Overview of Executive and Legislative Action Aimed at Non-Practicing Entities

The series of bills now under deliberation in Congress are intended combat the abusive practices of Non-Practicing Entities (NPEs), which some reform advocates regard as the most extensive and debilitating issue with the U.S. patent system. The legislature has tackled this issue with key provisions in 2011 and currently in 2015, while the courts have also weighed in on these matters. Some of the more significant legislative and judicial developments are described below.

The America Invents Act (AIA). The 2011 legislation was intended to reduce patent litigation by limiting abusive claims. AIA created a new forum for disputing patents through the Patent Trials and Appeals Board (PTAB), under the direction of the Patent and Trademark Office. This method bypasses the court system by allowing patent claims to be challenged through inter partes review, where evidence is presented concerning the invalidity of the patent and a decision is rendered within 12 months. The success of these methodologies is uncertain, as petitioners can challenge a patent multiple times even after the PTAB has ruled.

2015 Reform Initiatives. A series of bills in 2015 aimed at ameliorating the effects of NPEs include the following key provisions: fee shifting, enhanced pleading requirements, customer stay specifications and demand letter amendments. Fee shifting is intended to stem the quantity of patent infringement suits by providing that the defeated party cover the attorney’s fees of the prevailing party. The defeated party can avoid paying these fees only if the court determines that it asserted reasonably objective claims in the suit. Second, current pleading standards would be modified to be more in line with pleading requirements in other parts of the law. Third, customer stay protections would be implemented to protect end customers by allowing the manufacturer of the product in question to defend its case while temporarily postponing actions against end users, which tend to be smaller businesses that are selling the allegedly infringing product. Lastly, the bill would give the Federal Trade Commission the authority to limit and reform the distribution of abusive demand letters.

Case law developments. Court opinions in Octane Fitness, LLC v. Icon Health &Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc. altered the analysis by which courts determine whether to allocate attorney’s fees for patent litigation by increasing the discretion of district courts in awarding such fees.

John Connors is an intellectual property attorney with decades of experience in registering patents and enforcing patent rights. Connors & Associates provides expert legal and business advice through an international network of attorneys specializing in all types of intellectual property law. Contact us at (949) 833-3622 or visit Connors & Associates online to learn more about our services or to schedule a consultation.

Dylan Connors

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