IP insider: Stalemate or statesman?

Several things are needed to move forward constructively with the rebalancing of the US IP system

Participants in the current US patent litigation reform debate have demonstrated one indisputable truth even if it is not a particularly fine achievement – we can achieve a stalemate. Patent reform in Washington will be extremely difficult unless we step back from the political fray and reconsider both the content and form of the legislative debate. The solution is at hand in the form of refinements to many of the provisions already under discussion.

To achieve legislative consensus, various provisions must be scaled back. Congress accomplished something analogous three years ago with the America Invents Act, legislation that many said would or could never come to pass.

One lesson from the debates around the act is that the courts can, will and do step in to resolve some of the patent system’s more vexing problems. Once those thorny issues were resolved by the courts and removed from the legislative table, the players reclaimed crucial manoeuvering room which allowed them to reach agreement on the remaining issues. Advocates sometimes voice concerns that court-fashioned solutions are less durable than statutory changes. However, as we also learned from the debates around the America Invents Act, the district and circuit courts tend to refine and strengthen the direction set by the Supreme Court, shaping a sturdy foundation of judicial precedent. The same can occur with the current legislation.

Stakeholders and Congress can pick up the pieces to achieve meaningful and timely patent litigation reform. Here is how.

Fee shifting

There are still calls to codify or at least fortify the Supreme Court’s Octane Fitness and Highmark rulings from this past term. However, helpful decisions have already come from the lower courts. We must let the judicial system work, with the district courts and Court of Appeals for the Federal Circuit applying the parameters set out by the Supreme Court. Legislative reinforcement or adjustment should only be in response to a real and demonstrated need – not in anticipation of a problem that may no longer exist.

Demand letters

These become problematic when they are aggressive and misleading, with non-specific allegations and no evidence of actual infringement, widely broadcast to extort settlement fees from lawful businesses. The pending Targeting Rogue and Opaque Letters Bill addresses this issue. Of course, one person’s aggressive demand letter is another’s zealous defence of property. The bill does what can reasonably be done and accepts that if we want an inclusive system which permits property holders to protect their assets, the goal cannot be to stop all aggressive demand letters.

Discovery and pleadings

This area has been particularly controversial. We need a legislative provision which articulates the goals – consistency, appropriate staging to cut costs and heightened pleading requirements where these are sensible – while simultaneously exhorting the judiciary to implement these. This would prove beneficial over time and leave the courts with sufficient authority.

Covered customer stays

Understandably, innkeepers, retailers and coffee-shop proprietors want to be left out of patent infringement suits involving their use of off-the-shelf IT products. This may seem logical given that they are mere users. However, many technologies are highly customisable, providing extra value which has been added by the user or a third party on the user’s behalf. It is difficult for a fixed statute to establish whether a particular case of infringement is inherent in an acquired IT solution (warranting dismissal from litigation) or caused by after-market user modifications (meaning that the user should be required to defend against infringement complaints). The solution is a provision that permits true end users and non-value added retailers to be removed from litigation, while leaving the closer calls to the courts.

Nautilus

In Nautilus the Supreme Court held that claims are indefinite if they fail to inform those skilled in the art about the scope of the invention. This decision could prove a watershed for areas plagued by vague patents that act as fodder for abusive litigation. Simple codification by Congress of the Supreme Court’s decision on claim definiteness will do as much or more to curb abuse as any of the proposals under debate in the past year.

Funding

Finally, it is critical that Congress once and for all put the issue of fee diversion at the US Patent and Trademark Office (USPTO) to rest. The repeated stripping of funds from the federal agency responsible for granting patents is the root cause of many of our patent system’s troubles. One of the most decisive steps Congress could take towards safeguarding future innovation is to enact legislation requiring that all fees paid by US innovators be retained by the USPTO to process patent applications. This would do more for job creation and economic growth than any other proposal for patent reform currently on the table.

Completing legislation is hard enough with a political stalemate in Congress. It is even harder when affected interests are also stalemated. However, there is a clear path to move forward. We now possess not only the knowledge but also the judicial precedents and the legislative readiness for an improved, well-balanced, refortified patent litigation system to safeguard the future of US innovation for all participants in a great and diverse innovation ecosystem.

David Kappos is a partner at Cravath, Swaine & Moore, New York, and the former director of the US Patent and Trademark Office. He recently spoke on this topic at IIT Chicago-Kent College of Law’s Supreme Court IP Review. His keynote speech can be read here.

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