Senate Judiciary Reaches ‘Agreement in Principle’ on Patent Abuse Bill Compromise

The Senate Judiciary Committee’s tentative deal on a compromise version of the Patent Transparency and Improvements Act (S-1720) is a step forward in its effort to curb abusive patent litigation, but its decision to delay a vote until after the upcoming two-week recess could affect the outcome, stakeholders told us Thursday. Chairman Patrick Leahy, D-Vt., said in a statement Wednesday that the committee had reached “a broad bipartisan agreement in principle” on the compromise, to be contained in a manager’s amendment. “This is a complex issue and we need additional time to draft the important provisions that have been the subject of discussion,” he said. Leahy said he plans to circulate a finalized manager’s amendment as soon as the Senate returns from the recess, which begins Friday, and the committee will consider S-1720 the same week. Senate Judiciary had already delayed the S-1720 markup three times, most recently postponing a meeting set for Tuesday specifically to consider the bill (CD April 9 p13).

Stakeholders told us they don’t yet know the details of the tentative S-1720 compromise, though several noted it likely means there’s been some sort of breakthrough on a controversial provision on fee-shifting that would require the losing party in a patent infringement case to pay the winner’s attorney fees. Although disagreements in negotiations last weekend and throughout this week related to multiple issues, the fee-shifting provision had been the thorniest, a pro-patent revamp industry lawyer told us. There was also pronounced disagreement on a proposed customer stay provision, said Intellectual Ventures Chief Policy Council Russ Merbeth and an industry lobbyist in separate interviews. The provision would allow a judge to stay a patent lawsuit against the end-user of a potentially infringing product if the product’s manufacturer is willing to step in on the user’s behalf.

The fee-shifting disagreement had been over whether the provision would require automatic fee-shifting or if it would give judges some degree of discretion over the fee-shifting rules, the pro-revamp lawyer said. “As long as the bill gives district courts a message that they really need to be on the lookout for weaker cases and be more willing to shift fees, the precise language is not as important,” the lawyer said. “Once you've moved away from English-style automatic fee-shifting, it’s as much about motivating judges as it is about the exact language.” U.S. legal system revamp advocates have sought a shift to rules observed in England and Wales, where the losing party in a case pays the winning party’s court costs and other legal fees.

Pro-revamp stakeholders praised Senate Judiciary for reaching agreement. “The fact that Leahy is saying they just have to work out the details makes me hopeful, and the time during the recess will be good for that,” said Charles Duan, Public Knowledge director-Patent Reform Project. “My one hope is that we don’t just hear a lot of campaigning from critics who want to delay this process even further.” BSA/The Software Alliance is “pleased that they're still making progress and that there’s a bipartisan effort to try to address it,” said Tim Molino, policy director-U.S. government activities. “I don’t think the two-week break makes any difference in how this thing proceeds.” The Application Developers Alliance has “great faith in Senators Leahy, [Chuck] Schumer, [Charles] Grassley, [John] Cornyn and their colleagues, and look[s] forward to seeing their draft after the recess,” said President Jon Potter in a statement.

Merbeth said he takes Leahy “at his word, though I don’t quite know what it really means. Does it mean that they have agreement on all of the provisions? Or does it just mean that the stickiest part of the last week or 10 days -- fee shifting -- is what they've agreed in principle on?” One of “the disappointments of the last few weeks is how closed-door the process has been,” he said. “I'd hope there’s more stakeholder input outside the committee -- that they're not just negotiating among themselves. Changes in language matter. They have business consequences.”

The delayed release of the manager’s amendment will hopefully allow inventors and universities additional input in its final language, Merbeth said. “However the negotiations go at this point, simply taking the foot off the pedal and allowing people some breathing room is good for the ultimate outcome,” he said. “You give people more of an opportunity to have a reasoned discussion if you don’t have a gun to their heads.” The Innovation Alliance, which has urged the Senate to proceed cautiously on drafting patent revamp legislation, praised “the decision to postpone the markup to take more time to draft a proposal that can achieve broad-based support,” said Executive Director Brian Pomper in a statement. “The future of the U.S. economy depends upon getting that balance right.”