By Andrew Williams —

After
releasing two "discussion drafts," Rep. Bob Goodlatte (R-VA) (at right), the
Chairman of the House Committee on the Judiciary, finally introduced a bill in
the House on October 23, 2013, with the non-descript title of "Innovation
Act."  Rep. Goodlatte had released
his first discussion draft on May 23, 2013, and a substantially revised draft
dated September 6, 2013.  Many of the provisions
of the second draft were met with skepticism in the patent community, and
unfortunately, the currently introduced bill differs only on minor respects.  At the time of release of the second
discussion draft, we highlighted some of the major provisions (see "Rep. Goodlatte Introduces Second 'Discussion Draft' of Legislation Aimed at Curbing 'Abusive Patent Litigation'").  In an effort to minimize repetition, we will
point out some of the changes that were made to the bill in the intervening
month, and we highlight some of the issues or concerns that the bill presents.

We
will also only focus on the section dealing with patent infringement actions
here, considering the motivation behind the present bill was to combat the
perceived "patent troll" problem.  Rep. Goodlatte explained when he release the first discussion draft:  "This
bill helps to address the issues that businesses of all sizes and industries
face from patent troll-type behavior and aims to correct the current
asymmetries surrounding abusive patent litigation."  Of course, as whenever the derogative term
is invoked, this bill does not attempt to define what a "patent troll"
is.  As such, the bill does not adequately
differentiate between practicing and non-practicing entities.  In other words, the bill is not narrowly
tailored to address the problem that it was introduced to solve.  Therefore, even if the goal is to take down
the trolls, this bill could have the unintended consequence of
taking down the entire patent system with it.

One
of the most significant problems with the present bill is the move from "notice"
pleading to initiate a patent infringement lawsuit towards something that much
more resembles the detail required by infringement contentions not normally
required until much later in the litigation.  Therefore, the type of information that the bill will require any party
asserting a patent (whether in the complaint, counter-claim, or cross-claim) to
plead includes an identification of each patent and each claim allegedly
infringed, an explanation as to where each element of each claim is found in
each "accused instrumentality," whether each element is infringed
literally or under the doctrine of equivalents, and how the terms of each claim
correspond to the functionality of the accused instrument.  It is unclear with this level of detail
whether claim charts will be required to satisfy this pleading requirement.  The pleadings will also require a description
of the direct infringement, the acts of any alleged indirect infringement, and
the right of the party to assert the patent, a list of complaints already filed
which identify the same patent, and whether the patent is subject to any
licensing terms or pricing commitments.  Of course, a similar requirement is not imposed on an alleged infringer
pleading invalidity of the patent, which may by understandable considering the
time constraints involved in answering a complaint.  However, this is not true when a potential
infringer brings a declaratory judgment action including a count of invalidity,
but the bill does not address this situation.

One
of the problems with such heightened pleading standard is that accused
infringers might be able to successfully challenge a patent infringement
lawsuit on the sufficiency of the pleadings without ever having to address the
merits of the case.  Even though the bill
provides what type of information must be included in the complaint, it does
not specify the level of detail required.  It is also unclear what the penalty will be for patent holder failing
such a sufficiency challenge.  Parties normally
have the right to amend the complaint once without seeking leave of the Court,
but will the courts freely grant leave if more than one complaint is
needed?  More importantly, if the patent
holder's infringement contentions are modified during discovery, will an
amended complaint need to be filed?  Will
information contained in the complaint lead to any estoppel issues down the
road?  And, if the alleged infringer
challenges the sufficiency of the Complaint, can the patent holder seek limited
discovery for the purposes satisfying the pleading requirements?  Unfortunately, none of these issues are
addressed by the bill.

On
the bright-side, one of the changes included in the bill since the second
discussion draft is that it now includes a provision for situations in which
the information is not readily accessible to a party.  However, to invoke this provision, the patent
holder will still need to include in the pleadings why the undisclosed
information was not available and the efforts undertaken to access this
information.  Of course, as with the
issues raised above, it is unclear what the standard will be to determine if
information is, in fact, unavailable, and what that standard will be to
determine whether research efforts were satisfactory.  The newly introduced bill also includes a
provision for filing such a complaint under seal if it contains confidential
information.

Another
controversial provision of the bill relates to significant proposed changes to
35 U.S.C. § 285.  This section currently
provides for the possibility of awarding attorney's fees to the prevailing
party in "exceptional circumstances."  However, the newly introduced bill flips the default, so instead of
attorney's fees being a possibility in certain cases, the bill requires courts
to award reasonable fees to the prevailing party unless they "find
that the position of the nonprevailing party or parties was substantially
justified or that special circumstances make an award unjust."  It is clear that the purpose of this
provision is to provide the courts with the ability to "punish"
non-practicing entities that are considered to assert their patents
abusively.  However, this provision will
likely to have the consequence of stifling legitimate patent infringement
lawsuits, regardless of whether the patent holder is a practicing entity or
not.  If the goal is to enable the courts
to curb patent abuse, 35 U.S.C. § 285 as it currently stands can be amended to
remove the "exceptional circumstances" requirement, as many
commenters have suggested and as introduced in other bills currently
pending in Congress.

Rep.
Goodlatte and others were motivated to introduce this bill to curb the
perceived patent assertion abuses that have been so frequently reported in the
mainstream media (usually without much factual support for the
proposition).  Instead, the bill that was
introduced is not narrowly tailored, but rather is a blunt instrument that will
impact all patent infringement actions (outside of Hatch-Waxman actions brought
pursuant to 35 U.S.C. § 271(e)(2)).  It
is important to note, however, that this bill has yet to be discussed by the
Committee on the Judiciary, so the chance of it passing the House in its
current state, much less passing the Senate, is highly unlikely.  We will, of course, continue to follow and
report on the progress of this bill, as well any comparable bills that are
introduced in either the House or the Senate.