Patent Reform Act of 2011 – Miscellaneous

On February 3, the Senate Judiciary Committee unanimously voted to report the Patent Reform Act of 2011 (S.23), adopting two amendments (from Sens. Leahy, Hatch, and Grassley and from Sens. Feinstein and Kyl) to the bill. The bill includes several changes to key provisions in the patent statutes. We previously reported about the provisions that would establish a first-to-file system and about the changes to procedures for challenging validity, but the bill also includes several other notable changes to the patent statutes.

In addition to the third-party validity challenge provisions, the bill also proposes a patent owner-initiated procedure for supplemental patent examination. If a patent owner requests supplemental examination based on “information believed to be relevant to the patent,” the USPTO would then determine whether the information raises a substantial new question of patentability. If so, the USPTO would undertake an ex parte reexamination, subtracting the patent owner statement of 35 U.S.C. § 304. Essentially, then, supplemental examination would give the patent owner the chance to initiate ex parte reexamination for any information raising a substantial new question of patentability. The current statute limits grounds for requesting ex parte reexamination to patents or printed publications. Supplemental patent examinations could give patent owners increased opportunity to strengthen patent validity and enforceability, providing a chance to increase patent value.

The false marking statute in 35 U.S.C. § 292 would change under the bill, eliminating the qui tam aspect. Under the current statute as interpreted by the Federal Circuit in The Forest Group, Inc. v. Bon Tool Co., any party may bring suit on behalf of the government (a qui tam action) against a party that marks unpatented products as patented, seeking a $500 fine for each marked item. Concerns have arisen about non-injured parties seeking excessive damages under this law. As the Patent Reform Act proposes, the statute would only allow the United States itself to sue for the $500 per-offense relief, but would allow other parties to sue to recover damages for competitive injury resulting from the false marking.

The bill would further make changes to the damages provisions in 35 U.S.C. § 284, basically requiring courts to identify methods for damages calculations in a particular case and then adhere exclusively to those methods. As originally proposed, the bill would have also included provisions in this section that explicitly allow treble damages only in cases of willful infringement. However, the amendment from Sens. Feinstein and Kyl removed these provisions and reinstated the current statute’s language authorizing treble damages at the court’s discretion. Nonetheless, the new requirements for courts’ damages calculations would likely result in more clearly-reasoned damages rulings, more evaluable on appeal.

Under the proposed Patent Reform Act, the USPTO would receive the authority to set both patent and trademark fees via rulemaking involving public notice and comment. Also regarding fees, the bill would establish a new micro-entity status, eligible for a 75% reduction in fees, in addition to the currently-available small entity status. Allowing the USPTO to set its own fees would likely raise costs of obtaining a patent slightly. However, if Congress refrains from diverting USPTO fees, allowing the USPTO to retain the increased fees, then the fee increase could ease the USPTO’s funding problems and therefore quicken and strengthen the examination process. Patent applicants would thus probably see a small increase in fees and may receive decreased pendency or improved examination in return.

The bill would also declare, as obvious and lacking novelty, strategies “for reducing, avoiding, or deferring tax liability,” state or federal, domestic or foreign. Such tax strategies would therefore not be patentable under 35 U.S.C. §§ 102 and 103. Incentives to find new ways to minimize tax payments are already high, so this provision will likely only result in greater competition among tax preparation firms and lower prices of tax preparation for taxpayers.

As noted in previous discussion of validity challenges, the bill would discontinue the defense to infringement based on the best mode requirement of 35 U.S.C. § 112. The bill would also remove defenses based on any reissue-eligible errors of 35 U.S.C. § 251: claims for more or less than the patentee had a right to claim in the patent, or defective specifications or drawings.