Innovation Act Seen Likely to Clear House Judiciary at Planned Markup

The amended bill no longer contains a controversial provision that would have expanded and made permanent a temporary U.S. Patent and Trademark Office covered business method (CBM) patent review program to include software patents. The program, created through the America Invents Act, currently only allows companies facing a lawsuit to seek a PTO review of the patent when it relates to financial services. The CBM provision had drawn heavy opposition from the software industry, with IBM, Microsoft and others lobbying hard for its removal (CD Nov 19 p15).

The CBM provision was by far the most controversial piece of HR-3309 -- and its removal means “there are probably enough votes to pass the bill out of committee,” an industry source familiar with committee negotiations told us. Despite the revisions, House Judiciary ranking member John Conyers, D-Mich., and Intellectual Property Subcommittee ranking member Mel Watt, D-N.C., said in a statement Monday that they could not support HR-3309. “We do not believe that this legislation should become a vehicle to pass far ranging changes to the litigation system, such as limits on pleadings and discovery and intrusive mandates on the court system,” Conyers and Watt said in the statement. Conyers was among the eight House Judiciary members who asked Goodlatte earlier this month for additional time to hear from stakeholders and study the bill before a markup (CD Nov 12 p9).

It’s unclear how many committee Democrats will join Conyers and Watt in opposing HR-3309, the industry source said. “The big question is whether Goodlatte will come to some agreement on the fee-shifting provision,” the industry source said. “The Democrats have come a long way in compromising and last I heard they had not come to an agreement. If they do, then there should be a number of Democratic votes in favor of the bill. … The Democrats want to feel they're a part of this, not just voting for a Republican bill. If they don’t get anything, there are a bunch of Democrats who will vote against it."

At least two Republicans who signed the Conyers letter now support HR-3309 because Goodlatte removed the CBM provision. Rep. Steve Chabot, R-Ohio, now believes the bill is “acceptable as it is in the manager’s amendment,” an aide told us. “His concern was that we give the CBM patent provision time to work itself out.” Rep. Doug Collins, R-Ga., said Monday he now supports the amended bill because it no longer includes the CBM provision. Collins and Rep. Suzan DelBene, D-Wash., had planned an amendment to remove the CBM provision at Wednesday’s markup. DelBene said in a statement Monday that the manager’s amendment “moves the Innovation Act in a positive direction."

The revised HR-3309 has more support from the software industry, with BSA/The Software Alliance Director of Government Relations Tim Molino telling us he believes “it’s a strong bill now, aimed at going after litigation abuses that are plaguing the system without hurting innovation, which is what we believed the CBM provision did.” IBM now supports HR-3309, said Vice President of Technology Policy-Governmental Programs Timothy Sheehy in a letter to Goodlatte. The CBM provision “would have harmed software innovation and diminished U.S. competitiveness,” but the rest of the bill has “broad industry support,” Sheehy said.

BSA and other software industry stakeholders believed the CBM provision discriminated against software-related patents by treating them differently from other types of patents. “By doing that, it lowered the value of our innovations versus other industries’ innovations,” Molino told us. Expansion of the CBM program also had “serious trade implications” because if the U.S. adopted a policy “that treats software patents differently in the U.S., it’s very hard for our trade negotiators to stand in front of other countries and say their policies are discriminatory,” he said. Other provisions in the bill have also drawn criticism, “but most people, even if they don’t agree with the specific text of the language, agree with the goals behind that language,” Molino said. “I think there will be improvements to the bill in the markup, but most stakeholders I've talked to at least agree in part with the goals of the legislation."

In addition to removing the CBM provision, the manager’s amendment also revised a provision that would allow courts more discretion to stay patent lawsuits against a product’s end-users. The revised provision extends the time limit for end-users to seek a stay “until the time of entry of the first scheduling order in the case, if that is later than the time limit of 120 days after the first pleading specifically alleging infringement,” a House Judiciary aide told us. The revised provision also would allow a court to determine an end-user is not subject to a consent judgment in some cases and cleans up other language.

The manager’s amendment revised a provision that seeks to change federal court rules for patent cases to provide “additional discretion for the Judicial Conference in implementing the rules on core document discovery,” the House Judiciary aide said. It also cleaned up the language of a provision that requires heightened pleading standards in patent cases and provides courts with limited discretion to ensure a discovery provision “does not result in reverse gamesmanship,” the aide said. The manager’s amendment revised the bill’s joinder provision to ensure it would activate when a party is “unable to satisfy a fee award,” allows parties to indicate whether they are financially able to pay a fee award and provides for a party to receive advance notice that they could be joined, the aide said. The manager’s amendment also includes a new provision that would extend the Patent Pilot Program, created in the 111th Congress, by an additional 10 years. Another new provision would require the Administrative Office of the U.S. Courts to conduct a study on the idea of developing a patent small claims court in court districts that are implementing the Patent Pilot Program.

The Coalition for 21st Century Patent Reform believes HR-3309 has “improved greatly” following the revisions included in the manager’s amendment, Horton said. The group, which had been highly critical of HR-3309, still can’t support the bill as it stands but believes problematic provisions are now fixable, Horton said. “There’s a couple of things that still trouble us,” including the bill’s provisions limiting discovery before claim construction, he said. “The provision, the way it’s currently drafted, I don’t believe will achieve nearly the upside they anticipate but will have appreciable effects on delaying litigation in most of the pending patent cases. You won’t get enough discovery to get to a resolution of the matter either at summary judgment or even enough to drive settlement early on.”