From the Executive Summary of the proposed legislation:

H.R. 3309 targets abusive patent litigation by increasing transparency within the litigation process and requiring parties to disclose more initial information to explain why a suit is being filed.  The bill also provides for education and outreach to small businesses; requires studies on abusive patent litigation; and makes improvements and corrections to the Leahy-Smith America Invents Act (AIA).  A section-by-section analysis by the House Judiciary Committee is available here.

Patent Infringement Actions

Heightened initial pleading requirements: H.R. 3309 requires a party alleging patent infringinement to disclose more information than is currently required in its initial pleadings.  Specifically, the bill requires a claimaint to identify the patents and claims that are allegedly infringed; and to specify how they are being infringed.

Fee shifting: The bill requires fees and expenses to be paid to the prevailing party if the claims brought against it were not reasonably justified under law.  The modification does not impose a strict “loser pays” system, as the nonprevailing party is immune from paying a fee award if its claims were brought in good faith and were reasonably justified in law and fact.[1]

Joinder provision: If a nonprevailing plaintiff is a patent assertion entity and is not able to pay fees and expenses awarded to the prevailing party, H.R. 3309 allows the court to join an interested party (e.g. a parent entity) to satisfy the fee-shifting award.

Discovery in patent cases: If a court determines that it must first rule on the construction of terms used in a patent claim, prior to considering the alleged infringement claim, H.R. 3309 allows the court to limit the information that must be disclosed in discovery until claim construction has occurred.

Transparency of Patent Ownership

H.R. 3309 requires the plaintiff, upon filing an initial complaint for patent infringement, to also provide to the court, other parties, and the Patent and Trademark Office (PTO) basic information on the patent.  This information includes the patent assignee, the parent entity of any assignee, any entity with a right to sublicense or enforce the patent, and any entity with a financial interest in the patent.  H.R. 3309 requires that the information be updated throughout the life of the patent.

Customer-Suit Exception

H.R. 3309 allows a manufacturer to intervene in a suit against its customer and allows the action to be stayed as to the customer in the meantime, as long as the manufacturer and the customer agree.[2]  To receive a stay, the customer must agree to be bound by any issues it has in common with the manufacturer that ultimately are decided by the court.

Procedures and Practices to Implement and Recommendations to the Judicial Conference

H.R. 3309 requires the Judicial Conference to promulgate rules and procedures on core document discovery.

Case management: The bill provides for procedures to ensure initial disclosure and early case management conference practices in District Courts, to help identify any potentially case-dispositive issues.

Revision of form for filing a patent infringement case: H.R. 3309 eliminates Form 18, the current short-form patent complaint, and allows creation of a new form that requires disclosure of more information to accused infringers.

Protection of IP licenses in bankruptcy: The bill ensures U.S. law—not foreign law—is followed, guaranteeing that intellectual property (IP) licenses are not eliminated in bankruptcy.  U.S. law prevents a bankruptcy trustee from terminating licenses to patents and other IP of the debtor.  Manufacturers often invest billions of dollars in reliance on their right to practice a technology pursuant to a license.  Allowing the elimination of a license in bankruptcy would create commercial uncertainty and would undermine manufacturing investment.

Small Business Education, Outreach, and Information Access

H.R. 3309 establishes a small business education and outreach program.  It directs PTO to provide resources for small business concerns arising from patent infringement and abusive patent litigation practices.

The bill also requires PTO to develop a website to include patent transparency information.  In part, the website must notify the public when a patent case is brought in Federal court.

Studies on Patent Transactions, Quality, and Examination

H.R. 3309 requires several studies, including 1) a study on secondary market oversight for patent transactions to promote transparency and ethical business practices; 2) a study on patents owned by the U.S. government; 3) a study on patent quality and access to the best information during examination; 4) a study on developing a pilot program for patent small claims courts; 5) a study on the prevalence of demand letters sent in bad faith and their negative impact on the marketplace; and 6) a study on business method patent quality.

Improvements and Technical Corrections to the Leahy-Smith America Invents Act

H.R. 3309 makes several improvements and technical corrections to the Leahy-Smith America Invents Act (AIA), including the following:

Elimination of Section 145: H.R. 3309 eliminates 35 U.S.C. §145, which allows a patent applicant whose claims have been rejected, and who has appealed to the Patent Trial and Appeal Board and lost, to challenge the Board’s decision in a Federal district court rather than appealing to the Federal Circuit.[3]  With the AIA in place, entities who previously relied on Sec. 145 to have new evidence considered can accomplish the same administratively through a continuation application.

Post-Grant and Inter Partes claim construction: The bill ensures that claims of issued patents be construed as a matter of law in post-grant and inter partes review, since the proceedings are an adjudication of the validity of issued patent claims and not a reexamination of the claims of an issued patent.  H.R. 3309 ensures that the proceedings are implemented in line with Congressional intent, and brings consistency to PTO proceedings, which use judicial claim construction in reexaminations where the claims are no longer permitted to be freely amended.

Prior art in cases of double patenting: The bill codifies the double-patenting doctrine[4] and applies it to first-to-file patents, controlling the effects of exceptions to prior art that permit a patentee to obtain multiple patents for what is basically the same invention and then sell those patents to different parties, requiring others to obtain multiple licenses from multiple parties to practice the invention.

Clarification of limits on patent term adjustment: Current law “provides for a day-for-day adjustment of the term of a patent for delays attributable to the PTO after an application has been pending for more than 3 years.  Subparagraph (B) excludes certain events from that adjustment.”[5]  H.R. 3309 clarifies that no “B delay” patent-term adjustment (PTA) may be awarded for any of the time accrued after an applicant has restarted prosecution by filing a request for continued examination (RCE).