Senate Judiciary’s Latest Patent Bill Delay Due to Republicans, Chairman Leahy Says

Sen. Chuck Schumer, D-N.Y., who has taken on an enlarged role in the S-1720 negotiations, circulated a compromise proposal Monday that would have addressed “a few contentious issues” in the bill, but “we have not yet received constructive feedback” on the proposal from committee Republicans, Leahy said. Two stakeholders told us they were not clear on the exact details of the proposal Schumer circulated Monday, but said Schumer had been pushing for a compromise that included a fee-shifting provision that was less aggressive than versions championed by Sen. John Cornyn, R-Texas, and other committee Republicans.

Cornyn said in a statement that the delay was due not to Senate Judiciary Republicans but “a fight between Senate Democrats. Sen. Leahy may have given up, but I am happy to keep discussing this bill with the White House and a majority of House Democrats, including [House Minority Leader] Nancy Pelosi [D-Calif.] who all supported strong fee shifting.” The House passed the Innovation Act (HR-3309), which included a fee-shifting provision, in early December on a 325-91 vote. Several House Democrats said they supported HR-3309 but were concerned about the fee-shifting provision (CD Dec 6 p11).

Senate Judiciary ranking member Chuck Grassley, R-Iowa, said in a statement that committee members are still “working in good faith” on S-1720 negotiations but “we're not there yet. Sometimes, it takes more time than we'd like, but, the end result is a better product. I'm willing to sacrifice a little time to develop a bipartisan bill that we all can support."

Meanwhile, the House Commerce Subcommittee pushed forward Tuesday with its exploration of potential legislation targeting abusive pre-litigation demand letters. Balanced legislation reining in abuse of demand letters is necessary because “these bad actors are arrogantly manipulating the intellectual property system -- and they're getting away with it,” said subcommittee Chairman Lee Terry, R-Neb., during a subcommittee hearing. Subcommittee ranking member Jan Schakowsky, D-Ill., said she also wants to “develop a solution to this growing issue,” saying legislation should outline minimum standards for information included in demand letters in order to increase transparency about the entities that send them. Both said legislation should differentiate bad actors from legitimate rights assertion.

All of those who testified at the House Commerce hearing said demand letter abuse required a legislative solution, but they differed on how the bill should target abuse. Vermont Attorney General William Sorrell urged the subcommittee to create legislation that “requires specific disclosures to increase transparency in patent demand letters,” including specific patent numbers, information on a patent’s owners, related cases and a description of how a letter recipient violated the patent at issue. Legislation should also hold patent holders accountable for unfair and deceptive practices, including codifying FTC and state law enforcement agencies’ authority to enforce consumer protection statutes, Sorrell said. Vermont is one of several states that have passed laws on demand letter abuse, with bills pending in others, he said.

Cisco wants legislation that would require entities that send demand letters to more than 10 entities that aren’t the manufacturer of a potentially infringing product to file their letters in an FTC-managed online database, said Mark Chandler, Cisco chief compliance officer. A registering entity would need to include a list in each letter of the products it believes infringe its patent and notify the recipient he has the right to have the manufacturer defend the case, Chandler said. The bill should also require the disclosure of all entities that benefit from a patent’s enforcement and a list of all previous licenses for that patent, he said. Savings Institute Bank & Trust CEO Rheo Brouillard, speaking on behalf of the American Bankers Association, also urged the creation of a registry that entities would be required to use if they send “numerous” demand letters in a single year.

Caterpillar General Patent Counsel Dennis Skarvan, speaking for the Coalition for 21st Century Patent Reform, urged House Commerce to create legislation that outlines “clear rules of the road” rather than vague factors, and that any sanctions should be limited to the senders of “objectively false” demand letters. The bill should also include a “safe harbor” provision that outlines what all patent owners can continue to do to assert their patents, Skarvan said. National legislation is necessary because state legislation is uneven, with some bills potentially open to challenges on constitutional grounds, he said. Michael Dixon, CEO of the University of Nebraska Medical Center’s UNeMed commercialization entity, also urged the creation of balanced legislation that would not hurt legitimate entities. Legislation should also require entities found to be abusing the U.S. patent system to reimburse companies harmed by the abuse, Dixon said.