Why is the Stronger Patent Act of 2019 so contentious?

Why is the Stronger Patent Act of 2019 so contentious?

On September 11, 2019, the Senate Judiciary Committee’s Subcommittee on Intellectual Property held a hearing on the STRONGER Patents Act of 2019. The panel that provided testimony on the patent reform legislation was evenly split for and against the bill, highlighting the lack of consensus on how to address patent validity concerns.

Proposed Changes Under STRONGER Patents Act

In July, U.S. Senators Chris Coons (D-Del.) and Tom Cotton (R-Ark.) and U.S. Representatives Steve Stivers (R-Ohio) and Bill Foster (D-Ill.) reintroduced the Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act. Versions of the patent reform legislation have been introduced since 2015.

The stated goal of the STRONGER Patents Act is to “strengthen the position of the United States as the world’s leading innovator by amending title 35, United States Code, to protect the property rights of the inventors that grow the country’s economy.” In support of the bill, its sponsors cite the weakening of the U.S. patent system due to unintended consequences of new post-grant administrative proceedings at the U.S. Patent and Trademark Office (USPTO), as well as recent court decisions.

One of the most controversial provisions restores the presumption of injunctive relief upon a finding that a patent is both valid and infringed. The new 35 U.S.C. 283(b) would state:

(b) INJUNCTION — Upon a finding by a court of infringement of a patent not proven invalid or unenforceable, the court shall presume that— (1) further infringement of the patent would cause irreparable injury; and (2) remedies available at law are inadequate to compensate for that injury.

The new provision would essentially overrule the U.S. Supreme Court’s decision in eBay v. MercExchange, 547 U.S. 388 (2006). In that case, the Court held that the presumption that an injunction should issue to a prevailing patent owner was inappropriate and that courts needed to apply the four-factor test that they have historically employed for injunctions.

Below are several other key provisions of the STRONGER Patents Act:

• Claim Construction: The bill harmonizes the standard used in post-issuance proceedings at the Patent Trial and Appeal Board (PTAB) with the standard used in district court litigation, codifying a recent USPTO rule.
• Burden of Proof: Another section harmonizes the PTAB standard of proof with that used in district courts, where “clear and convincing” evidence is needed to invalidate a patent. According to the bill’s sponsors, this standard gives appropriate deference to the USPTO’s initial expert examination and issuance of a patent, which is relied upon by inventors, patent owners, and investors.
• Standing Requirement in PTAB Proceedings: Under the bill, a petitioner in a PTAB proceeding would need to show standing, i.e. a business or financial reason to challenge the validity of a patent, just as in district court.
• Re-Examination of Patents: The bill harmonizes the treatment of re-examination proceedings with the treatment of inter partes review (IPR) post-grant proceedings and establishes clear guidelines for the treatment of parallel proceedings.
• Composition of PGR and IPR Panels: Adjudicators who decide whether to allow a post-grant proceeding would be distinct from the PTAB judges who will decide the outcome of a petition.
• Demand Letters: The Federal Trade Commission (FTC) would be empowered to police abusive, patent-related, demand letters. Specifically, demand letters sent in bad faith would be considered an unfair or deceptive act or practice within the meaning of section 5(a)(1) of the Federal Trade Commission Act.
• USPTO Funding: The bill eliminates fee diversion through the establishment of a new USPTO revolving fund in the U.S. Treasury. As argued by the bill’s sponsors, “Adequate, dependable funding is critical for timely, higher-quality patents.”

Arguments For and Against Patent Reform Bill

The STRONGER Patents Act is divisive, which is not surprising given the lack of consensus on how to reform the U.S. patent system. At the recent committee hearing, stakeholders argued strongly both in favor of and against the bill. Supporters maintain that changes are necessary to strengthen patent rights, citing that U.S. patents have become too difficult to enforce and too unreliable to justify investments in emerging technologies. As Innovation Alliance’s Executive Director Brian Pomper stated:

The PTAB was intended to be a quicker and cheaper venue to challenge the validity of questionable patents, not an easier venue. In practice, it has been easier to invalidate patents in the PTAB than in district court, and the PTAB process has been abused by large corporations who have initiated repeated PTAB challenges against valid patents in ways not intended by Congress or tolerated in district court. This legislation is urgently needed to maintain our patent system’s role as an engine for U.S. economic growth and job creation, as it has done for more than 200 years.

Critics of the STRONGER Patents Act argue that the existing inter partes review system provides a sufficient check on patent validity. They also maintain that the Supreme Court’s eBay decision has not been proven to stifle innovation. Prior to the hearing, a coalition of 27 university professors wrote a letter to Congress expressing their opposition to the bill. They wrote:

The changes to IPR set forth in the STRONGER Patents Act are not necessary, given the Patent Office’s discretion over decisions of whether or not to institute IPR proceedings. That discretion allows the PTO to handle the highly fact-specific issues that arise in IPR proceedings on a case-by-case basis to address concerns that might arise about potential abuses of the IPR process. The bright-line provisions of the STRONGER Patents Act are both unnecessary and unwise.

What’s Next?

Many of the above patent reforms have been proposed before and failed to advance beyond the committee. However, momentum appears to be building to enact some, if not all, of the proposals. We will continue to monitor the progress of the STRONGER Patents Act and provide updates as they become available.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Libby Babu Varghese, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.