Following hot on the heels of the Patent Reform Acts of 2005, 2006, 2007 and 2008, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and former chair Orrin Hatch (R-Utah), along with House Judiciary Committee Chairman John Conyers (D-Mich.) and ranking minority member Lamar Smith (R-Texas), introduced, you guessed it, the “Patent Reform Act of 2009.”

The legislation (S.515 and H.R.1260) is set to pick up where patent-reform efforts left off last year.  Controversial provisions remain so get ready to see continued efforts at lobbying for changes.  Sens. Leahy and Hatch conceded during a press conference that more work needed to be done on the legislation but said reforms were needed urgently to improve patent quality and create more certainty in patent litigation.

In a nutshell, the Patent Reform Act of 2009 Senate Bill provides for the following:

Sec. 1.  Short title; table of contents

This Act may be cited as the Patent Reform Act of 2009.

Sec. 2.  Right of the first inventor to file

This section converts the United States’ patent system into a first-inventor-to-file system, giving priority to the earlier-filed application for a claimed invention.  Interference proceedings are replaced with a derivation proceeding to determine whether the applicant of an earlier-filed application was not the proper applicant for the claimed invention – such a proceeding will be faster and less expensive than were interference proceedings.  This section also encourages the sharing of information by providing a grace period for publicly disclosing the subject matter of the claimed invention, without losing priority.

Further, an exception is made for claiming an invention if the subject matter previously disclosed was obtained directly or indirectly from the inventor or joint invention or if the subject matter was owned by the same person or subject to an obligation of assignment to the same person.

Sec. 3. Inventor’s oath or declaration

In general.— The section streamlines the requirement that the inventor submit an oath as part of a patent application, and makes it easier for patent owners to file applications.

Sec. 4.  Right of the inventor to obtain damages

Damages.  Requires the court to conduct an analysis to ensure that, when a “reasonable royalty” is the award, it reflects the economic value of the patent’s “specific contribution over the prior art”, i.e. the contribution the invention makes to promoting science and the useful arts per the requirement of Article I, Section 8 of the Constitution.  The court also is required to identify the factors that will be considered in determining a reasonable royalty, ensuring that the record is clear on what considerations the judge or jury assessed in awarding damages.

Willful infringement.  This section changes the doctrine of willful infringement in both procedural and substantive respects. Courts will now require a plaintiff to demonstrate with clear and convincing evidence that the infringer acted in a manner that was objectively reckless, which is also subject to a good faith defense.

Prior User Rights.­  If the same invention is later patented by another party, the prior user may not be liable for infringement to the new patent holder, although all others will be.  This section permits the defense to be used by entities controlling or controlled by the prior user.

Sec. 5.  Post-grant procedures and other quality enhancements

The section expands the evidence that a party may cite to the USPTO under § 301 to include written statements of the patent owner regarding the scope of the patent claims and evidence that the claimed invention was in public use or on sale in the United States more than one year prior to the application.  Requests for reexamination under § 302 can be based on either prior art or prior public use or sale, as can requests for inter partes reexamination under chapter 31.  Inter partes reexamination will now be heard by an administrative patent judge in accordance with procedures established by the Director.  Inter partes reexamination is further improved by permitting a third-party requester to file written comments.

A third-party requester is estopped from asserting the invalidity of any claim determined to be valid in inter partes reexamination on any ground that was raised in reexamination.  Further, the estoppel bar to instituting an inter partes reexamination proceeding after a judicial determination of patent validity is lowered from a “final decision” to a judgment of the district court.

This section also creates a new post-grant review procedure that can be instituted either within 12 months after the issuance of a patent or a reissue patent, or if the patent owner consents.  The post-grant review begins with a cancellation petition and moves forward only if the Director determines that there is a substantial new question of patentability.  The presumption of validity does not apply in this proceeding, but the burden of proof is on the party advancing a proposition.  The Director will prescribe rules governing the proceeding, including rules to sanction abuse.  This section prohibits successive filings or filings after a final decision in a civil action.

Sec. 6. Definitions; patent trial and appeal board

The Board of Patent Appeals and Interferences is replaced with the new Patent Trial and Appeal Board (“Board”).  The Board is charged with (i) reviewing adverse decisions of examiners on applications and reexamination proceedings, (ii) conducting derivation proceedings, and (iii) conducting the post-grant review proceedings.

Sec. 7.  Submissions by third parties and other quality enhancements

This section creates a mechanism in § 122 for third parties to submit timely pre-issuance information relevant to the examination of the application, including a concise statement of the relevance of the submission.

Sec. 8.  Venue and jurisdiction

Subsection (a) – The venue provision for patent cases, section 1400 of title 28, is amended as follows:

Civil actions for patent infringement, including declaratory judgment actions, may only be brought in a judicial district (1) where the defendant has its principal place of business or is incorporated or formed, or, for a foreign corporation with a U.S. subsidiary, where its primary United States subsidiary has its principal place of business or is incorporated or formed; (2) where the defendant has committed substantial acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the operations of the defendant; (3) where the primary plaintiff resides, if the primary plaintiff in the action is an institution of higher education or a nonprofit patent and licensing organization (as those terms are defined in this section); (4) where the plaintiff resides, if the sole plaintiff in the action is an individual inventor who qualifies as a “micro-entity” pursuant to section 123 of title 35.  A defendant may request the case be transferred where (1) any of the parties has substantial evidence or witnesses that otherwise would present considerable evidentiary burdens to the defendant if such transfer were not granted, (2) transfer would not cause undue hardship to the plaintiff, and (3) venue would be otherwise appropriate under section 1391 of title 28.

Sec. 9. Patent and Trademark Office regulatory authority

This section gives the director rulemaking authority to set or adjust any fee under §§ 41 and 376, and section 1113 of title 15, provided that such fee amounts are set to reasonably compensate the USPTO for the services performed.  The Director may also reduce such fees.

Sec. 10. Residency of Federal Circuit judges.

The District of Columbia area residency requirement for Federal Circuit judges in section 44(c) of title 28 is repealed.  Any judge of the Federal Circuit who does not reside within a 50-mile radius of Washington DC must use the chambers of an existing courthouse in the district where the judge resides.

Sec. 11. Micro-Entity Defined

This section adds a new § 123, which defines the qualifications for “micro-entity” status, which can be used by the USPTO to craft rules appropriate to a newly-defined class of small inventors.

The Senate Judiciary Committee has scheduled a hearing on the new legislation for March 10.

See the Senate version here.

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