpriorartthatcanberaisedinaCBMpetition.Inaddition,H.R.9wouldallowtheUSPTOtowaivethefilingfeeforaCBMpetition.

ProposalsinpriorCongresseswouldhavemademoresignificantchangestotheCBMprogram,includingeliminatingtheprogram’s9-yearsunsetandexpandingthecategoriesofbusinessmethodpatentsthatcouldbechallenged inCBM. See Sen.Schumer (D-NY)’sS.866 (“PatentQuality ImprovementAct of2013”)(introducedMay6,2013);Rep.Issa(R-CA)’sH.R.2766(“STOPAct”)(introducedJuly22,2013).

In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudy and Report on the Implementation of the Leahy-Smith America Invents Act. The report states:“The USPTO recommends adhering to the sunset period and discontinuing CBM proceedings onSeptember16,2020.”

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1.24. Limiting CBM Review to CBM Claims TheUSPTOhastakenthepositionthatasinglepatentclaimdirectedtoa“coveredbusinessmethod”renders all claimsof thepatenteligible for aCBM review. Rep.Goodlatte’s second discussion draft,circulated in September 2013,would have overruled theUSPTO’s interpretation by expressly limitingCBM review “only for those claims in a patent that qualify the patent as a covered businessmethodpatent.”Thisprovision,however,wasomittedfromRep.Goodlatte’sH.R.3309,introducedinthe113thCongress, and as well as from Rep. Goodlatte’s H.R. 9, introduced in the current 114th Congress.Currently,nopendingbillcontainssuchaprovision.

1.25. Section 101 Challenges in Post-Grant Review Somehavequestionedwhetherpatenteligibilityunder35U.S.C.§101canbe raised inapetition forPGRorCBM.Forexample,somehavearguedthat§101cannotberaisedbecause§101is,technicallyspeaking, a “requirement” and not a “condition for patentability” as that term is used in 35U.S.C. §282(b)(2).TheUSPTO,bycontrast,hastakenthepositionthat§101canberaisedinPGRorCBM.InVersataDev.Group,Inc.v.SAPAm.,Inc.,793F.3d1306(Fed.Cir.2015),theFederalCircuitagreedwiththeUSPTOthat§101canberaisedinapetitionforPGRorCBM.Currently,nopendingbilladdressesthisissue.

1.26. Privy Estoppel in CBM Review Through an apparent legislative error, the estoppel provision specific to CBM applies only to the“petitioner”and the“petitioner’s realparty in interest”–butnot to thepetitioner’s“privy”. SeeAIA§18(a)(1)(D). Bycontrast, theestoppel in IPRandPGRapply toall threeentities: thepetitioner, realpartyininterest,andprivy. See35U.S.C.§§315(e)(2),325(e)(2). Currently,nopendingbilladdressesthisissue.

1.27. Filing Deadline for CBM Review TheAIAsetvariousdeadlinesforfilingapetitionforPGRandIPR.PGRpetitionsmustbefiledwithin9monthsaftereithertheissuanceofafirst-to-filepatentortheissuanceofareissuepatentwhoseclaimshavebeenbroadenedduringreissue. IPRpetitionsmustbefiledwithin1yearofbeingservedwithacomplaintalleginginfringementofapatent. Bycontrast,thereisnodeadlineforapetitionertofileaCBMpetitionafterbeingservedwithan infringementcomplaint,despitethefact that thepetitioner’sstandingtofileaCBMpetitionrequiresithavingbeensuedorchargedwithinfringementofthepatent.Currently,nopendingbilladdressesthisissue.

1.28. Micro Entity Expansion Both Sen. Grassley (R-IA)’s S.1137 (“PATENT Act”) (as reported) and Sen. Coons (D-DE)’s S. 631(“STRONG Patents Act of 2015”) (introduced) would allow institutions of higher education andnonprofitresearchtoqualityasa“microentity”andtherebyreceivea75%reductioninfeesassociatedwithfilingandprosecutingUSpatentapplications. Acomparisonofthemicro-entityprovisionsofthebillsisshowninthechartbelow.

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Grassley–S.1137[asreported] Coons–S.632[introduced]

(d) Institutions Of Higher Education And NonprofitResearchOrganizations.—Forpurposesof thissection,a micro entity shall include an applicant who certifiesthat—

(d) InstitutionsOfHigher Education.—Forpurposesofthis section, a micro entity shall include an applicantwhocertifiesthat—

(1) the applicant’s employer, from which theapplicant obtains the majority of the applicant’sincome, is an institution of higher education asdefinedinsection101(a)oftheHigherEducationActof 1965 (20 U.S.C. 1001(a)), or a comparableorganizationoutsidetheUnitedStates;

(1) the applicant’s employer, from which theapplicant obtains the majority of the applicant’sincome, is an institution of higher education asdefinedinsection101(a)oftheHigherEducationActof1965(20U.S.C.1001(a));

(2)theapplicanthasassigned,granted,conveyed,or is under an obligation by contract or law, toassign, grant, or convey, a license or otherownership interest in the particular applications tosuchaninstitutionofhighereducation;

(2)theapplicanthasassigned,granted,conveyed,or is under an obligation by contract or law, toassign, grant, or convey, a license or otherownership interest in the particular applications tosuchaninstitutionofhighereducation;

(3) the applicant is an institution of highereducationasdefinedinsection101(a)oftheHigherEducation Act of 1965 (20 U.S.C. 1001(a)), or acomparableorganizationoutsidetheUnitedStates;

(3) the applicant is an institution of highereducationasdefinedinsection101(a)oftheHigherEducationActof1965(20U.S.C.1001(a));or

(4) the applicant is an organization described insection 501(c)(3) of the Internal Revenue Code of1986andexemptfromtaxationundersection501(a)of suchCode,oracomparableorganizationoutsidethe United States, that holds title to patents andpatent applications on behalf of such an institutionof higher education for the purpose of facilitatingcommercializationofthetechnologiesofthepatentsandpatentapplications;or

(4) the applicant is an organization described insection 501(c)(3) of the Internal Revenue Code of1986andexemptfromtaxationundersection501(a)of suchCode that holds title to patents andpatentapplications on behalf of such an institution ofhigher education for the purpose of facilitatingcommercializationofthetechnologiesofthepatentsandpatentapplications.

(5) the applicant is an organization described insection 501(c)(3) of the Internal Revenue Code of1986andexemptfromtaxationundersection501(a)ofsuchCodeandcertifiesthat—

(A) the applicant performs, at least in part,researchordevelopmentactivitiesfortheFederalGovernment;or(B) the applicant has assigned, granted, or

conveyed,orisunderanobligationbycontractorlawtoassign,grant,orconvey,a licenseorotherownershipinterestintheparticularapplicationstoan organization described in section 501(c)(3) ofthe Internal Revenue Code of 1986 and exemptfrom taxation under section 501(a) of such Codethat performs, at least in part, research ordevelopment activities for the FederalGovernment.

[Nosuchprovision]

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1.29. Double Patenting Rep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”)(asreported)containsaprovisiontocodify,insomeways, the judge-made doctrine of “obviousness-type double patenting.” The provision adds a newsubsection(e)toSection102,therebycreatinganewcategoryofso-called“Double-PatentingPriorArt.”Afirstclaimedinvention,havinganearliereffectivefilingdatethanasecondclaimedinvention,“shall…constitutepriorart”againstthesecondclaimedinvention,unless—(1)thesecondclaimedinventionisconsonantwitharequirementforrestrictionunderthefirstsentenceofsection121withrespecttotheclaimsissuedinthefirstpatent;or(2)anelectionhasbeenrecordedintheOfficebytheownerofthesecond patent or the application onwhich the second patent issues disclaiming the right to bring ormaintainacivilactionundersection281toenforcethesecondpatent.Thedisclaimerinparagraph(2)shallnotapply if—(A)thereliefbeingsought inthecivilactionwouldnotconstituteacauseofactionbarredbyresjudicatahadtheassertedclaimsofthesecondpatentbeenissuedinthefirstpatent;and(B) the owner of the first patent or the application onwhich the first patent issues has recorded anelection limiting the enforcement of the first patent relative to the second patent in the mannerdescribed in this paragraph, the owner of the first patent is a party to the civil action, or a separateactionundersection281toenforcethefirstpatentcannolongerbebroughtormaintained.

1.30. Inventor’s Oath in Continuing Applications BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”) (asreported)wouldamend35U.S.C.§115(a)bystriking"shallexecute"andinserting"mayberequiredtoexecute."ThischangewouldallowtheUSPTOtodecidewhetherandunderwhatcircumstancestorequirethefilingofan inventor’soathordeclarationaspartofthefilingofapatentapplication. For example,while the Leahy-Smith America Invents Act eliminated the requirement tosubmit a new inventor’s oath or declaration in continuing applications if the oath or declarationwasexecuted and filed in an earlier application, an oath or declaration filed pre-AIA does not necessarilyserveasabasistoavoidfilinganewoathordeclarationinpost-AIAcontinuingapplications.

1.31. Priority Claims in Assignee-Filed Applications BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) would make retroactive fixes, going back to September 16, 2012, forapplicationsfiledinthenameoftheassignee(ratherthaninthenameoftheinventors)andthatclaimpriority to a provisional application under 35 U.S.C. §119(e)(1) or non-provisional application under§120. Asamended,bothstatutorysectionswouldaccordthebenefitoftheearlierapplication’sfilingdate to the later-filedapplication, regardless if the later-filedapplicationwas filed “byan inventororinventors” (aswas thecasepre-AIA)orwas filedby theassignee (aspermittedafter theAIA). ThesechangesaremaderetroactivetoSeptember16,2012,thedatetheassignee-filingprovisionof35U.S.C.§118wentintoeffectundertheAIA.

In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudy and Report on the Implementation of the Leahy-Smith America Invents Act. The report states:“TheUSPTOrecommendsthatthebenefitprovisionsin35USC§119(e)and35USC§120beamendedtostatethattheapplicationmustnamean inventor incommonratherthanthattheymustbefiledbyacommoninventor.”Thereportexplainsthatthis“statutorychangeisneededtoavoidconfusionasto

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whetheranassignee-filednonprovisionalapplicationmayclaimthebenefitofaprior-filedprovisionalornonprovisionalapplication.”

1.32. Federal Jurisdiction Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported)containsaprovisiontitled“Clarificationof Jurisdiction,”whichprovides thata federal subjectmatter jurisdictionshallextendtoanyactionorclaimthat(A)necessarilyrequiresresolutionofadisputedquestionastothevalidityofapatentorthescopeofapatentclaim;or(B)isanactionorclaimforlegalmalpracticethatarisesfromanattorney’sconduct in relation to an action or claim arising under an Act of Congress relating to patents. Thisprovisionisapparentlyintendedtobringpatentmalpracticeclaimsbackunderfederaljurisdictioninthewakeof theSupremeCourt’sdecision inGunnv.Minton, 133S.Ct. 1059 (2013) (holding thatpatentmalpracticecasebroughtinstatecourtdidnotneedtobebroughtinfederalcourt).

1.33. Divided Infringement Sen.Coons(D-DE)’sS.631(“STRONGPatentsActof2015”)(introduced)wouldaddanewsubsection(j)to35U.S.C.§271,whichstates:“Forafindingofliabilityforactivelyinducinginfringementofaprocesspatentundersubsection(b),orforcontributoryinfringementofaprocesspatentundersubsection(c),itshallnotbearequirementthatthestepsofthepatentedprocessbepracticedbyasingleentity.”

InLimelightNetworks, Inc.v.AkamaiTechs., Inc.,134S.Ct.2111(2014),theSupremeCourtheldthatactive inducement under §271(b) requires that some person must be liable for direct infringementunder§271(a). The followingyear, inAkamaiTechnologies, Inc. v. LimelightNetworks, Inc.,797F.3d1020(Fed.Cir.2015)(enbanc),theFederalCircuithelddirectinfringementmayoccurwheremorethanone actor is involved in practicing the steps of a patented process, so long as the acts of one areattributabletotheothersuchthatasingleentityisresponsiblefortheinfringement,eitherbecause(1)theentitydirectsorcontrolsothers'performanceor(2)theactorsformajointenterprise.

1.34. Willful Infringement Sen.Coons (D-DE)’sS. 631 (“STRONG Patents Act of 2015”) (introduced)would amend thedamagesprovision of 35U.S.C. §284 by specifying that damagesmay be increased up to 3 times the amountfoundorassessedupondetermining,bya“preponderanceoftheevidence,”thattheinfringementwas“willfulorinbadfaith.”

InHaloElecs., Inc.v.PulseElecs., Inc.,136S.Ct.1923(2016),theSupremeCourtreversedtheFederalCircuit’s two-part objective-subjective test for willful infringement, holding instead that §284 allowsdistrictcourtstopunishthefullrangeofculpablebehavior,includingwheretheinfringerlaterdevelopsa reasonable defense at trial. The Supreme Court also lowered the burden of proof for provingwillfulness—from a “clear and convincing evidence” standard to a lower, “preponderance of theevidence”standard.

1.35. Prior User Defense BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)wouldrepealsubsections(f)and(g)of35U.S.C.§273involvingtheprioruser defense. Subsection (f) states, “If the defenseunder this section is pleadedby a personwho is

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foundtoinfringethepatentandwhosubsequentlyfailstodemonstrateareasonablebasisforassertingthedefense,thecourtshallfindthecaseexceptionalforthepurposeofawardingattorneyfeesundersection285.” Subsection(g)states,“Apatentshallnotbedeemedtobe invalidundersection102or103solelybecauseadefenseisraisedorestablishedunderthissection.”

TheAIAcreateda“prioruser”defensetopatentinfringementwherethedefendanthadbeenpracticingthe inventionat least1 yearbefore theeffective filingdateof thepatent. Somehave called for thisdefensetobeexpandedbyeliminatingthe1-yearcutoffdateandbyallowing“substantialpreparations”formanufactureanduse(priortotheactualmanufactureanduse)toqualifyasgroundsforinvokingthedefense. Currently,nopendingbillwouldeliminatethe1-yearcutofforwouldexpandthedefensetoinclude“substantialpreparations.”

1.36. Patent Office Funding and Fee-Setting Authority BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) would extend the 7-year sunset of the USPTO’s fee-setting authority.H.R.9wouldextendtheperiodbyanadditional10years(foratotalof17years).S.1137wouldextenditbyanadditional7years(foratotalof14years).

Sen.Coons (D-DE)’sS. 631 (“STRONG Patents Act of 2015”) (introduced)wouldestablish a revolvingfundtowhichall feescollectedbytheUSPTOwouldbecredited. ThefundwouldbeavailabletotheDirector,without fiscal year limitation, to cover all administrative and operating expenses associatedwiththeservices,programs,activities,anddutiesoftheUSPTO.

Rep.Conyers(D-MI)’sH.R.1832 (“InnovationProtectionAct”) (introduced)proposesarevolvingfundidentical to the fund proposed in S. 632. Additionally, H.R. 1832would require an annual report toCongressonthepreviousfiscalyearspendingandplansformodernizingtheUSPTO.TheDirectorwouldalso be required to notify the Committees onAppropriations of both houses of the amount of fundsavailableforthatfiscalyearatthebeginningofeachfiscalyear.

In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudyandReportontheImplementationoftheLeahy-SmithAmericaInventsAct.Thereportincludesarecommendation to: “Remove the [7-year] sunset period and make authority to adjust patent andtrademark fees by rule permanent.” The report also includes two additional recommendationsregardingtheproceduralformalitiestheUSPTOmustfollowwhenexercisingitsfee-settingauthority:(1)“Specifythatthe30-dayrequirement isapplicabletoa ‘formal’ feeproposal.Replacethe30-daytimeperiodforapublichearingwitha45-daytimeperiod”;and(2)ChangetheeffectivedatetostartfromthedatepublishedintheFederalRegister,butmaintaintherequirementtopublishproposedchangesinboththeFederalRegisterandtheOfficialGazette.”RegardingUSPTOfunding,thereportrecommends“eliminatingtherequirementforadetailedspendingplantoaccompanyareprogrammingnotificationtotransferfundstotheoperatingreserve”andalso“encouragesCongresstoexpeditiouslyreviewanysubmitted spending plans to enable the smooth transfer of funds from the PTFRF [Patent andTrademarkFeeReserveFund].” As the reportexplains, “Delaysofany significantperiodof timemaycreateunnecessaryuncertaintyinUSPTO’sbudgetingprocessordelayplannedexpendituresdetailedinthespendplan.”

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1.37. Deputy Director BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)wouldamendthe35U.S.C.§3(b)(1)inthefollowingway:“TheSecretaryofCommerce,uponnominationbytheDirector,shallappointaDeputyUnderSecretaryofCommercefor Intellectual Property and Deputy Director of the United States Patent and Trademark OfficewhoshallbevestedwiththeauthoritytoactinthecapacityoftheserveasActingDirectorintheeventoftheabsenceorincapacityoftheDirectororintheeventofavacancyintheofficeoftheDirector.”

Duringtheperiodof2001to2013, theUSPTOhaspublished66FederalRegisternoticessignedbyan“ActingDirector”of theUSPTO. Similarly, inRandallMfg. v.Rea, 733F.3d1355 (Fed.Cir. 2013), thecasecaptionidentifiestherespondentasthe“ActingDirector”oftheUSPTO.Ineachoftheseinstances,theofficeoftheDirectorwasvacantduetoresignation,ratherthanincapacityorotherabsence.

1.38. Bankruptcy Protection BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)includeaprovisionmakingU.S.bankruptcylawapplicabletocross-borderbankruptcycasesinvolvingIPlicenses.

1.39. Reverse-Payment Settlements BothSen.Klobuchar(D-MN)’sS.2019(““PreserveAccesstoAffordableGenericsAct”)(introduced)andSen. Sanders (I-VT)’s S.2023 (“Prescription Drug Affordability Act of 2015”) (introduced) wouldauthorizetheFTCtoinitiateanenforcementproceedingagainstpartiestoanyagreementresolvingorsettlingapatentinfringementclaiminconnectionwiththesaleofadrugproduct,andwouldpresumethat an agreement has anticompetitive effects if an abbreviated new drug application (“ANDA”) filerreceivesanythingofvalue, includinganexclusive license,andtheANDAfileragrees to limitor foregoresearch,development,manufacturing,marketing,orsalesoftheANDAproductforanyperiodoftime.

1.40. Patents For Humanity BothSen.Leahy(D-VT)’sS.1402(“PatentsforHumanityProgramImprovementAct”)(aspassedintheSenateonMay26,2016)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)wouldexpandtheUSPTO’s“PatentsforHumanity”program(publishedat77Fed.Reg.6544)byallowingtheholderofanaccelerationcertificateissuedundertheprogramto“transfer(includingbysale)theentitlementtosuchaccelerationcertificatetoanotherperson.”Undertheexistingprogram,selectedwinnersreceivea“certificate” thatcanberedeemedtoaccelerateanexparte reexaminationproceeding, includingoneappealtothePTABfromthatproceeding;apatentapplication,includingoneappealtothePTABfromthatapplication;oranappeal to thePTABofaclaimtwice rejected inapatentapplicationor reissueapplication or finally rejected in an ex parte reexamination. Under the USPTO’s program, however,certificatesawardedarenottransferrabletothirdparties.

1.41. Section 145 Repeal Under 35 U.S.C. §145, an applicant whose claims have been finally rejected may sue the USPTO indistrict court, where the applicant can introduce new evidence in support of patentability. Rep.Goodlatte’sH.R. 3309 (introduced in the 113th Congress)would have repealed § 145. However, this

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provision was struck from H.R. 3309 by an amendment introduced on the House floor by Rep.Rohrbacher(R-CA),whichprevailedoverRep.Goodlatte’soppositionbyarecordedvoteof260-156infavorofretaining§145.Currently,nopendingbilladdressesthisissue.

1.42. FCC Infringement Immunity Some telecommunications companies have been sued for infringing patents that cover wirelesstechnologies usedby emergency first responders,where the infringing aspects of this technology arenecessarytocomplywithFederalCommunicationsCommission(FCC)regulations. Sen.Cardin(D-MD)introducedS.1478inthe113thCongresswhichwouldimmunizecompaniesthatsupplythistechnologyandwouldinsteadcreateanexclusiverightofactionforpatentinfringementagainstthegovernmentintheU.S.CourtofFederalClaims.Currently,nopendingbilladdressesthisissue.

1.43. Car Parts Immunity Rep. Issa (R-CA)’s H.R. 1057 (introduced) and Sen. Hatch (R-UT)’s S. 560 (introduced), both titled“Promoting Automotive Repair, Trade, and Sales” or “PARTS” Act, would provide infringementimmunitywithrespecttoadesignpatentthatclaimsacomponentpartofamotorvehicleasoriginallymanufactured.Specifically,apersonwouldnotbeliableforpatentinfringementifthepersonwereto:(1)make,test,oroffertosellwithintheUnitedStates,or importintotheUnitedStates,anyarticleofmanufacture that is similaror the same inappearance to thecomponentpart claimed in suchdesignpatentifthepurposeofsucharticleisfortherepairofamotorvehicletorestoreitsappearancetoasoriginallymanufactured,or(2)useorsellwithintheUnitedStatesanysuchsameorsimilararticlesforsuchrestorationsmorethan30monthsaftertheclaimedcomponentpartisfirstofferedforpublicsaleaspartofamotorvehicleinanycountry.

1.44. Seed Patent Immunity Inthe113thCongress,Rep.Kaptur(D-OH)introducedH.R.193(“SeedAvailabilityandCompetitionActof 2013”) which would provide an exemption from patent infringement for any person who retainsseedsharvestedfromthecropsgrownfrompatentedseedsifthepersonregisterswiththeSecretaryofAgriculture andpays fees set by the Secretary. Suchpersonwould not beboundby any contractuallimitationoranyrequirementtopayroyalties.Currently,nopendingbilladdressesthisissue.

1.45. Ending Pre-GATT Patent Term Inthe112thCongress,Rep.Smith(R-TX)introducedatechnicalcorrectionsbillHR.6621thatcontainedaprovisiontoretroactivelyeliminatethe17-yeartermofpre-GATTpatents.Thisprovision,however,waseventually removed from the bill, which was signed into law as Public Law 112–29 (AIA TechnicalCorrectionsAct).Currently,nopendingbilladdressesthisissue.

1.46. Study on Business Method Patent Quality BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENTAct”)(asreported)wouldrequiretheComptrollerGeneraloftheUnitedStatestoconductastudyonthevolumeandnatureoflitigationinvolvingbusinessmethodpatents. Thestudyshallfocusonexaminingthequalityofbusinessmethodpatentsassertedinsuitsallegingpatentinfringement,andmayincludeanexaminationofanyotherareasthattheComptrollerGeneraldeterminestoberelevant.

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1.47. Study on Secondary Patent Market BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported)would require theUSPTO to conduct a study (A) to develop legislativerecommendationstoensuregreatertransparencyandaccountabilityinpatenttransactionsoccurringonthesecondarymarket;(B)toexaminetheeconomicimpactthatthepatentsecondarymarkethasontheUnited States; (C) to examine licensing and other oversight requirements thatmay be placed on thepatentsecondarymarket,includingontheparticipantsinsuchmarkets,toensurethatthemarketisalevel playing field and that brokers in themarket have the requisite expertise and adhere to ethicalbusinesspractices;and(D)toexaminetherequirementsplacedonothermarkets.

1.48. Small Business Outreach and Study BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported) would require the USPTO, using existing resources, to develop“educationalresourcesforsmallbusinesstoaddressconcernspertainingtopatentinfringement.”Bothbills also require the USPTO’s existing small business outreach programs to provide education andawarenessonabusivepatent litigationpractices. Bothbillsalsowouldrequire theUSPTOtocreateawebsite tonotify thepublicwhenapatent case is brought in Federal court, including themandatoryinformationregardingownershipthattheplaintiffisrequiredtofileincourt,andanyotherinformationtheDirectordeterminestoberelevant.

H.R.9alsorequirestheUSPTOtoconductastudytoexaminetheeconomic impactofthe InnovationAct on the ability of individuals and small businesses owned bywomen, veterans, andminorities, toassert, secure, and vindicate the constitutionally guaranteed exclusive right to inventions anddiscoveries.

Sen.Coons(D-DE)’sS.631 (“STRONGPatentsActof2015”) (introduced)wouldrequiretheUSPTOtomakeavailableonlineatnochargeallpatentandtrademarkinformationthatisavailableatthePublicSearchFacilityoftheUSPTO’sAlexandria location, includingsearchtoolsanddatabases, informationalmaterials,andtrainingclassesandmaterials.

1.49. Study on Government Owned Patents Rep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”)(asreported)wouldrequiretheUSPTOtoconductastudyonpatentsownedbytheU.S.Governmentthat—(A)examineshowsuchpatentsarelicensedandsold, and any litigation relating to the licensing or sale of such patents; (B) provides legislative andadministrative recommendations onwhether there should be restrictions placedonpatents acquiredfrom the United States Government; (C) examines whether or not each relevant agency maintainsadequate records on the patents owned by such agency, specificallywhether such agency addresseslicensing,assignment,andGovernmentgrantsfortechnologyrelatedtosuchpatents;and(D)providesrecommendations to ensure that each relevant agency has an adequate point of contact that isresponsibleformanagingthepatentportfoliooftheagency.

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1.50. Study on Patent Examination Quality Rep.Goodlatte(R-VA)’sH.R.9(“InnovationAct”)(asreported)wouldrequiretheComptrollerGeneralof the United States to conduct a study on patent examination at the USPTO and the technologiesavailable to improve examination and improve patent quality. The study shall include: (A) anexamination of patent quality at the Office; (B) an examination of ways to improve patent quality,specificallythroughtechnology,thatshallincludeexaminingbestpracticesatforeignpatentofficesandtheuseofexistingoff-the-shelf technologies to improvepatentexamination; (C)adescriptionofhowpatentsareclassified; (D)anexaminationofprocedures inplacetopreventdoublepatentingthroughfiling by applicants in multiple art areas; (E) an examination of the types of off-the-shelf prior artdatabasesandsearchsoftwareusedbyforeignpatentofficesandgovernments,particularly inEuropeandAsia,andwhetherthosedatabasesandsearchtoolscouldbeusedbytheOfficetoimprovepatentexamination; and (F) an examination of any other areas the Comptroller General determines to berelevant.

1.51. Study on Demand Letters Rep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”)(asreported)wouldrequiretheUSPTOtoconductastudyoftheprevalenceofthepracticeofsendingpatentdemandlettersinbadfaithandtheextenttowhich thatpracticemay, through fraudulentordeceptivepractices, imposeanegative impacton themarketplace.

1.52. Study on Small Claims Patent Court BothRep.Goodlatte(R-VA)’sH.R.9 (“InnovationAct”) (asreported)andSen.Grassley(R-IA)’sS.1137(“PATENT Act”) (as reported)would require the AdministrativeOffice of theUS Courts to conduct astudytoexaminetheideaofdevelopingapilotprogramforpatentsmallclaimsprocedureswithinthejudicial districts that areparticipating in theexistingPatentCasePilotProgramestablishedbyPub. L.111-349. Thestudywouldexamine(i)thenecessarycriteriaforusingsmallclaimsprocedures;(ii)thecoststhatwouldbeincurredforestablishing,maintaining,andoperatingsuchapilotprogram;and(iii)thestepsthatwouldbetakentoensurethattheproceduresusedinthepilotprogramarenotmisusedforabusivepatentlitigation.

In December 2012, the USPTO published a Federal Register notice requesting public comment onwhethertheUnitedStatesshouldestablishasmallclaimsproceedingforpatentenforcement incaseswith lowmonetarydamages. AmongthequestiontheUSPTOaskedwaswhetherthere isaneedanddesireforthistypeofproceeding,inwhatcircumstancesisthisproceedingneeded,andwhatfeaturesthisproceedingshouldpossess. Thenoticementionedthatin1989-90,boththeAmericanIntellectualProperty LawAssociation (AIPLA) andAmericanBarAssociation Intellectual Property Section (ABA-IP)expressedsupportforthecreationofasmallclaimspatentcourt.

1.53. Grace-Period Expansion Rep.Sensenbrenner(R-WI)’sH.R.1791(introduced)andSen.Baldwin(D-WI)’sS.926(introduced),bothtitled“GracePeriodRestorationActof2015”,wouldeliminateaspriorartanydisclosurebyanypersonthat ismadewithinthe1-yeargraceperiod, ifsuchdisclosure ismadebeforetheclaimedinventionispubliclydisclosed,1yearor lessbefore theeffective filingdateof theclaimed invention, inaprinted

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publication by a “covered person” in amanner that satisfies thewritten-description and enablementrequirementsof§112(a).A“coveredperson”isdefinedastheinventor,jointinventor,oranotherwhoobtainedtheclaimedinventiondirectlyorindirectlyfromtheinventororjointinventor.

1.54. Secret Prior Art TheUSPTOhas interpretedtheAIA’schanges to35U.S.C.§102asoverrulingMetallizingEngineeringCo. v.KenyonBearing&AutoPartsCo., 153F.2d516 (2dCir. 1946) (holding thatapatentee’s secretcommercializationofitsinvention,morethan1yearbeforetheeffectivefilingdate,constitutespriorartagainsttheinvention).TheUSPTO’sinterpretationisbeingchallengedonappealattheFederalCircuitinHelsinnHealthcareS.A.v.Dr.Reddy’sLabs. Ltd.,No.16-1284. Currently,nopendingbill addressesthisissue.

1.55. Patent-Related Tax Deduction Rep.Schwartz (D-PA) introducedH.R. 2605 (“Manufacturing Innovation inAmericaAct”) in the113thCongress which would have reduced business taxes by more than half, to a 10 percent rate, forcompanies that manufacture patented products in the United States. The bill seeks to encouragecompaniestoinventandownpatentsintheUnitedStatessimilartotheUnitedKingdom’s“PatentBox”taxscheme.Currently,nopendingbilladdressesthisissue.

1.56. Pre-Issuance Submissions TheAIAcreatedamechanismforthepublictofile“thirdpartysubmissions”ofpriorartandtohavethatart considered by the USPTO examiner during the pendency of a patent application. While the AIArequiresthissubmissionto includea“concisedescriptionoftheassertedrelevanceofeachsubmitteddocument,” theUSPTOhas interpreted the statuteasprohibiting the submittingparty from includingany“arguments”orany“proposedgroundsofrejection”inthesesubmissions.Asubstantialnumberofthird party submissions have been found defective for this reason. Moreover, the USPTO hasinterpreted the AIA as disallowing third party submissions in reexamination proceedings and reissueapplications,eveniftheclaimsarebeingbroadenedduringreissue.Currently,nopendingbilladdressesthisissue.

1.57. Inventorship Challenges TheAIAeliminated subsection (f)of35U.S.C.§102,whichprovided, “Aperson shallbeentitled toapatentunless. . .hedidnothimselfinventthesubjectmattersoughttobepatented.”Somethoughtthat by eliminating this provision, the identity of the true inventor would no longer be relevant topatentability, which instead would be addressed solely in a derivation proceeding. The USPTO,however, has taken the position that inventorship is still relevant to patentability andmay form thebasisofarejectionunder35U.S.C.§101(“Whoeverinventsordiscovers....”).Currently,nopendingbilladdressesthisissue.

1.58. Inventor’s Oath in Reissue Applications In 2003, as part of the USPTO’s 21st Century Strategic Plan, the USPTO proposed eliminating theprohibitionagainstassignees(ratherthaninventors)applyingforabroadeningreissuepatentunder35U.S.C.§251(c).AlthoughtheAIAnowpermitsapplicationstobefiledbytheassignee,theAIAdidnot

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remove the requirement in §251(c) that inventors must execute a new oath or declaration in abroadeningreissueapplication.Currently,nopendingbilladdressesthisissue.

1.59. Mandatory 18-Month Publication of Patent Applications CongressmayneedtoconsiderwhetherratificationoftheTrans-PacificPartnership(“TPP”)willrequireamending U.S. patent law to requiremandatory publication of pending patent application within 18months of the application’s filing date or, if priority is claimed, the application’s earliest prioritydate. Some believe that the absence of a non-publication request exception in Article 18.44 of theTPP—anexceptionthatwasincludedinearliernegotiatingdrafts—willbartheUSPTOfromcontinuingitspracticeofallowingapplicantstorequestnon-publicationunder35U.S.C.§122(b)(2)(B).

2. Executive Agency Proposals

During2013-2014,theWhiteHouseannounced8executiveactionsdirectedtopatentissues.First,onJune4,2013,theWhiteHouseannounced5executiveactions"tohelpbringaboutgreatertransparencytothepatentsystemandleveltheplayingfieldforinnovators."Later,onFebruary20,2014,theWhiteHouseannouncedthreemoreexecutiveactionsaimedatencouraginginnovationandstrengtheningthe"quality and accessibility of the patent system." Below is a summary and status of each of the 8executive actions directed to patents, aswell other initiatives being undertaken across the ExecutiveBranch.

2.1. Executive Action 1: Attributable Patent Ownership Aimedatexposing“patenttrolls”who“setupshellcompaniestohidetheiractivities”,theUSPTObegana rulemakingprocess to requirepatentapplicantsandowners to regularlyupdate their “realparty ininterest”informationateachpointduringthepatentapplicationprocessandthroughoutthetermofanissuedpatent.However,afterreceivingfeedbackfromthepublic,theUSPTOdecidednottoimplementafinalrule. AsDirectorMichelleK.Leeexplaining,“afterreadinga lotof inputandtalkingtoa lotofstakeholders, [the USPTO has decided that] Congress is in the best position to enact rules ontransparency,becauseyouhavebetterauthoritytoaskforthatkindofinformationattimeoflitigation.”Hearing on H.R. 9, Committee on the Judiciary, House of Representatives, Serial No. 114-20, at p. 61(April14,2015).

2.2. Executive Action 2: Clarity in Patent Claims Initially aimed at discouraging or curbing the use of functional claim language (e.g., “means plusfunction” language forsoftware inventions), theUSPTOshiftedthe focusof this initiative toexaminertrainingandimprovingtheclarityoftheexaminationrecord.TheUSPTOalsolauncheda“GlossaryPilotProgram” tovoluntarilyencourageapplicants to includeaglossaryof claimdefinitions in theirpatentspecifications.

2.3. Executive Action3: Empowering Downstream Users Inaneffort toeducate “unsuspecting retailers, consumers, and smallbusinesses” thatareaccusedofpatentinfringement,theUSPTOcreatedawebsite(www.uspto.gov/patents-maintaining-patent/patent-

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litigation/patent-litigation) that provides information on: (1) the steps someone can take when theyreceive a patent infringement letter; (2) basic information about patents, including explainingwhat apatentisandhowtofindacopyofapatent;(3)howtodeterminewhoownsapatent;(4)howtofindanattorney;and(5)howtodetermineifanyoneelseisbeingsuedbythepatentowner.

2.4. Executive Action 4: Expanded Outreach and Focused Study ThisexecutiveactioninvolvesUSPTO-ledroundtableson“hightechpatentissues”andanexpansionofthe USPTO’s Thomas Alva Edison Visiting Scholar Program whereby law school professors conductscholarly research at the USPTO on either a full or part-time basis. Examples of roundtables topicsinclude prior art access, glossaries, software partnership, and internet searching and use ofcrowdsourcingtolocatepriorart.

2.5. Executive Action 5: Crowdsourcing Prior Art This initiative seeks to use crowdsourcing to locate prior art that is otherwise not contained in theUSPTO’ssearchdatabases. TheUSPTOconductedseveral roundtablesandrequestedcomments fromthe public on the topic and states that it will issue “proposed examiner search and crowdsourcingguidance.”

2.6. Executive Action 6: More Robust Technical Training and Expertise

Underthisinitiative,theUSPTOhasexpandeditsexistingPatentExaminerTechnologyTrainingProgramthatbrings inoutside technical experts to give topical lectures topatentexaminerson issues in theirfields.Inparticular,theUSPTOhas“simplifiedtheprocessofascientistorengineertovolunteertheirtimetoprovidetechnicaltrainingtoexaminers,”isalso“leverag[ing]allpossiblewaystomaketrainingpossiblesuchasthroughtheuseofthesatelliteofficelocationsaslecturevenues,webcasting,andotheronlineresources.”

2.7. Executive Action 7: Patent Pro Bono and Pro Se Assistance Under this initiative, theUSPTOhaspostededucational resources forproseapplicants seeking to filepatent applications, andhas encouraged law schools andbar associations to give free legal advice tosmallinventorsinterestedinsecuringpatentprotectionfortheirinventions.AccordingtotheUSPTO’swebsite,theagencyhasappointedafull-timeProBonoTeamtoworkwiththeAIAProBonoAdvisoryCounciltoextendcoveragetoall50states.

2.8. Executive Action 8: Strengthen Enforcement of ITC Exclusion Orders

Theonlyoneof theeight executive actionsnotdelegated to theUSPTO, this initiative is intended to“make the enforcement of exclusion orders issued by the International Trade Commission moretransparent, effective, and efficient.” In February 2015, the ITC announced a pilot programaimed atproviding more efficient determinations on the scope of remedial orders it issues with respect toredesigns and new products introduced after the original ITC investigation has been completed.Separately,Customs&BorderProtectionisproposingtoamenditsrulesgoverningtheenforcementof

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ITCexclusionordersbycreatinganinterpartesproceedingthatwouldallowboththepatentownerandtheaccusedinfringertoaddresswhetheranimportedproductiscoveredbyanexclusionorder.

2.9. ITC Domestic Industry InJune2013,theITCannouncedthatithad“launchedapilotprogramtotestwhetherearlierrulingsoncertaindispositiveissuesinsection337investigationscouldlimitunnecessarylitigation,”andspecificallypointed to “the existence of a domestic industry” as one issue to be decided within 100 days ofinstitutinganinvestigation.

2.10. FTC Investigations of Patent Assertion Entities InSeptember2013, theFTCpublishedaFederalRegisternoticeseekingpubliccommentonproposedinformation requests to “PAEs and other entities asserting patents in the wireless communicationsector,includingmanufacturersandnon-practicingentitiesandorganizationsengagedinlicensing.”ThenoticestatesthattheFTCisconductingthisstudypursuanttoitsauthorityunderSection6(b)oftheFTCAct.Theproposedinformationrequest,whichtheFTCsaiditexpectstosendtoapproximately25PAEsand15otherentities,wouldincludethefollowingquestions:

• How do PAEs organize their corporate legal structure, including parent and subsidiary entities?(RequestB)

• WhattypesofpatentsdoPAEshold,andhowdotheyorganizetheirholdings?(RequestC&D)• HowdoPAEsacquirepatents,andhowdotheycompensatepriorpatentowners?(RequestE)• HowdoPAEsengageinassertionactivity(i.e.demand,litigation,andlicensingbehavior)?(Request

F)• WhatdoesassertionactivitycostPAEs?(RequestG);and• WhatdoPAEsearnthroughassertionactivity?(RequestH)TheFTChasnotyetpublishedtheresultsoftheabove-describedSection6(b)study.In2013,theFTCbegananinvestigationofMPHJ,apatentassertionentitythatsentthousandsoflettersto smallbusinessesalleging infringementofpatentsonnetworked scanners. MPHJ’s lettersallegedlydemanded payment of a royalty and threatened legal action if the business did not agree to thedemand.Nosuitswereeverfiledagainstbusinessesthatfailedtorespondtotheletters. Inaddition,MPHJallegedlyfalselyrepresentedthatmanyothercompanieshadalreadyagreedtopaytheroyalty.TheFTCclaimedthatMPHJviolated15U.S.C.§45byengaginginunfairordeceptiveactsorpracticesinor affecting commerce. OnNovember 6, 2014, the FTC announced that it had reached a settlementagreementwithMPHJ.Underthatagreement,MPHJhasagreednottomakefalseorunsubstantiatedrepresentations that a patent has been licensed to others or that it intends to initiate a lawsuit, andmustcomplywithreportingrequirements.

2.11. FTC/DOJ Licensing Guidelines In August 2016, the FTC and DOJ Antitrust Division published a proposed update to the AntitrustGuidelines for theLicensingof IntellectualProperty (alsoknownasthe IPLicensingGuidelines),whichwere originally issued in 1995. The proposed update is intended to “modernize” the IP Licensing

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Guidelinesinorderto“accuratelyreflectinterveningchangesinstatutoryandcaselaw”inthepast20-plusyears.PubliccommentsontheproposedupdateareduebySeptember26,2016.

2.12. DOJ/USPTO Standard Essential Patents In January2013, theDOJ’sAntitrustDivisionandtheUSPTOreleasedapolicystatement titled“PolicyStatement on Remedies for Standards-Essential Patents Subject to Voluntary F/Rand Commitments.”ThestatementgenerallydisfavorstheissuanceofexclusionordersbytheITCincaseswhereapatentisessential to a technology standard and is encumbered with a commitment by the patent owner tolicensethepatentonafair,reasonable,andnondiscriminatory(F/RAND)basis.Thestatementidentifiescertain exceptions to this rule, such as “where the putative licensee is unable or refuses to take aF/RANDlicenseandisactingoutsidethescopeofthepatentholder’scommitmenttolicenseonF/RANDterms,” and “if a putative licensee is not subject to the jurisdiction of a court that could awarddamages.”

On August 3, 2013, the U.S. Trade Representative (USTR) relied in part on the DOJ/USPTO policystatement when it vetoed the ITC’s exclusion order against Apple involving a Samsung patentencumberedwithaFRANDcommitment.

2.13. USPTO Report on AIA Implementation In September2015, theUSPTO issued its 4-year implementation report as requiredby theAIA, titledStudy and Report on the Implementation of the Leahy-Smith America Invents Act. In addition toreportingonthemanner inwhichtheUSPTOhas implementedtheAIA, thestudy recommendedthatCongressmakethefollowinglegislativechanges:

Topic Recommendation

EnrollmentandDiscipline Allowdisciplinaryproceedingstocommence18monthsaftermisconductwasfirstmade known to USPTO rather than one year, and clarify timing related toconcurrentlypendingcourtcases.

OathandDeclaration Amendthebenefitprovisionstostatethattheapplicationmustnameaninventorincommonratherthanthattheymustbefiledbyacommoninventor.

SamePartyJoinder Clarify joinder provisions for inter partes and post-grant review proceedings tostatethatsamepartyjoinderispermitted.

CorrectionofReal-Party-in-Interest

Allowfortimelycorrectionofrealpartyin-interestidentificationwhereerrorarosewithoutdeceptiveintent.

Fee-SettingSunsetProvision Removethesunsetperiodandmakeauthoritytoadjustpatentandtrademarkfeesbyrulepermanent.

Fee-SettingPublicAdvisoryCommitteeHearings

Specify that the 30-day requirement is applicable to a “formal” fee proposal.Replacethe30-daytimeperiodforapublichearingwitha45-daytimeperiod.

Fee-SettingEffectiveDateofFeeChanges

ChangetheeffectivedatetostartfromthedatepublishedintheFederalRegister,but maintain the requirement to publish proposed changes in both the FederalRegisterandtheOfficialGazette.

USPTOFundingDetailedSpendingPlan

Eliminate the requirement for a detailed spending plan to accompany areprogrammingnoticetotransferfundstotheoperatingreserve.

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2.14. USPTO International Harmonization TheUSPTO held a roundtable inNovember 2014 to obtain public input on the topic of internationalharmonization of substantive patent law. Among other topics, the roundtable focused on theharmonizationof(a)thedefinitionandscopeofpriorart,(b)thegraceperiod,and(c)thestandardsforassessingnoveltyandobviousness/inventivestep.TheUSPTOissueda“ReportandRecommendation”basedonthisroundtablewhichmadetworecommendations:(1)“USPTOshouldcontinueengagementwith key jurisdictions to advance harmonization discussions on issues related to prior art and itsapplicationduringexamination,givingdueconsideration to theviewsof stakeholdersasexpressedattheRoundtableandinwrittensubmissions”;and(2)“USPTOshouldconsiderseparatingissuesthataremore suitable for harmonization at the legal level from those where work at an administrative orpracticelevelmightbemorefruitful.”

2.15. USPTO Post-Grant Rulemaking InApril2016, theUSPTOpublisheda final rulethatamendedtheproceduresgoverning IPR,PGR,andCBMproceedingsbeforethePTAB.Specifically,theamendedprocedures:

• Allowpatentownerstofile,withtheirpreliminarypatentownerresponse,testimonialevidenceintheformofdeclarationsoraffidavits;

• AddaRule11-typecertificationforpapersfiledinaproceeding;• ClarifythatthePTABwilluseadistrictcourt-styleclaimconstructionstandardforpatentsthat

willexpireduringaproceedingandtherefore,cannotbeamended,whilemaintainingtheuseofthe“broadestreasonableinterpretation”standardforallotherpatents;and

• Replacethepagelimitwithawordcountlimitformajorbriefings.

The USPTO also said that it would amend its Office Patent Trial Practice Guide to reflect these rulechangesanddevelopmentsinpracticeconcerninghowtheUSPTOhandlesmotionstoamend,motionsforadditionaldiscovery,realparty-in-interestandprivyissues,andconfidentialinformation.

TheUSPTOalsosaidthatitwillcontinuetorefinetherulesasneededtopromotefairnessandefficiencyinPTABproceedings.

2.16. OIG Report on USPTO Examiner Time and Attendance InAugust2016,theDepartmentofCommerce’sOfficeoftheInspectorGeneral(“OIG”)issuedareporttitled:AnalysisofPatentExaminers’TimeandAttendance,InvestigativeReportNo.14-0990.Thereportfound that the USPTO paid examiners over $18.3 million in wages and benefits for hundreds ofthousandsofhoursthatOIGcouldnotconfirmtookplace.OIG’srecommendationswerefortheUSPTO:

(1) to reevaluate its examiner production goals for each art unit and revise them, to the extentnecessary,toreflectefficienciesinworkprocessesfromautomationandotherenhancements;

(2) to require all examiners to provide supervisors with their work schedules, regardless ofperformanceandratings;

(3) toreinstatetheUSPTOrequirementthatemployeesusetheirUSPTO- issuedIDbadgestoexittheUSPTOfacilitiesthroughthecontrolled-accessturnstilesduringweekdayworkinghours;

(4) torequireallteleworkerstoremainloggedintotheUSPTOnetworkduringtheirworkinghourswhenthenetworkisavailabletotheteleworker

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(5) to review its policies, procedures, and practices pertaining to overtime hours to identify andeliminatetheareassusceptibletoabuse;and

(6) toconsiderdeployingSmallOfficeHomeOffice(SOHO)routersbyallteleworkers.

2.17. GAO Report on Patent Examination Quality InJuly2016,theGAOpublishedtworeportsonpatentexaminationquality:PatentOfficeShouldDefineQuality, Reassess Incentives, and Improve Clarity (GAO-16-490) and Patent Office Should StrengthenSearchCapabilitiesandBetterMonitorExaminers'Work(GAO-16-479).

Inthefirstreport,theGAO’srecommendedtheSecretaryofCommercetodirecttheUSPTO:

(1) to develop a consistent definition of patent quality, and clearly articulate this definition inagencydocumentsandotherguidance;

(2) tofurtherdevelopmeasurable,quantifiablegoalsandperformanceindicatorsrelatedtopatentqualityaspartoftheagency'sstrategicplan;

(3) toanalyzethetimeexaminersneedtoperformathoroughpatentexamination;(4) toanalyzehowcurrentperformance incentivesaffect theextent towhichexaminersperform

thoroughexaminationsofpatentapplications;(5) toestablishaprocesstoprovidedataontheresultsofthePatentTrialandAppealBoard(PTAB)

proceedingstomanagersandstaff intheUSPTO'sTechnologyCenters,andanalyzePTABdatafor trends in patent quality issues to identify whether additional training, guidance, or otheractionsareneededtoaddresstrends;

(6) toevaluate theeffectsofcompactprosecutionandotheragencyapplicationandexaminationpoliciesonpatentquality;and

(7) toconsiderwhethertorequirepatentapplicantstoincludeclaimclaritytools--suchasaglossaryof terms, a check box to signal functional claim language, or claim charts--in each patentapplication.

Inthesecondreport,theGAO’srecommendedtheUSPTO:

(1) to work with the European Patent Office (EPO) to identify a target level of consistency ofCooperative Patent Classification decisions between USPTO and EPO and develop a plan tomonitorconsistencytoachievethetarget;

(2) todevelopandperiodicallyupdateadocumentedstrategytoidentifykeysourcesofnonpatentliteratureforindividualtechnologycentersandtoassesstheoptimalmeansofprovidingaccesstothesesources,suchasincludingtheminUSPTO'ssearchsystem;

(3) to develop written guidance on what constitutes a thorough prior art search within eachtechnologyfield(i.e.,mechanical,chemical,electrical), technologycenter,artarea,orartunit,asappropriate,andestablishgoalsandindicatorsforimprovingpriorartsearches;

(4) toensure thatsufficient information iscollected in reviewsofpriorart searches toassess thequalityofsearchesatthetechnologycenterlevel,includinghowoftenexaminerssearchforU.S.patents,foreignpatents,andnonpatentliterature;

(5) tousetheauditsandsupervisoryreviewstomonitorthethoroughnessofexaminers'priorartsearchesandimprovementsovertime;

(6) to specifically assess the time examiners need to conduct a thorough prior art search fordifferenttechnologies;and

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(7) assesswhetherthetechnicalcompetenciesofexaminersineachtechnologycentermatchthosenecessary; develop strategies to address any gaps identified, such as a technical trainingstrategy;andestablishmeasurestomonitorprogresstowardclosinganygaps.

2.18. GAO Study on Non-Practicing Entities The GAOwas tasked under the AIA to study the consequences of patent litigation by non-practicingentities andpatentmonetization entities (PMEs). GAO released its report inAugust 2013. TheGAOfound that PMEs do not file themajority of patent infringement lawsuits and that the change in thenumber of suits brought by PMEs in the last 5 years was “not statistically significant.” Rather, themajorityofpatentinfringementsuitscontinuetobebroughtbypracticingentities. (SeeFig.4ofGAOreportbelow.) Moreover, in thesoftwarespace,operatingcompaniesaccount for59%ofall lawsuitsfiledinvolvingsoftwarepatents,whereasPMEsaccountfor41%.

2.19. SBA Report on First-to-File AIA§3(l) required theSmallBusinessAdministration (SBA) toconductastudyof theeffectsonsmallbusinessesofswitchingtoafirst-to-filesystem.ThereportwasduetoCongressonSeptember16,2012,butwasnotissueduntilJune15,2015.TheSBA’sreport,titledTheLeahy-SmithAmericaInventsAct:APreliminaryExaminationofItsImpactonSmallBusinesses,foundnoconsensusinitsliteraturereviewontheeffectsoftheAIA’sswitchtofirst-to-file.Thereportdidfind,basedonCanada’ssimilarexperience,that“thepatentingofsmallercompaniesdeclinedrelativetolargercompaniesafterCanada’sswitchtofirst-to-filebecameeffective.”However,duetothe“complexityofandambiguitieswithintheAIA,”thereportconcludedthat“theimpactofthe[AIA]legislationonsmallbusinessesisyettobedetermined.”Thereportrecommendedafollow-upstudytobeperformedin3to5years.

3. Judicial Developments

ThefollowingsignificantcasesarependingbeforetheU.S.SupremeCourtandtheFederalCircuit.

3.1. Samsung v. Apple Design Patents InMarch2016,theSupremeCourtgrantedSamsung’spetitionforwritofcertiorariastothequestion:“Where a design patent is applied to only a component of a product, should an award of infringer's

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profitsbelimitedtothoseprofitsattributabletothecomponent?”TheU.S.Governmentfiledanamicusbrief supporting neither party but arguing that: (1) Section 289 of the Patent Act of 1952 does notpermitapportionmentofdamagesbasedon theextent towhich the infringer’sprofiton the relevant“articleofmanufacture”wasattributable to the infringingdesign, and (2) to calculate the totalprofitdueunderSection289,thefact-findermustidentifythe“articleofmanufacture”towhichtheinfringingdesignhasbeenapplied,andthatarticlewillnotalwaysbethefinishedproductsoldtoend-users.ThecaseissetfororalargumentonOctober11,2016.

3.2. SCA Hygiene Laches Defense In May 2016, the Supreme Court granted SCA Hygiene Products Aktiebolag’s petition for writ ofcertiorari as to thequestion:“Whetherand towhatextent thedefenseof lachesmaybara claim forpatent infringement brought within the Patent Act's six-year statutory limitations period, 35 U.S.C.§286.”Inanenbancdecisionbelowinthissamecase,theFederalCircuitheldthat,unlikeincopyrightcases, the lachesdefensemaybeused tobarpatent infringement claimsaccruingwithin the six-yearlimitationsperiodunder§286.

3.3. Life Technologies Single-Component Supply In June 2016, the Supreme Court granted Life Technologies’ petition for writ of certiorari as to thequestion:“WhethertheFederalCircuiterredinholdingthatsupplyingasingle,commoditycomponentofa multi-component invention from the United States is an infringing act under 35 U.S.C.§271(f)(1),exposing themanufacturer to liability for allworldwide sales.” The Federal Circuit hadheld that LifeTechnologies is liable for patent infringement for worldwide sales of a multi-component kit madeabroadbecauseasingle,commoditycomponentof thekitwasshipped fromaLifeTechnologies’U.S.facility to itsownforeign facility. InMay2016, theU.S.Government filedabriefurgingtheSupremeCourt to grant certiorari as to the abovequestion, in response to a call for the viewsof the SolicitorGeneral.

3.1. TC Heartland Venue InJuly2016,theSupremeCourtgrantedTCHeartland’sapplicationtoextendtimetofileapetitionforwrit of certiorari until September 12, 2016. In April 2016, the Federal Circuit denied TC Heartland’spetition forwrit ofmandamus, agreeingwith theU.S.District Court for theDistrict ofDelaware thatvenuewasproperinthatdistrictbecauseTCHeartland“resides”inthatdistrictwithinthemeaningof28U.S.C.§1440(b),asinterpretedinVEHoldingCorp.v.JohnsonGasApplianceCo.,917F.2d1574(Fed.Cir. 1990) (holding that a corporation “resides” in any districtwhere itwould be subject to personaljurisdiction).

3.1. Aqua Products Burden of Proof for Claim Amendments The en banc Federal Circuit is scheduled to hear oral argument on December 9, 2016 in In re AquaProducts, Inc.,No.2015-1177. InAugust2016,theFederalCircuitgrantedAquaProducts’petitionforrehearingenbancandorderedbriefingonthefollowingquestions:

(1) “When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTOrequirethepatentownertobeartheburdenofpersuasion,oraburdenofproduction,regarding

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patentability of the amended claims as a condition of allowing them? Which burdens arepermittedunder35U.S.C.§316(e)?”

(2) “Whenthepetitionerdoesnotchallengethepatentabilityofaproposedamendedclaim,ortheBoard thinks the challenge is inadequate, may the Board sua sponte raise patentabilitychallenges to such a claim? If so, where would the burden of persuasion, or a burden ofproduction,lie?”

3.2. Helsinn v. Teva Secret Commercialization TheFederalCircuitisscheduledtohearoralargumentonOctober4,2016inHelsinnHealthcareS.A.v.TevaPharmaceuticalsUSA,Inc.,No.16-1284.Thecaseinvolvesaquestionoffirstimpressionregardingwhether the amendmentsmade to 35U.S.C. §102 by the Leahy-Smith America Invents Act overruleMetallizingEng’gCo. v.KenyonBearing&AutoPartsCo., 153F.2d516 (2dCir. 1946) (holding thatapatentee’ssecretcommercializationof its invention,morethan1yearbeforetheeffectivefilingdate,constitutes prior art against the invention). Both the USPTO and the district court below haveinterpretedthenewlyaddedlanguagein§102,“orotherwiseavailabletothepublic,”asmodifyingeachof the preceding categories of prior art in that sentence (“in public use, on sale”), and therefore aninventor’spublicuseorsaleofaninventionispriorartagainsttheinventiononlyiftheuseorsalemadethe invention “available to the public.” In May 2016, the U.S. Government filed an amicus brief insupportofappelleeHelsinn.

4. State Law Developments

4.1. State Legislation Morethanhalfthe50stateshaveenactedorintroducedalawintheirlegislaturestoitmakeillegalforaperson to send “bad faith” patent demand letters to residents of their states. Most of these statesdefine“badfaith”usingalistofnon-exhaustivefactors,suchasfailingtoidentifythepatentownerorpatent number in the demand letter, failing to conduct an infringement analysis before sending theletter,demandinganunreasonable royaltyamount,ordemandinga responsewithinanunreasonablyshortperiodoftime. Somestatesprovideanexemptionforuniversitiesandtheirtechnologytransferorganizations, as well as exemptions for pharmaceutical litigation under 35 U.S.C. §271(e)(2) or 42U.S.C.§262.

4.1.1. Alabama

In2014,AlabamaenactedS.B.121.Thelawallowscourtstoconsider,asonefactorweighingagainstafinding of bad faith, that the letter was sent by an institution of higher education or a technologytransferorganizationownedoraffiliatedwithsuchaninstitution. Thelawexemptsdemandlettersorcivilactionsthatincludeaclaimforreliefarisingunder35U.S.C.§271(e)(2).

4.1.2. Arizona

In 2016, Arizona enacted H.B. 2386. The law prohibits the making of false accusations of patentinfringementbyoutliningfactorsasevidenceofbadfaithandfactorsasevidenceofgoodfaith.Thelawallowscourtstoconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassent

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by an institution of higher education or a technology transfer organization affiliated with such aninstitution. The law exempts demand letters that include a claim for relief arising under 35 U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.3. California

In2015,theCalifornialegislaturefiledAssemblyJointResolutionAJR9withtheSecretaryofStatethatwould “urge the President and the Congress of the United States to craft a balanced and workableapproach to reduce incentives for and minimize unnecessary patent litigation while ensuring thatlegitimatepatentenforcementrightsareprotectedandmaintained.”

4.1.4. Colorado

In2015,ColoradoenactedH.B.1063.Thelawexemptsinstitutionsofhighereducation,theirassociatedtechnology transfer entities, as well as a claim for relief arising under 35 U.S.C. §271(e)(2) after anobjectivelygoodfaithinvestigation.

4.1.5. Connecticut

In 2014, theConnecticut SenatepassedS.B. 258 as amendedby SenateAmendment ScheduleA andwasplacedontheHouseCalendar.Underthebill,thefactthataninstitutionofhighereducationoratechnology transferorganizationsent the letter isa factor thatweighs towardsgood faith. Thebill issilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.6. Florida

In2016,FloridaenactedS.B.439.Thelawexemptsinstitutionsofhighereducation,technologytransferorganizations ownedby or affiliatedwith an institutionof higher education, anddemand letters thatincludeaclaimforreliefarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.7. Georgia

In2014,GeorgiaenactedH.B.809.Thelawallowscourtstoconsider,asonefactorweighingagainstafinding of bad faith, that the letter was sent by an institution of higher education or a technologytransferorganizationownedoraffiliatedwithsuchaninstitution.Thelawexemptsanydemandletterorcivilactionthatarisesunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.8. Idaho

In2014,IdahoenactedS.B.1354.Thelawissilentwithrespecttodemandletterssentbyinstitutionsofhigher education, or technology transfer organizations. The law exempts any demand letters orassertionsofpatentinfringementarisingunder35U.S.C.§271(e)(2).

4.1.9. I l l inois

In2014,IllinoisenactedS.B.3405.Thelawissilentwithrespecttodemandletterssentbyinstitutionsofhighereducation,ortechnologytransferorganizations,orclaimsarisingunder35U.S.C.§271(e)(2).

OnFebruary18,2016,S.B. 2887was introduced toamendthe2014 law. Thebillwoulddefinegoodfaithandbadfaithlikemanyofthebillsfromotherstates. Thebillwouldallowcourtstoconsider,asone factorweighingagainsta findingofbad faith, that the letterwas sentbyan institutionofhigher

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education or a technology transfer organization owned or affiliated with such institutions. The billwouldexemptdemandlettersthatclaimreliefarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.10. Indiana

In 2015, Indian enacted H.B. 1102. The law exempts institutions of higher education, technologytransferorganizationsownedbyoraffiliatedwithaninstitutionofhighereducation,anddemandlettersthatincludeaclaimforreliefarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.11. Iowa

On January 14, 2015, S.B. 1028 was introduced in the Iowa Senate. The bill would allow courts toconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitutionofhighereducationora technologytransferorganizationownedoraffiliatedwithsuchan institution.Thebillissilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.12. Kansas

In 2015, Kansas enactedS.B. 38. The lawdoes not discuss the treatment of demand letters sent byinstitutions of higher education or technology transfer organizations. The law exempts any demandlettersorassertionsofpatentinfringementarisingunder35U.S.C.§271(e)(2).

4.1.13. Kentucky

On January 7, 2016,H.B. 190was introduced in the KentuckyHouse. The billwould allow courts toconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitutionofhighereducationora technologytransferorganizationownedoraffiliatedwithsuchan institution.Thebillwouldexemptanydemandletterorclaimarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.14. Louisiana

In2014,LouisianaenactedS.B.255.Thelawallowscourtstoconsider,asonefactorweighingagainstafinding of bad faith, that the letter was sent by an institution of higher education or a technologytransferorganizationownedbyoraffiliatedwith suchan institution. Thebill is silentwith respect todemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.15. Maine

In2014,MaineenactedS.P. 654. The lawallows courts to consider, asone factorweighingagainst afinding of bad faith, that the letter was sent by an institution of higher education or a technologytransfer organization owned by or affiliatedwith such an institution. The law exempts any demandletterorassertionofinfringementthatarisesunder35U.S.C.§271(e)(2)or42U.S.C.§262.

OnJanuary27,2015,H.P.117wasintroducedtotheMaineHousetoamendthe2014lawbyremovingtheexemptionforclaimsarisingunder35U.S.C.§217(e)(2)and42U.S.C.§262. Thebill failedintheHouse.

4.1.16. Maryland

In2014,MarylandenactedS.B.585.Thelawallowscourtstoconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyarepresentativeofaninstitutionofhighereducationora

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technology transfer organization affiliated with such an institution. The law exempts assertions ofpatentinfringementarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.17. Massachusetts

On May 24, 2016, S. 2367 was introduced in the Massachusetts Senate. The bill allows courts toconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitutionofhighereducationora technologytransferorganizationownedoraffiliatedwithsuchan institution.However,thebillexemptsinstitutionsofhighereducationandtheirtechnologytransferorganizations,iftheinstitutionisincorporatedunderthelawsofandhasitsprincipalofficesinMassachusetts.Thebillwouldalsoexempt501(c)(3)non-profitorganizationsthatareincorporatedunderthelawsofandhaveprincipalofficesinMassachusetts,anddemandlettersorassertionsofinfringementconcerningsubjectmatter governedby7U.S.C. § 136, et seq, 7U.S.C. § 2321, et seq, 21U.S.C. § 301, et seq, 35U.S.C.§161,etseq,35U.S.C.§271(e)(2),and42U.S.C.§262.

4.1.18. Michigan

OnJune9,2016,S.289passedtheMichiganSenate.Thebillexemptsinstitutionsofhighereducation,technology transfer organizations owned by or affiliatedwith an institution of higher education, anddemandlettersthatincludeaclaimforreliefarisingunder21U.S.C.§355,35U.S.C.§271(e)(2),or42U.S.C.§262.

4.1.19. Minnesota

In2016,MinnesotaenactedH.F. 1586. The lawexempts institutionsofhighereducation, technologytransfer organizations associated with institutions of higher education, and 501(c)(3) non-profitorganizations. The law also exempts demand letters that include a claim for relief under 35 U.S.C.§271(e)(2),21U.S.C.§355,or42U.S.C.§262.

4.1.20. Mississippi

In2015,MississippienactedH.B.589. The lawexemptsany“state institutionofhigher learning,”any“agency of the State of Mississippi,” any “technology transfer organization that is owned or has awritten affiliation agreement with a state institution of higher learning or an agency of the State ofMississippi,orisformedpursuanttoSection37-147-1,”andanypersonthatlicensedpatentrightsfromsuchentitiesabove,oranypersonseekingreliefunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.21. Missouri

In2014,MissourienactedH.B.1374.Thislawallowscourtstoconsider,asonefactorweighingagainsta finding of bad faith, that the letterwas sent by an institution of higher education or a technologytransferorganizationownedoraffiliatedwithsuchaninstitution.Thelawexemptsanydemandletterorassertionofpatentinfringementarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.22. Montana

In2015,MontanaenactedS.B.39. Thelawexemptsinstitutionsofhighereducation,theirtechnologytransferorganizations,anddemandlettersthatincludeaclaimarisingunder35U.S.C.§271(e)(2).

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4 .1.23. Nebraska

OnApril 17, 2014, L.B. 677 was “indefinitely postponed” in theNebraska legislature. The billwouldallowcourtstoconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitutionofhighereducationoratechnologytransferorganizationownedoraffiliatedwithsuchaninstitution. Thebill issilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.24. New Hampshire

In2014,NewHampshireenactedS.B. 303. The lawallowscourts toconsider,asone factorweighingagainst a finding of bad faith, that the letter was sent by an institution of higher education or atechnology transfer organization owned or affiliated with such an institution. The law exempts anydemandletterorassertionofpatentinfringementarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.25. New Jersey

OnMarch14,2016,A.310wasintroducedintheNewJerseylegislature.Thebillexemptsinstitutionofhigher education and their technology transfer organizations. The bill also exempts demand lettersrelated to apatent that is requiredor authorizedunder35U.S.C. §271(e), 21U.S.C. §355, 42U.S.C.§262,ora“requestfordisclosure”authorizedunder35U.S.C.§287(b)(4).

4.1.26. North Carol ina

In 2014,North Carolina enactedS.B. 648. The law allows courts to consider, as one factorweighingagainst a finding of bad faith, that the letter was sent by an institution of higher education or atechnologytransferorganizationownedoraffiliatedwithsuchaninstitution.However,thebillexemptsinstitutions of higher education and their technology transfer organizations, if the institution isincorporated under the laws of and has its principal offices in North Carolina. The bill would alsoexempt501(c)(3) non-profit organizations that are incorporatedunder the lawsof andhaveprincipaloffices inNorthCarolina,anddemand lettersorassertionsof infringementconcerningsubjectmattergovernedby7U.S.C.§136,etseq,7U.S.C.§2321,etseq,21U.S.C.§301,etseq,35U.S.C.§161,etseq,35U.S.C.§271(e)(2),and42U.S.C.§262.

4.1.27. North Dakota

In2015,NorthDakotaenactedH.B. 1163. The lawallows courts to consider, asone factorweighingagainst a finding of bad faith, that the letter was sent by an institution of higher education or atechnology transfer organization owned or affiliated with such an institution. The law exempts anydemandlettersentby:

a. Anycorporation tradedonapublic stockexchangeoranyentityownedorcontrolledbysuchcorporation;

b. Anownerof thepatentwhich isusingthepatent inconnectionwiththesubstantial research,commercial development, production, manufacturing, processing, or delivery of products ormaterials;

c. Anyinstitutionofhighereducationasthattermisdefinedinsection101ofthefederalHigherEducationActof1965[20U.S.C.1001];or

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d. Any technology transfer organization whose primary purpose is to facilitate thecommercializationoftechnologydevelopedbyaninstitutionofhighereducation.

4.1.28. Ohio

OnMay11,2015,H.B.194wasintroducedintheOhioHouse.Thebillwouldallowcourtstoconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitutionofhighereducationoratechnologytransferorganizationownedoraffiliatedwithsuchaninstitution.Thebillissilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.29. Oklahoma

In 2014, Oklahoma enacted H.B. 2837. The law exempts institutions of higher education and anytechnology transfer organization whose primary purpose is to facilitate the commercialization oftechnologydevelopedbyaninstitutionofhighereducation.Thelawalsoexemptsanydemandletterorcivilactionarisingunder35U.S.C.§271(e)(2).

4.1.30. Oregon

In2014,OregonenactedS.B.1540.Thelawallowscourtstoconsider,asonefactorweighingagainstafinding of bad faith, that the letter was sent by an institution of higher education or a technologytransferorganizationownedbyoraffiliatedwithsuchan institution. The law issilentwithrespect todemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.31. Pennsylvania

OnFebruary4,2014,S.B.No. 1222was introduced in thePennsylvaniaSenate. Thebillwouldallowcourtstoconsider,asonefactorweighingagainstafindingofbadfaith,thattheletterwassentbyaninstitution of higher education or a technology transfer office organization or affiliatedwith such aninstitution.Thebillwassilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.32. Rhode Is land

In 2016, Rhode Island enactedH.7425 and S.2542. The lawwould allow courts to consider, as onefactor weighing against a finding of bad faith, that the letter was sent by an institution of highereducationora technology transferorganizationownedoraffiliatedwith suchan institution. The lawalsoexemptsanydemandletterorassertionofpatentinfringementunder35U.S.C.§271(e)(2).

4.1.33. South Carol ina

In 2016, South Carolina enactedH. 3682. The law exempts institutions of higher education and anytechnology transfer organization whose primary purpose is to facilitate the commercialization oftechnologydevelopedbyaninstitutionofhighereducation.Thelawalsoexemptsanydemandletterorcivilactionarisingunder35U.S.C.§271(e)(2).

4.1.34. South Dakota

In 2014, South Dakota enacted S.B. 143. The law allows courts to consider, as one factor weighingagainst a finding of bad faith, that the letter was sent by an institution of higher education or a

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technology transfer organization owned or affiliated with such an institution. The law exempts anydemandlettersentby:

a. Anycorporation tradedonapublic stockexchangeoranyentityownedorcontrolledbysuchcorporation;

b. Any owner of the patent who is using the patent in connection with the production,manufacturing,processing,ordeliveryofproductsormaterials;

c. Anyinstitutionofhighereducationasthattermisdefinedinsection101oftheHigherEducationActof1965(20U.S.C.§1001)asofJanuary1,2014;or

d. Any technology transfer organization whose primary purpose is to facilitate thecommercializationoftechnologydevelopedbyaninstitutionofhighereducation.

4.1.35. Tennessee

In 2014, Tennessee enacted H.B. 2117. The law exempts institutions of higher education and anytechnology transfer organization whose primary purpose is to facilitate the commercialization oftechnologydevelopedbyan institutionofhighereducation. The lawalsoexemptsanydemand letterseekingaclaimforreliefarisingunder35U.S.C.§271(e)(2).

4.1.36. Texas

In 2015, Texas enacted S.B. 1457. The law is silentwith respect to institutions of higher education,technology transfer organizations, and demand letters relating to 35 U.S.C. §271(e)(2) or 42 U.S.C.§262.

4.1.37. Utah

In 2014,UtahenactedH.B. 117. The lawallows courts to consider, asone factorweighing against afinding of bad faith, that the letter was sent by an institution of higher education or a technologytransferorganizationownedoraffiliatedwithsuchaninstitution.Thelawexemptsanydemandletterorassertionofpatentinfringementarisingunder35U.S.C.§271(e)(2).

4.1.38. Vermont

In 2013, Vermont enactedH-299, becoming the first state to adopt an unfair competition law aimedspecifically at bad faith assertions of patent infringement. The law allows courts to consider, as onefactor weighing against a finding of bad faith, that the letter was sent by an institution of highereducationoratechnologytransferorganizationownedoraffiliatedwithsuchaninstitution.Thelawissilentwithrespecttodemandlettersinvolving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.39. Virginia

In2014,VirginiaenactedH.B.375.Thelawallowscourtstoconsider,asonefactorweighingagainstafinding of bad faith, that the letter was sent by an institution of higher education or a technologytransfer organization owned by or affiliatedwith such an institution. The law exempts any demandletterorassertionofpatentinfringementarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

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4 .1.40. Washington

In 2015,Washington enacted S.B. 5059. The law allows courts to consider, as one factor weighingagainst a finding of bad faith, that the letter was sent by an institution of higher education or atechnologytransferorganizationownedbyoraffiliatedwithsuchaninstitution. Thelawexemptsanydemandletterorcivilactionthatincludesacauseforreliefarisingunder35U.S.C.§271(e)(2),7U.S.C.§136,7U.S.C.§2321,21U.S.C.§301,35U.S.C.§161,42U.S.C.§262,or35U.S.C.§287.

4.1.41. Wisconsin

In2014,WisconsinenactedS.B.498.Unlikeotherstates,thelawrequiresanydemandlettertoinclude:a physical or electronic copy of the patent, and an identification of each claim of such patent beingassertedandthetarget'sproduct,service,process,ortechnologytowhichthatclaimrelates. Thebillexemptsthefollowing:

• Apatentnotificationofaninstitutionofhighereducationorofatechnologytransferorganizationthatisowned,controlled,oroperatedby,orassociatedwith,aninstitutionofhighereducation;

• Apatentnotificationof ahealth careor research institution thathas annual expendituresof atleast$10,000,000andthatreceivesfederalfunding;

• A patent notification attempting to enforce or assert a right in connection with a patent orpending patent on a device, or a component of that device, that is subject to approval by thefederalfoodanddrugadministrationorthefederaldepartmentofagriculture;and

• Apatentnotificationattemptingtoenforceorassertarightarisingunder35U.S.C.§271(e)(2)or42U.S.C.§262.

4.1.42. Wyoming

In2016,WyomingenactedS.F.65.Thelawexemptsanyinstitutionofhighereducationoratechnologytransfer organization whose primary purpose is to facilitate the commercialization of technologydevelopedbysuchan institution. The law is silentwith respect todemand letters involving35U.S.C.§271(e)(2)or42U.S.C.§262.

4.2. State Executive Actions Severalstateattorneysgeneralhavetakenmeasures tostopbadfaithpatentassertionbyconductinginvestigationsandreachingsettlementagreementsundertheirstateconsumerprotectionlaws.

4.2.1. Minnesota

InAugust2013,Minnesota’sAttorneyGeneral,LoriSwanson,announcedthatherofficehadreachedasettlement agreement with MPHJ Technology Investments, LLC, a patent assertion entity that sentthousandsofdemandletterstobusinesses. Accordingtotheattorneygeneral’spressrelease,“UndertheAssuranceofDiscontinuance,which isbelieved tobe the first settlementof its kind in thenationbetweenanAttorneyGeneralandapatenttroll,MPHJTechnologymustceaseitspatentenforcementcampaign in theStateofMinnesotaandcannot resumesuchbusinessactivities inMinnesotawithoutthepermissionof theAttorneyGeneral.” TheAttorneyGeneral’sOfficebegan investigatingMPHJ forviolations of state consumer protection laws in the spring of 2013, after receiving complaints fromseveralMinnesotasmallbusinessesthatweretargetedbythecompany.

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4 .2.2. Nebraska

InDecember2014,U.S.DistrictJudgeJosephF.Bataillonenteredajudgmentawarding$725,000infeesand costs against Nebraska’s Attorney General, Jon Bruning, and in favor of MPHJ TechnologyInvestments, LLC and Activision TV, Inc. (now ActiveLight, Inc.). Previously, in January 2014, JudgeBataillon granted MPHJ’s motion for preliminary injunction against Attorney General Bruning “fromtakinganystepstoenforcetheceaseanddesistorderissuedtoFarneyDanielsonJuly18,2013,inanymanner thatwouldpreventor impedetheFarneyDaniels firmfromrepresentingMPHJ inconnectionwith licensing and litigation of U.S. patents owned byMPHJ with respect to companies based in, orhavingoperationsin,Nebraska.”

In July 2013, Attorney General Bruning sent a cease and desist letter to the Texas law firm FarneyDanielsPCannouncingthathisofficewasinvestigatingwhetherFarneyDanielshadviolatedthestate’sunfair competition laws by representing patent assertion entities (includingMPHJ and Activision) onwhose behalf Farney Daniels had sent patent demand letters to persons in Nebraska. The letterdemandedthatFarneyDaniels“immediatelyceaseanddesist the initiationofanyandallnewpatentinfringement enforcement efforts within the State of Nebraska pending the outcome of this office’sinvestigation.”

InAugust2013,ActivisionTV,Inc.askedthecourttoenjoinAttorneyGeneralBruningfromenforcinghisorder.ActivisionsaidthatBruning'sattempttodictatewhothefirmcouldandcouldnotrepresentis"agrossandunsupportedinterferencewiththiscourt'sprerogatives.""TheorderisoutsidetheauthorityoftheNebraskaAG,andwithoutbasisinNebraskalaw,"arguedActivision."Further,evenifthereweresomeNebraskalawwhichpurportedtogranttheNebraskaAGauthoritytoissuetheCeaseandDesistOrder,whichthereisnot,suchNebraskalawwouldbepreemptedbytheU.S.Constitutionandfederallaw,”arguedActivision.

4.2.3. New York

In January 2014, New York’s State Attorney General reached a settlement agreement with MPHJTechnologyInvestments,LLCpertainingtoitsdemandletterssenttoNewYorkresidents.AccordingtotheAG’spressrelease,thesettlementwithMPHJ“imposesavarietyofobligationsonMPHJthatshouldserveasguidelinesforallpatenttrollsengagedinsimilarpatentassertionbehavior,”including:

(1) “DiligenceandGoodFaithWhenContactingPotentialInfringers.Theguidelinesrequireapatentholdertomakeaserious,good-faithefforttodeterminewhetheratargetedbusinessactuallyengagesin infringement before making an accusation. This prohibits the mass mailing of accusations ofinfringement to hundreds of businesseswith little regard to the actual likelihood that the businessesinfringed.Theguidelinesalsoforbidusingalawyerasathreateningmouthpieceforbaselessallegations.Ifapatenttrollcommunicatesthroughanattorney, theattorneysendingsuch lettersmustalsomakediligent efforts to ensure that there is a good-faith basis for believing that the targeted businessinfringedthepatents.”

(2) “ProvidingMaterialInformationSoanAccusedInfringerCanEvaluatetheClaim.Whenapatentholderaccusesabusinessof infringing itspatent, theguidelines require it toexplain thebasis for theclaiminreasonabledetail.Thisinformationwillallowtherecipienttoassesswhethertheaccusationhasanyfoundationinlightoftheactualactivitiesoftherecipient’sbusiness.Theguidelinesalsoprohibita

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patentholderfromtryingtocollectrevenueforapatentthathasbeenheldinvalid,andfromfailingtodisclosematerialinformationthatrevealsthepatent’slikelyinvalidity.”

(3) “NoMisleading Statements about a License Fee. If a patent holder seeks to justify a specificlicensingfee,itmustclearlyexplainthefactualbasisforitsproposedfee.Thisrequirementpreventsapatenttrollfromtakingadvantageofinformationalasymmetrytodeceivebusinessesintopayingmorethanafairpriceforalicense.”

(4) “Transparencyof theTrue Identity of thePatentHolder. The guidelinesprohibit apatent trollfromhidingits identityfromitstargets.Thisallowsbusinessesthathavebeentargetedbypatenttrollcampaigns to find informationabout thepatent troll. Ensuring transparencyhasanumberofpositiveeffects,includingallowingtargetedbusinessestofindandcommunicatewithoneanother.”

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ABOUT THE AUTHOR

AndrewS.BaluchisanintellectualpropertylawpartnerinaWashington,DClawfirmandaProfessorialLecturer inLawat theGeorgeWashingtonUniversityLawSchool,wherehe teaches internationalandcomparativepatentlaw.Previously,Mr.BaluchservedasdirectorofinternationalIPenforcementintheWhite House Office of the Intellectual Property Enforcement Coordinator (IPEC) and before this asexpert legal advisor to theUndersecretary of Commerce for Intellectual Property andDirector of theU.S.Patent&TrademarkOffice(USPTO). Healsopreviouslyservedasa lawclerk intheU.S.CourtofAppealsfortheFederalCircuit.Hecanbereachedatabaluch@law.gwu.edu.

DISCLAIMER

Thistextrepresentstheworkandopinionoftheauthor,anddoesnotnecessarilyreflecttheopinionoftheauthor’sfirm,itsattorneys,oritsclients.

ACKNOWLEDGMENT

The author thanks Phillip Beck, Connor Hansen, Jason Mock, and AndrewWalter for their researchassistanceonthisproject.

COPYRIGHT NOTICE

Copyright2016AndrewS.Baluch. ThecurrentSeptember1,2016editionof thisworkmaybe freelycopiedandre-publishedfornon-commercialuse,providedthatitisusedanddistributedinitsentirety,includingall titlepagesandthispage. Portionsofthisworkmaybefreelycopiedfornon-commercialuse,butonlywithproperattributioninamannerasconspicuousasthepresentationofthetextitself,whichattributionshallincludetheauthor’sfullname,thetitle,andthepublishingdateasshownonthecoverpage. All other rights, including the right topreparederivativeworks, are reserved. Copyrightlicensesmayberequestedfromtheauthorattheemailaddressgivenabove.

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Documents

PATENT REFORM 2016 - LAIPLA · © 2016 Andrew S. Baluch 1 PATENT REFORM 2016 A Comprehensive Guide to Current Patent Reform Developments in Congress, the Executive Branch, the Courts,