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House Passes Innovation Act, Senate to Consider Companion Legislation

December 10, 2013

Late last week, the Innovation Act (H.R. 3309) targeting so-called "patent troll litigation" passed the House of Representatives with large majorities from both parties and with support from the White House. The official tally was 325 for and 91 against the Act. The Innovation Act passed surprisingly quickly, considering that the bill was introduced by Judiciary Committee Chairman Bob Goodlatte (R-Va.) just six weeks earlier. Click here and here for previous coverage of the Innovation Act.

Many companies and interested groups, particularly those in the technology sector, believe the Innovation Act is an important step toward curbing abusive litigation by non-practicing entities or "patent trolls," which rely on a business model that supporters of the legislation argue effectively taxes innovation with little or no perceptible benefit. Other groups, including the National Small Business Association, and companies – small businesses in particular – expressed concern that the Innovation Act may do more harm than good in the enforcement of intellectual property rights because it may discourage patent owners with limited resources from enforcing their property rights. Rep. John Conyers (D-Mich.), the House Judiciary Committee's top-ranking Democrat, and Rep. Melvin Watt (D-N.C.) issued a joint statement against the bill and sought to delay the vote for further debate without success. Likewise, several prominent judges, the Intellectual Property Owners' Association, and several universities have criticized the bill, arguing that it will limit intellectual property rights and that managing intellectual property litigation is the province of the courts, not Congress. A strongly worded statement from Rep. Dana Rohrabacher (R-Calif.) said that the bill sends a "clear message to little inventors: give thanks for your intellectual property rights, because you may not have them by this time next year."

The House-approved Innovation Act looks slightly different from the originally introduced bill after two prominent amendments. The first amendment, which enjoyed support from both parties, requires that a patent holder identify its ultimate parent entity in its demand letters to alleged infringers in order to qualify for damages for willful infringement.

The second amendment preserves an applicant's right under 35 U.S.C. § 145 to bring suit in either the Eastern District of Virginia or the Federal Circuit Court of Appeals to obtain a patent after a USPTO rejection. The Innovation Act as originally drafted limited venue for such a lawsuit to the Federal Circuit. Two other amendments also passed, one that requires an economic impact study as to the effects of the law on small businesses owned by women, veterans and minorities, and the other that makes a few technical and clarifying changes to the language of the Act.

Two notable amendments were the subject of much debate, but ultimately failed to pass. First, Rep. Watt's amendment to remove the fee-shifting provisions from the Act narrowly lost by a vote of 199-213. Second, an amendment aimed at limiting the customer-stay provisions of the Act to companies with less than $25 million annual revenue was also defeated. As passed, the Innovation Act allows a court to stay a patent case against all customers of a product or process in favor of a parallel case against the manufacturer of that product or process.

The Senate must pass companion legislation for the Innovation Act to go to the President. Rep. Goodlatte's Senate counterpart, Senate Judiciary Chairman Sen. Patrick Leahy (D-Vt.), previously introduced the Patent Transparency and Improvements Act of 2013 (S. 1720), which is currently pending in committee. A Senate Judiciary Committee hearing to debate that bill is scheduled for December 17, but it is unclear whether the Senate will eventually consider that Senate bill or the House's Innovation Act for a floor vote. If the Senate approves any companion bill, however, a conference committee will be set up to reconcile any differences in the bills as passed.

President Obama has publicly supported the Innovation Act and is likely to sign any resulting legislation that makes it to his desk.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Mark A. Klapow
Partner – Washington, D.C.
Phone: +1.202.624.2975
Vincent J. Galluzzo
Partner – Washington, D.C.
Phone: +1.202.624.2781