House sub-committee holds second hearing on abusive patent litigation

On 16th April 2013 the House of Representatives Judiciary Sub-committee on Courts, Intellectual Property and the Internet held its second hearing on abusive patent litigation. Six industry representatives spoke to address the issues related to cases brought by non-practising entities (NPEs) and the impact on competitiveness and job creation in the United States. The hearing was focused on NPE litigation at the International Trade Commission (ITC) and beyond.

The witnesses at the hearing included:

• Kevin Rhodes, vice president and chief IP counsel, 3M Innovative Properties Co.
• Jonathan W Dudas, former under secretary of commerce for intellectual property and director of the US Patent and Trademark Office (USPTO).
• Colleen V Chien, professor, Santa Clara University School of Law.
• Russell W Binns, Jr, associate general counsel, IP law and litigation, Avaya, Inc.
• Deanna Tanner Okun, partner, Adduci, Mastriani & Schaumberg, LLP and former chairman of the ITC.
• David Foster, chairman of the Legislative Committee, ITC Trial Lawyers Association.

Both sides of the spectrum were represented at the hearing. Some statements were made supporting patent reforms in an effort to minimise abusive litigation, while others cautioned against too much legislative regulation of the patent system and the courts. Congress was clear that any proposed change must not adversely affect US innovators.

The inquiry focused on understanding the differences between litigating before the ITC and in federal district court, the nature of the available remedy (an exclusion order) and the additional considerations involved (domestic industry, public interest), as well as statistics regarding the types of entity that bring cases, their successes and the general trend at the ITC. Recurring themes included cost control and proposed methods of reducing frivolous litigation, particularly at the ITC.

Several panellists noted that the ITC has recently shown awareness of the issues and has taken action in response to criticisms regarding the high cost of ITC litigation and alleged forum abuses, including issuing new rules and limits on discovery in ITC cases, as well as ordering an expedited hearing and initial determination on domestic industry – which had not been done before – in March 2013 in the 874 investigation. Another innovative approach suggested by one panellist is that the ITC consider staying cases against downstream product manufacturers and end users in favour of cases against the manufacturer or supplier of the accused article itself.

Other comments focused on whether Congress should seek to reform the system based on an entity’s status as an NPE or patent assertion entity, or whether the focus should instead be on the conduct in question. Some of the solutions suggested by the panellists include limiting duplicative litigation in the ITC and district courts, limiting duplicative action in the courts and before the USPTO, understanding the economic and business nature of NPEs and patent assertion entities, and providing industries with access to data related to litigation and negotiations.

The first sub-committee hearing on these issues was held on 14th March 2013 and addressed the impact of abusive patent litigation by NPEs on innovation and jobs in the United States, as well as potential solutions such as the SHIELD Act, discovery limits, cost shifting, utilisation of intervention and impleader rules, staying suits against end users, alternative damages calculations, stricter drafting requirements for patent claims and mandatory recordation of assignments.

The witnesses during the 14th March 2013 hearing were:

• Mark Chandler, senior vice president, general counsel and secretary, Cisco Systems, Inc.
• Janet L Dhillon, executive vice president, general counsel and secretary, JC Penney Company, Inc.
• John G Boswell, senior vice president, chief legal officer and corporate secretary, SAS Institute, Inc.
• C Graham Gerst, partner, global IP law group, LLC.
• Philip S Johnson, senior vice president and chief IP counsel, Johnson & Johnson.
• Dana Rao, vice president and associate general counsel for IP litigation, Adobe Systems, Inc.