IFA update on the Need for Congressional Action to Stop Patent Trolls

The effort to pass patent litigation reform was recently reignited and has rapidly picked up momentum over the first half of the year.  The debate this Congress has a distinctly different tone from the debate over the America Invents Act, though.  Rather than the traditional industry divide of “big tech vs. big PhRMA,” there has been a broad based, cross-industry call for patent litigation reform, as evidenced by a letter to Congressional leadership from 50 trade associations stating that something must be done now. The Administration entered the patent debate earlier this summer with a comprehensive plan to address patent troll issues, including fee shifting and real party in interest provisions, that was well received by the tech industry.  Legislatively, several bills covering different parts of the debate have been introduced to date in the House and Senate.  Of particular interest to Intuit are S. 1013, the Patent Abuse Reduction Act, sponsored by Senator Cornyn (R-TX), and H.R. 2639, the Patent Litigation Reform Act of 2013, sponsored by Congressmen Jeffries (D-NY) and Farenthold (R-TX).  Both of these bills contain provisions that would address some of the systemic abuses in the current patent litigation system by: (1) requiring heightened pleading of patent infringement claims to provide greater transparency into the nature of the alleged infringement and ownership of the patent; (2) providing for staged and/or limited initial discovery; and (3) giving judges greater direction as to when they should shift fees.  The Chairmen of the House and Senate Judiciary Committees plan to introduce bills in September that will serve as vehicles for the comprehensive reform effort.  However, we expect that these bills will be different in their initial approach.  Namely, Chairman Leahy (D-VT) of the Senate Judiciary Committee will likely introduce a narrow bill that substantively will not address much more than when to stay end user/customer suits, but will amend his bill in committee to incorporate additional provisions.  Chairman Goodlatte (R-VA) of the House Judiciary Committee will introduce a more comprehensive bill that will include heightened pleading, discovery, and fee shifting language at the outset and that will closely parallel Senator Cornyn’s legislation. On the whole, there is a broad base of support for doing something on each of these issues in the larger comprehensive effort.  However, the question remains how much can be done given the specter of trial bar opposition to setting a precedent for other litigation reform efforts.  Currently, the prospects look very good for strong heightened pleading language and some form of staged discovery, pending the court’s consideration of certain motions.  The prospects for cost shifting provisions - both for discovery beyond established documents and upon resolution of a case - are murkier.  With regard to discovery shifting, there have been some concerns raised as to how to define “core documents” in a manner to provide judicial flexibility given evolving technologies.  With regard to potential “loser pays” language, the concerns are much more politically driven, based purely on concerns that it would discourage independent inventors and small business from defending their rights. These and related issues will be some of the key issues discussed in hearings held on introduced and proposed legislation this fall.  The legislation, though, is not expected to move until during the 2014 work-period, given prioritization of other issues that Congress has to consider this fall, such as Syria, immigration, debt ceiling, and continued funding of the Federal government.