It's starting to look like 2011 could be the year that Congress finally passes patent reform legislation. This week, the full Senate begins debate on the Patent Reform Act of 2011, a bill that is receiving a lot of press, mostly for its funding and first-to-file provisions. Much watered down from the original proposal, the bill fails to address many of the larger problems with the patent system, but nonetheless would make important and necessary improvements to the system, such as:
Codifying the Standard for Willful Infringement
As the law currently stands, if a defendant is found to have willfully infringed a patent, the court may award the patent holder treble damages (up to three times the damages actually incurred by a plaintiff). Setting the bar for willfulness too low chills innovation, as potential competitors will hesitate to develop products that might conceivably touch on an existing patent (even where they think a patent is invalid) lest a court disagree with them and they get hit with an enormous damage award. Apparently recognizing this risk, the bill would codify language (which the Federal Circuit already endorsed in cases such as In re Seagate Technology) that a plaintiff must prove, by clear and convincing evidence, that the defendant acted despite an “objectively high likelihood that his actions constituted infringement of a valid patent, and this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.” In other words, mere knowledge that a patent exists would not be enough to prove willful infringement. This higher standard makes it tougher for a plaintiff to get treble damages, hopefully only allowing for their award in the most egregious of cases.
Pilot Program Challenging Business Method Patents
An amendment from Senator Chuck Schumer would implement a pilot program designed to "review" business method patents. While the contours of the pilot program are unclear, Senator Schumer has in the past voiced his concern about business method patents, concerns that we share. We applaud any effort to review – and limit – patents (especially business method patents) that do nothing to promote the useful arts and, in fact, often inhibit innovation by essentially imposing a "patent tax."
Increased Opportunity for Third-Party Challenges
The Senate bill provides for three types of third-party challenges to patents. The first would allow a third party to submit potentially invalidating prior art while the patent application is pending, which it usually cannot do. The second would allow a third party to petition the Patent Office to re-review a patent application within nine months of the patent’s issuance. The process for this review would likely be similar to the current reexamination process. Finally, the third type, which is only available after the nine-month window has passed, would allow for a third party to file an inter partes review, but solely on the grounds of novelty and obviousness. These new inter partes reviews would replace the current inter parties reexaminations. Under the new system, a party initiating the review would only need to show a reasonable likelihood that the petition would prevail with respect to at least one claim, which is a lower standard than the current requirement that a petitioner show proof of a substantial new question of patentability.
EFF supports new opportunities for meaningful challenges to patentability. Opening up the process to third parties will give tinkerers additional opportunities to challenge patents before they end up in expensive litigation and will help the Patent Office limit overbroad and unpatentable claims that hinder innovation.
Unfortunately, this bill (unlike some of its predecessors) would not limit damages for infringement. The bill also does not include an important "second window" for third parties to challenge an application post-grant. While we applaud efforts that give third parties the right and ability to challenge bad patents, one single nine-month window is simply not enough for small innovators and inventors who lack time and funds to carefully monitor every patent coming out of the Patent Office. Finally, we are disappointed that the bill would take the teeth out of the Best Mode defense, which currently allows an alleged infringer to invalidate a patent when that patent fails to teach the "best way" to make the invention. Under the new bill, the patent would only have to show "a way" to make the invention, removing an important part of the bargain under which patents are granted – the disclosure of the best mode.
Despite the bill's problems, we are encouraged that Congress seems serious about reforming the patent system and is making efforts to level the playing field between patent owners and other innovators whose work is often stymied by bad patents. EFF will continue to monitor the legislation as it works its way through Congress.