The Senate introduced their counterpart to the House Patent Reform Act this month (Patent Reform Act of 2006; S. 3818). Senator Orrin Hatch declared from the start that the pending bill represents a bipartisan compromise but acknowledges that both sides are in favor of a post-grant review process for patents and moving to a first-to-file system. Senator Hatch also acknowledged the need to reform the patent system (including granting the USPTO more authority with regard to rule-making) to deal with patents such as the one for the crustless peanut butter and jelly sandwich.

The two most substantial changes to the Patent Act involve limitations on the availability of enhanced damages upon a showing of “willful” infringement by a plaintiff and a parallel limitation on the availability of unenforceability under the doctrine of “inequitable conduct.” Like its House counterpart, the bill proposes these changes in an effort to streamline and reduce the cost of litigation. The bill, however, was not able to reach an agreement regarding the continued efficacy of the best mode requirement – elimination of this requirement would also serve to streamline litigation.

The bill makes further efforts to reduce the costs or, at least, improve the ability of litigants to predict those costs. For instance, the bill provides a broader safe harbor for prior users of patented technology. Senator Hatch stated “prior user rights are, in reality, a defense to infringement liability for those making or preparing to make commercial use of an invention prior to a patent being issued. Prior to a patent’s issuance, such a user often has no way of knowing that he is – or will be – infringing a patent. In some cases, the user has independently invented the subject matter in question, in which case it would be inequitable to subject him or her to infringement liability. Currently, the prior user defense is available only with respect to method patents. The bill expands the prior user defense to all categories of patents and makes related changes to this defense.” The bill also proposes a codified “apportionment” rule for calculation of damages. Finally, the bill requires courts to award attorneys’ fees to a prevailing party in cases where the non-prevailing party’s legal position was not substantially justified.

Finally, this section also addresses Section 271(f) of Title 35. Under current law, either a foreign or domestic patent holder may be able to obtain damages based on foreign uses of domestically-manufactured components of an infringing article. The House bill only sought to curtail the effect of this provision (entered by Congress in 1984) by applying it to tangible items (as opposed to software inventions per the 2005 Federal Circuit appeal of Eolas Techs. v. Microsoft Corp. The Senate bill goes a step further an repeals the 1984 provision in its entirety. This may be a case of throwing the baby out with the bath water as it will open the field for everyone to partially develop inventions in the United States, ship the components abroad, assemble them, and sell them in foreign countries without fear of infringement suits in those countries.

Conclusion

While much of patent reform still remains an open debate, it is clear that Congress is making progress toward reaching a resolution on many of the points discussed herein. Stay tuned for a deeper analysis of the actual language of the proposed bill when I actually have time to write one!

Today’s post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd’s Cincinnati office.

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