As we discussed in a prior post, the U.S. Senate is currently debating a patent reform bill (“the Innovation Act”) passed by the House of Representatives late last year directed to perceived patent litigation abuse by certain patent assertion entities (what some characterize as “patent trolls”).  The Senate is also debating a competing bill (“the Patent Transparency and Improvements Act of 2013”) introduced by Senator Patrick Leahy (D-Vt.), Chairman of the Senate Judiciary Committee.

The bill passed by the House would impose heightened pleading standards for patent infringement complaints, requiring patent-plaintiffs to identify — in their complaint — the patents, the patent claims specifically asserted, the instrumentalities accused of infringement, and an element-by-element description of how each accused instrumentality practices the asserted patent claims.  These standards would, if enacted into law, provide patent-defendants the opportunity to seek early dismissal of complaints that fail to plead the requisite factual information.

The House bill would also require a patent-plaintiff to plead “[w]hether a standard-setting body has specifically declared such patent to be essential, potentially essential, or having potential to become essential to that standard-setting body.”  As we noted previously, SSOs generally do not declare patents essential or potentially essential to their standards.  Instead, declarations of essentiality are usually made by the patent owners themselves in letters of assurances or similar disclosures.  These disclosures frequently do not declare whether the patent covers the standard, but assert that it might cover the standard and set forth the obligations the patent owner agrees to if the patent actually is essential to the standard.

The Senate bill would require patent-plaintiffs to be transparent with ownership information for asserted patents.  Specifically, at the outset of infringement litigaiton, patent-plaintiffs would be required to disclose to the Court and all adverse parties any persons, associations of persons, firms, partnerships, corporations (including parent corporations), or other entities other than the patentee itself known by the patentee to have “a financial interest (of any kind) in the subject matter in controversy or in a party to the proceeding; or (2) any other kind of interest that could be substantially affected by the outcome of the proceeding.”

The Senate bill would also require courts to stay infringement suits against customers of infringing products or processes if:

(1) the manufacturer and the customer consent in writing to the stay;

(2) the manufacturer is a party to the action or a separate action involving the same patent or patents relating to the same covered product or process;

(3) the customer agrees to be bound under the principles of collateral estoppel by any issues finally decided as to the manufacturer that the customer has in common with the manufacturer; and

(4) the motion for stay is filed after the first pleading in the action but not later than the later of—(a) 120 days after service of the first pleading in the action that specifically identifies the product or process as a basis for the alleged infringement of the patent by the customer, and specifically identifies how the product or process is alleged to infringe the patent; or (b) the date on which the first scheduling order in the case is entered.

The Senate bill would also expressly grant the Federal Trade Commission authority to investigate and bring enforcement actions against patent holders that engage in unfair and deceptive acts and practices in connection with demand letters to accused infringers.

Recently, Senator Leahy announced that he would be listing “bipartisan legislation for consideration on” the Senate’s next agenda.  As a result, the bipartisan bill will be discussed during the upcoming Executive Business Meeting of the Senate Judiciary Committee on March 27, 2014.  We will monitor the meeting and provide an update on the status of this legislation.