Members of the Senate Judiciary Committee are hoping that the patent reform bill that stalled in the last Congress will finally get enough traction to pass this year.

Committee Chairman Patrick Leahy, D-Vt., and Senators Orrin Hatch, R-Utah, and Chuck Grassley, R-Iowa, announced that they plan to introduce the Patent Reform Act of 2011 on Jan. 25. Leahy has scheduled a mark-up at the committee's Jan. 27 business meeting. It will be the first piece of legislation the committee takes up this year.

The senators said the measure is nearly identical to a compromise that committee members reached last March. The compromise was introduced as a managers' amendment to S. 515, which the committee approved in April 2009.

The compromise included a provision that would permit patent holders to request a supplemental examination of a patent and revised the standard for willful infringement (Also see "Patent Reform Bill In Senate Could Reduce "Inequitable Conduct" Litigation" - Pink Sheet, 1 March, 2010.).

One difference from last year's compromise is the addition of a provision prohibiting patents on tax strategy methods.

This will be the fourth consecutive Congress in which comprehensive patent reform legislation has been introduced. It failed to move last year because of unresolved differences between the House and Senate versions (Also see "Patent Reform Bill Is Bogged Down, Rep. Conyers Reports At Hearing" - Pink Sheet, 10 May, 2010.). The House Judiciary Committee had said it would not rubber stamp the Senate measure but did not specify what changes it wanted.

House Committee Also To Take Up Patent Reform

Q. Todd Dickinson, former director of the Patent and Trademark Office, said that it's a positive sign that the chairs of both the Senate and House Judiciary Committees are ready to take up the legislation early on in this Congress.

House Judiciary Committee Chairman Rep. Lamar Smith, R-Tex., is planning a hearing on patent reform legislation in the next few weeks and there is some presumption he will have a draft bill before then (Also see "House Focuses On Patent Reform, Other IP Issues With New Judiciary Subcommittee" - Pink Sheet, 24 January, 2011.).

Dickinson, now executive director of the American Intellectual Property Law Association, said one big issue not addressed in the legislation is the diversion of fees from the PTO to other government programs. The bill gives the agency the authority to set fees but Dickinson said this makes no sense if the appropriator can take the funds.

"We need some way to permanently end the diversion of fees," he said.

The Senate Judiciary Committee noted in a release that the managers' amendment from last Congress was supported by the Pharmaceutical Research and Manufacturers of America, Biotechnology Industry Organization, Genentech, Johnson & Johnson, Novartis and Pfizer, among others.

From Willfulness To False Markings

As in last year's compromise, the Patent Reform Act of 2011 gives the court a gate-keeping role, whereby judges are to identify methodologies and factors to determine damages in infringement litigation. The measure also establishes a post-grant review procedure that allows the patent owner to amend the patent. And it requires "clear and convincing evidence" that an infringer's conduct was "objectively reckless" for there to be a finding of willful infringement.

The Act specifies that an infringer's knowledge of the infringed patent is insufficient to find that infringement was willful. And if a court finds there is a close case as to infringement, validity or enforceability it shall not increase damages and willful infringement shall not be tried to the jury.

The measure also retains a provision to limit litigation over the false marking of patents. Currently, a company can be sued by a private party for putting an expired patent number on a product if it did so with the intent to deceive the patent office. The bill states that any person who has suffered a competitive injury as a result of false marking could file a suit "for recovery of damages adequate to compensate for the injury."

The legislation also establishes an inter partes review process – in which members of the public initiate a review and participate in the proceedings – as an alternative to litigation. A panel of three administrative patent judges would hear the challenge and their decision would be appealable directly to the U.S. Court of Appeals for the Federal Circuit.

The challenger must also meet a new threshold of "reasonable likelihood" of prevailing in invalidating a patent claim. And the challenger cannot raise in court arguments that it "reasonably could have raised" during the inter partes review. In addition, the patent owner may file one motion to amend the patent during the review.

By Brenda Sandburg

Patent Reform Bill Is Resurrected; Senate Measure Mirrors Last Year's Compromise

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