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america invents act, IP, Patent

Congress Mulls Changes To Patent Enforcement

Two bills currently pending in Congress, if passed, would ultimately impact patent enforcement far more than the lengthy America Invents Act signed into law last year.  First up is H.R. 3889 Promoting Automotive Repair, Trade, and Sales Act, introduced by California Republican (and inventor) Darrell Issa and aimed at curbing enforcement of design patents that claim “a component part of a motor vehicle.”  Also pending is H.R. 6245, reportedly dubbed the Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act. Interestingly, the only online source that appears to have an actual pdf copy of the bill text (as of Thursday evening) is the Electronic Freedom Foundation.  As the name implies, SHIELD addresses the recovery of legal fees and costs by an accused infringer.

As usual, each bill is packed with problematic language, unintended consequences and blatant pandering to special interest groups.  Of course, most readers already knew this when they read the first sentence, above about bills pending in Congress.

Re-designing Design Patents

Many would likely predict that the PARTS Act is dead-on-arrival, except for two factors.  First, people actually care about design patents now that Apple is seeking $2 B worth of damages over them.  Second, the bill’s sponsor, Darrell Issa, was a key voice during the AIA debates and could be in line for the Commissioner of Patents position if the Republican’s retake the White House.  The operative portion of Issa’s PARTS bill states:

With respect to a design patent that claims a component part of a motor vehicle as originally manufactured–

(A) it shall not be an act of infringement of such design patent to make or offer to sell within the United States, or import into the United States, any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured; and

(B) after the expiration of a period of 30 months beginning on the first day on which any such component part is first offered to the public for sale as part of a motor vehicle in any country, it shall not be an act of infringement of such design patent to use or sell within the United States any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured.

Apart from the influences and justifications for the bill, the construction of the new proposed law is puzzling.  According to the bill text, it would never be an act of infringement to make, offer to sell or import an article matching the appearance of a patented, motor vehicle component part, but it would be an act of infringement–in the first 30 months of the part being offered for sale–to use or sell the part?  In other words, prior to expiration of the 30-month period, an after-market parts-supplier could advertise and offer unlicensed replacement parts, but would only incur infringement by actually selling the part.  Even more confusing, the ultimate purchaser would also be on the hook for using the part.

Semantics aside, the purpose of the bill is clear: to remove a tool that automotive manufacturers currently use to curb the sale of third-party, aftermarket, unauthorized replacement parts.  Testimony during a recent subcommittee hearing centered around exterior component parts, such as vehicle fenders and hoods.  Automotive companies, in recent years, have taken to patenting these discrete vehicle body components, rather than patenting vehicle designs as a whole, in an effort to prevent after-market companies from selling slavish copies of body parts and undercutting prices set by the original manufacturer.

However, body parts are not the only vehicle parts subject to design patents.  Consider, for example, US Patent No D659714for a throttle body.  Other automotive-related design patents include components like valve covers, pumps and even basic machine elements whose novelty is sometimes best conveyed through illustration rather than language.  Of course, the proposed law may not apply to these types of patents if the phrase “to restore such vehicle to its appearance as originally manufactured” is interpreted to apply only to vehicle exteriors.  However, that logic still raises questions about the proposal’s applicability to another important category of automotive-related design patents: tire tread patterns.

Proponents of the bill include after-market automotive parts companies and insurance companies who want easier access to cheap, after-market alternatives to original equipment components.  To drum up support, Issa claims that his design patent legislation will help protect Americans who like to work on their own cars.  In reality, it will only disincentivize automotive designers from exploring creativity in automotive design and cut into replacement part sales for a recovering domestic auto industry.  Even more importantly, Congressional testimony from Brinks Hofer’s Kelly Burris points out that the bill would also apply to motorcycles. The bill also threatens to stifle creativity among independent hot rod and chopper designers.

One-Sided Cost Recovery

A pair of congressmen, Peter DeFazio and Jason Chaffetz, introduced H.R. 6245, and has already been widely reported as posing a threat to so-called “patent trolls.”  Of course, nothing in the legislation is specific to non-practicing entities, or even to the practice of acquiring patents for the purpose of generating licensing revenue.  The bill, however, does attempt to address frivolous lawsuits, but only covering specific technology areas.  From the bill text:

Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.

Attempting to undercut debate and rebuttal over the need or benefit of the proposed bill, commentator Mike Masnick wrote, “I fully expect to see patent system supporters throw a massive hissy fit over this very, very minor change to patent law, but it’s so minor that I’m at a loss as to how they’ll have any compelling argument.”  In reality, this is a major change, not a minor one.  And there are compelling arguments against it, including the blatant pandering to specific lobbying groups, its unilateral application and lack of workable guidelines.

First, the bill is limited to computer hardware or software patents.  However, if frivolous lawsuits are a bad thing (and few would say they aren’t), then they are bad regardless of subject matter.  The fact that the bill is limited to computer and software patents illustrates the blatant special interest group pandering.  The bill’s proponents have absolutely no interest in providing legislation that is in the best interest of all stakeholders and should be reconsidered or re-drafted based on that reason alone.

Second, the bill is entirely one-sided in multiple ways.  For one thing, accused infringers can easily raise frivolous defenses to run up litigation cost for indigent patent owners, yet the bill provides no mechanism to deal with these types of issues.  In addition, the bill applies to lawsuits “disputing the validity” of a patent.  Thus, if a patent owner attempts to initiate licensing discussions with a company outside of litigation, the company would be able to file a declaratory judgment action, casting the patent owner into unwanted litigation, while arguing for the patent owner to pay the company’s high-priced attorneys to boot.  This, combined with the final point, threatens to chill even good faith assertion of patent claims out of fear that a court would misunderstand what it means to have a “reasonable likelihood of success.”

Finally, no guidelines are provided on what a “reasonable likelihood of success” is or looks like.  What if patent claims ultimately require discovery of non-public information to prove?  What if a district court adopts an unexpected claim construction?  Would invalidation of a patent at trial open the door for demonstrating lack of a “reasonable likelihood,” or does the presumption of validity protect patent owners in this instance? Does it make a difference if the patent owner was aware of the prior art before the lawsuit was filed?

Ultimately, the SHIELD act is too blunt an instrument, and only addresses one side of litigation abuses. If debate on the bill is to go further, serious changes are warranted.

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Discussion

4 thoughts on “Congress Mulls Changes To Patent Enforcement

  1. This reminds me so much of the “get out of jail free” card that Schumer gave to the banks because of the Datatreasury lawsuits. Blatantly one sided, and overbroad: almost any device that uses electrons will be called a “computer hardware” patent even if it is just a component. So for example all those IC manufacturers better rally to kill this or face enormous hurdles and threats in the future.

    Posted by J Nicholas Gross (@JNGross) | August 3, 2012, 9:40 am
  2. Patrick,

    Why do you believe Darrel Issa would be up for PTO Commissioner?

    We just keep adding bills to destroy the property rights of inventors – this is usually a signal that all property rights are in trouble and therefore the economy.

    Posted by dbhalling | August 3, 2012, 11:38 am
    • Dale –
      He’s been a strong backer of Romney’s. An appointment to a post 99% of the free world doesn’t give a flip about would be an easy way to repay the favor. Plus, good press for Romney to appoint a former inventor/small business owner as commissioner of patents. Other speculators are also making the suggestion.

      Posted by Patrick | August 3, 2012, 11:44 am

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