The U.S. House of Representatives recently passed House Bill 3309[H.B.] proposing further changes to the United States patent statute. The provisions of greatest concern to most business people are the proposed additional requirements for filing of patent infringement lawsuits in the United States. Since the settlement of the Blackberry patent infringement litigation several years ago, some are concerned that fraudulent patent infringement lawsuits are gutting the financial resources of bona fide inventors and investors. Because of this long-simmering concern several bills have been introduced in Congress as a remedy, but H.B. 3309 is the first one to pass either the House or Senate.
A representative provision from the bill is intended to discourage what is allegedly a skyrocketing flurry of frivolous patent infringement lawsuits: the court’s discretionary award of attorney fees and litigation costs to the prevailing (winning) entity or person after the litigation terminates. The court may award the attorney fees incurred by the winning person, as well as the costs of the litigation, unless (i) the position and conduct of the losing parties was substantially justified, or (ii) special circumstances otherwise make such an award unjust. Another provision prohibits the unilateral offer of settlement by a person bringing the infringement lawsuit as follows: such a person automatically becomes non-prevailing party under most circumstances. The purpose of this last provision is apparently to stifle what is considered exhortion, i.e., the litigation will continue against a hapless accused infringer unless the accused infringer pays the entity a large financial amount to end the litigation.
Furthermore, disclosure by the person or entity bringing the suit must specify the following:
1. The assignee of the disputed patent(s), that is, the person(s) or entity (s) that own the patents and who are not necessarily the inventors;
2. Any entity or person who can sublicense or enforce the patent(s);
3. Any other persons or entity with a financial interest in the patent(s) and
4. The ultimate parent entity of any specific assignee.
However, a person with a direct financial interest does not include (i) ownership of an equity interest in the party bringing the lawsuit (ii) unless this person can control the patent infringement litigation.
An “interested party” is defined in the bill as an owner(s) of the patent(s) (that is, an assignee(s)) with a right to enforce or sublicense the patent. With respect to “awarded attorney fees and costs” there is also a bill provision designated “joinder of interested parties.” Under this provision, imagine that a non-prevailing party (i.e., person or entity that loses the patent infringement lawsuit they originally brought) cannot pay the attorney fees and costs. Under the proposed new law, the court may require an interested party to pay this award if the non-prevailing party has no substantial interest in the patents other than bringing the lawsuit. This language appears to target entities that allegedly (i) accept rights to patents exclusively for litigation, and thereafter (ii) file infringement actions against defendants even if these actions are not legally justified. In these instances apparently the person who has assigned the patent to the litigating entity solely for bringing a lawsuit becomes financially responsible for the award of attorney fees and costs to the litigations. However, the court will not order an interested person to pay these fees if the interested party renounces ownership or direct financial interest in the patents.
©Adrienne B. Naumann
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