By Donald Zuhn —

On
February 25th, Senate Judiciary Committee Chairman Patrick Leahy (D-VT)
announced that the Committee had reached a "tentative agreement in
principle" regarding patent reform legislation (see "Chairman Leahy Announces 'Tentative Agreement in
Principle' on Patent Reform Bill").  Chairman Leahy noted that the Committee
would release details regarding the bill "in the coming days" and
after consultation with House legislators.  Last week, the Chairman fulfilled that pledge by unveiling a
Manager's Amendment to the Committee's bill (S. 515).

In
a press release
posted on Chairman Leahy's website, the Senator noted that "[w]ith this
agreement, we are closer than ever to advancing patent reform legislation
through the Senate."  The
Manager's Amendment was the product of nearly eleven months of negotiation by Chairman
Leahy and Senators Orrin Hatch (R-UT), Jeff Sessions (R-AL), Chuck Schumer
(D-NY), Jon Kyl (R-AZ), and Ted Kaufman (D-DE).

While
acknowledging that the agreement "may not be everything that everyone
wants," Chairman Leahy said the bill still "makes important reforms
to the outdated patent system."  He
hoped that Senate leaders would "soon schedule floor time for this
important legislation." 
Senator Sessions urged the Senate "to consider and act on this
legislation."  Observing that "[t]his
bill doesn't include all the changes I originally sought," Senator Hatch
stated that Congress still needed to "come together to reform our patent
system."

According
to the press release, the Manager's Amendment includes changes to first-window
post-grant review, inter partes
review, willfulness, interlocutory appeals, Patent and Trademark Office
funding, and supplemental examinations, while retaining the following previously
negotiated provisions:

(1) the transition to a
first-inventor-to-file system; (2) important changes to improve patent quality,
including by allowing third parties to comment on pending patent applications;
(3) a new, first-window post-grant review proceeding to weed out patents that
should not have issued; (4) the gatekeeper compromise on damages; (5) the
compromise on venue; (6) fee-setting authority for the PTO to address its back-log
problem; (7) amendments to best mode; (8) the new district court pilot program;
and (9) increased incentives for government laboratories to commercialize
inventions.

With
respect to the changes to the bill since it was reported out of Committee last
April (see "Senate 'Patent
Reform' Bill (S. 515) Voted out of Judiciary Committee"),
the release lists the following amendments:

• First-window post-grant review:  Shortens the window from 12 months to 9 months, and raises
the threshold for instituting a proceeding to a showing that it is "more
likely than not" that at least one claim is unpatentable.
•
Inter partes review:  (1)
Slightly raises the threshold for instituting an IPR to a "reasonable
likelihood" that the challenger would prevail in invalidating a claim of
the patent; (2) creates additional safeguards to prevent a challenger from
using the administrative process to harass patent owners; and (3) inserts "reasonably
could have raised" estoppel, preventing a challenger from raising in court
an argument that reasonably could have been raised during an inter partes
review that the challenger instituted.
•
Willfulness:  Codifies the recent
case law on willfulness, which requires willfulness to be demonstrated by clear
and convincing evidence that the infringer acted with objective recklessness,
and adds additional substantive and procedural safeguards for alleged
infringers, including (1) requiring willfulness to be pled with particularity;
(2) preventing mere knowledge of the patent to support a finding of
willfulness; (3) requiring specificity in pre-suit notifications;  (4) upon motion, prohibiting increasing
damages where there is a determination that a "close case" on
infringement, validity or enforceability exists; (5) permitting a party to
request the damages and willfulness phases be sequenced to occur after the
infringement stage; and (6) failing to obtain advice of counsel may not be used
to show willfulness or inducement.
•
Interlocutory appeals: 
Removes the provision that would have required the Federal Circuit to
accept interlocutory appeals of claim construction determinations.
•
PTO Funding:  Requires that
the PTO to reduce fees by 50% for small entities and by 75% for the new
classification of "micro-entities" created by the bill.
•
Supplemental Examinations:  Permits
a patent holder to provide additional, potentially material prior art regarding
the patent to the PTO.  If the PTO
considers the information and determines it has no effect on patentability,
that additional information cannot serve as the basis for an inequitable
conduct claim later in court.  The
information must be presented to the PTO and any reexamination must be completed
prior to litigation.

In
a statement
issued by the Biotechnology Industry Organization (BIO), BIO President and CEO
Jim Greenwood said "[t]he new manager's amendment contains many positive
changes to the underlying patent reform legislation reported out of the Senate
Judiciary Committee last April, which BIO supported."  Mr. Greenwood added that "the
latest amendment makes several important and well-crafted improvements to the
overall bill," and "represents a significant step forward towards
meaningful patent reform that will help sustain America's global leadership in
innovation and spur the creation of high-wage, high-value jobs in our nation's
innovation economy."

The
American Intellectual Property Law Association (AIPLA) released a statement on
Friday in which the group supported the Senate bill, calling it "a
carefully crafted compromise." 
The AIPLA also stated that "[t]he bill is a significant step forward
in improving U.S. patent law," adding that "[m]any of its provisions,
including the adoption of a first-inventor-to-file system and the expansion of
post-grant review options, will aid in strengthening the system as a
whole."  The AIPLA was
particularly pleased with the Committee's decision to "maintain the
constructive judicial gatekeeper function for determining royalty damages,
incorporate more definite standards for finding willful infringement, and aid
in determining appropriate venue in patent litigation."  AIPLA Executive Director Q. Todd
Dickinson said the bill "maintains a balanced, carefully crafted
compromise recognizing the divergent interests of the U.S. patent
community."

The
Innovation Alliance, a coalition of small and medium-sized technology
companies, issued a press release
providing the text of a letter the group sent to Chairman Leahy and Senator
Sessions, the Committee's Ranking Member. 
In the letter, the coalition stated that "[t]he legislation as
originally proposed included elements that would benefit only a portion of the
U.S. patent community and harm much of the rest, and it did not include other
elements that would benefit the system as a whole."  The group also contended that "a
series of decisions from the U.S. Supreme Court and the Court of Appeals for
the Federal Circuit has addressed virtually all of the substantive issues that
originally prompted calls for patent legislation, including remedies, venue,
and patentability standards." 
However, the group concluded that "[t]he manager's amendment to S.
515 as reported by the Judiciary Committee (GRA10134) . . . addresses much of
what we believe to be the most problematic provisions."  According to the group's letter, the
Manager's Amendment incorporates several important changes to the post-grant
review provisions, including:

• Precluding validity challenges in
court on any grounds that were raised or that reasonably could have been raised
during a prior inter partes review
before the U.S. Patent and Trademark Office;
•
Subjecting both inter partes review
and post-grant review challenges to a heightened threshold showing;
•
Clearly laying the burden of proof that a patent is invalid on the challenger
in any inter partes review or
post-grant review, correctly adopting the presumption that a patent granted by
the USPTO is valid; and
•
Imposing a deadline on inter partes
review and post-grant review proceedings, mandating that they be completed
within a one-year deadline, subject to an extension of no more than six months.

The
coalition contends that "[t]hese changes should help to minimize the
potential for repeated and abusive challenges to the validity of patents before
both the USPTO and U.S. courts as a means to stifle competition from
competitors and smaller innovative entities that are so crucial to the future
of our nation's economy."  As
a result of the above changes, and the Senate Judiciary Committee's decision to retain the gatekeeper
damages provision, the Innovation Alliance noted that it would "not oppose
the passage in this Congress of the manager's amendment announced [March 4]
(GRA10134)."