House Passes Anti-Patent Abuse Innovation Act

Several House Democrats who spoke in support of HR-3309 Thursday said they were still concerned with portions of the bill. Rep. Jerrold Nadler, D-N.Y., said he was a “reluctant” supporter of the bill, saying he was concerned about provisions that would further tort changes, particularly the fee-shifting provision. Nadler said he hoped the Senate would produce more balanced legislation. Rep. Suzan DelBene, D-Wash., said there was a “need for legislative action” to remove financial incentives for patent litigation abuse, but also said the House needed to continue to improve the bill if and when it goes to conference. Rep. Hakeem Jeffries, D-N.Y., said he supported the bill but said it was still a “work in progress” that needed guidance from the Senate.

Support for HR-3309 was bipartisan, but so was the opposition -- 64 Democrats and 27 Republicans voted against the bill. House Judiciary ranking member John Conyers, D-Mich., and Intellectual Property Subcommittee ranking member Mel Watt, D-N.C., continued to lead opposition to the bill Thursday, as they had during a House Judiciary markup late last month and throughout the weeks leading up to the final vote. Conyers said HR-3309 would go well beyond targeting the bad behavior of “patent trolls” and would ultimately have unintended consequences for the entire U.S. patent system. Watt said the bill’s supporters had rushed it through the vetting process and this lack of “due diligence” would mean “we're imposing a burden on the other people” in the litigation system.

The House voted 157-258 against an amendment from Conyers and Watt that would have instead put up for consideration a “Democratic substitute” bill that did not include HR-3309’s provisions on fee-shifting and changes to court rules in patent cases, and drew from the Patent Transparency and Improvements Act (S-1720), which is still in the Senate Judiciary Committee. Goodlatte “strongly” opposed the Democratic substitute amendment, saying in particular that a section on patent information disclosures was “absurd” because its language would require a patent owner to disclose all parties that had a financial interest in a patent -- possibly down to the owner of a single share of stock in a company. A near-identical amendment failed to pass during the House Judiciary markup (CD Nov 21 p14).

The 27 House Republicans who voted against HR-3309 included Rep. Dana Rohrabacher, R-Calif., who sponsored an ultimately successful effort to remove a provision from the bill that would have repealed a portion of U.S. patent law that allows U.S. district courts to hear appeals of U.S. Patent and Trademark Office decisions. The House voted 260-156 for Rohrabacher’s amendment. Rohrabacher said HR-3309 benefitted larger tech companies like Google and was an “attack on independent inventors.” Repealing the judicial review in particular was “attacking the little guy,” Rohrabacher said. The judicial review rule was being “heavily used by infamous patent trolls” and was “outdated and unnecessary” because patent applicants now have other avenues to seek reconsideration of PTO decisions, Goodlatte said.

The House approved two other amendments by voice vote. One amendment, led by Rep. Jared Polis, D-Colo., would require the senders of a demand letter or other pre-litigation notifications to include additional disclosure information. The other amendment, from Rep. Sheila Jackson Lee, D-Texas, would require PTO to study the effects that HR-3309 would have on the ability of “individuals and small businesses owned by women, veterans and minorities” to assert their patents.

The House voted against three other amendments, including an amendment from Rep. Thomas Massie, R-Ky., that would have removed HR-3309’s provision allowing a court to stay a patent lawsuit against a product’s end-users if the product’s manufacturer intervenes. An unsuccessful amendment from Jackson Lee would have limited business eligibility under the end-user stay provision to businesses that have less than $25 million in annual revenue. Goodlatte said both amendments would “considerably harm” the bill by limiting or removing the provision. An unsuccessful amendment from Watt would have modified HR-3309’s fee-shifting provision to allow judges to consider the “abusive tactics” of the prevailing party in a patent lawsuit in any decision about awarding fees.

Industry stakeholders largely lauded HR-3309’s passage, in statements issued Thursday. The bill “contains important reforms to the patent litigation process that will protect businesses from Main Street to Wall Street from the rampant abuses of so called ‘Patent Trolls,'” said Verizon General Counsel Randal Milch. “Verizon hopes the legislation moves quickly in the Senate to address this pressing problem.” NCTA President Michael Powell said that the House vote “sends a strong message that abusive patent lawsuits are causing serious harm to our nation’s economy and need to be stopped.” The vote “sends a strong message that lawmakers stand in support of innovation and condemn the harms caused to both the economy and our patent system by so-called ‘patent trolls,'” said NAB President Gordon Smith. CEA President Gary Shapiro said in a statement, “today Congress worked in bipartisan fashion to do the right thing and secure America’s economic future. Patent trolling is garden-variety extortion by another name, and we are one step closer to shutting it down.”

The Computer & Communications Industry Association believes “everyone from those buying tech products this holiday season to small businesses to our leading innovative companies have reason to cheer House passage of the Innovation Act,” said President Ed Black. Software and Information Industry Association President Ken Wasch said, “The strong, bipartisan vote on this bill demonstrates that there is significant momentum to put effective patent abuse reforms into law.” The House vote “is a victory for app developer creators and innovators, who too often are road kill for patent trolls,” said Application Developers Alliance President Jon Potter. “Innovators and inventors large and small will benefit from the bill’s reforms.” Public Knowledge believes the bipartisan vote “shows patent trolls that their abuse of the patent system is not going unnoticed and that their time is running out,” said Chris Lewis, vice president-government affairs.

The Innovation Alliance was disappointed with the vote, which “was not a surprise, given the massive effort to speed it through the legislative process without real consideration,” Executive Director Brian Pomper said in a statement. “The good news is that this debate is far from over. Even many of those who spoke in support of the bill in the House … emphasized that it remains a work in progress, and that further improvements to address the many concerns that have been raised are needed.” The American Intellectual Property Law Association believes that “while this legislation represents a significant step, there remains a lot more work to be done as it moves on to the U.S. Senate,” said Executive Director Todd Dickinson in a statement. “As this progresses, we look forward to continuing to work together with Congress toward a goal of ensuring that any legislation strikes the right balance between restraining abusive behavior while not impairing the legitimate rights of patent owners."

Attention now shifts to the Senate and specifically S-1720. “Targeted reforms should address abuses in the system while ensuring that legitimate inventors can continue to succeed and grow our economy,” said Senate Judiciary Chairman Patrick Leahy, D-Vt., in a statement. Senate Judiciary is set for a hearing on the bill at 10 a.m. Dec. 17 in 226 Dirksen.