The Litigation Reform Aspects of H.R. 1908

Others can comment on the prosecution side of the patent reform debate.  Developments in patent litigation, which the recently-passed House bill 1908 may provoke, are more in my field of interest.  Specific attention was given to the amended provisions on venue, interlocutory appeals, and inequitable conduct.

The bill would extensively amend 28 U.S.C. 1400(b), so that venue for patent cases could be only those locales with “substantial” connections to the parties, events, or operations.   One can try to predict how courts might apply the “substantial” standards in the amended provision.  Venue would be proper if the defendant has its “principal place of business or is incorporated” there; or, if there, the defendant “committed a substantial portion” of the infringing acts “and has” a business located in that venue that “constitutes a substantial portion of defendant’s operations.”  A patent plaintiff is supposed to sue in a venue where it does “substantial” R&D or manufacturing “related to the patent” in suit.  Courts have applied a substantial presence standard to personal jurisidiction questions, but not to patent venue issues.  About the only place in the present statute that uses similar language is 35 U.S.C. 271(f) as to supplying a “substantial portion of the components” of a patented combination.  It thus is unknown what makes activity “substantial” enough to secure venue. 

A prohibition in the venue provision of the bill would ensure that no party shall “manufacture venue.”  Another implies that, even if there was a last-minute run to file cases before the statute became effective,  cases filed after 7SEP07 “shall be transferred” to a venue meeting the statute’s new precepts of “substantial” nexus.  In my mind’s eye are ‘available to sublet’ signs in Marshall, TX.

A provision would amend 28 U.S.C. 1292 to allow interlocutory claim construction rulings to be appealed, if the district court allows that in its “discretion.”  A district court may grant leave for an interlocutory appeal, but that does not ‘manufacture’ appellate jurisdiction, and the CAFC is not required to review the ruling.  Anyway, Markman is so nineties,  now everyone plays the new KSR game.

Inequitable conduct gets some needed specificity in the as-passed version of H.R. 1908.  The threshold standard of materiality is art that supports a “prima facie finding of unpatentability,” which is “not cumulative” to art “of record.”  {Quare: can art be both cumulative and indicative of unpatenability?}.  The bill promotes employment of former examiners, who now can work as experts on whether “a reasonable examiner would have made” that “finding of unpatentability.”  Q: Were you formerly a patent examiner? A: Yes.  Q: Were you reasonable? A: Yes.  To Bench: I move to have him accepted as a prima facie expert.

The second test of “materiality” is withheld information that “refutes or is inconsistent” with arguments for patentability.  One unclear aspect is that the withheld information be “otherwise material.”  If that means material enough to support a finding of unpatentability, then less material art being withheld may be “inconsistent” with an argument, but not to the point of being inequitable conduct.

Some study will be needed to divine the two burdens of proof.  The “defense” must be “established by clear and convincing evidence,” but the materiality standard, i.e., the prima facie proof of unpatentability, needs only “a preponderance of the evidence.”  Also, prima facie was a term chosen advisedly, since when evaluating it, “rebuttal evidence shall not be considered.” 

The reforms on the intent element are that “specific facts beyond materiality …must be proven” to establish intent, such as, “circumstances that indicate conscious or deliberate behavior” to mislead or deceive.  In recent CAFC caselaw only a few cases had evidence, apart from materiality, that would prove “conscious or deliberate” misconduct.  Moreover, it’s expensive to discover this evidence.   No express burden is set out for proving “intent” to “mislead or deceive the examiner,” but again, “Circumstantial evidence may be used” to prove intent.

The bill does not expressly allocate the issues are those for a jury or for a judge to decide, but apparently, the jury could decide all the issues, and leave to the court to “balance the equities to determine which” remedy to impose.  Moving the ‘balancing’ away from the evaluation of materiality and intent, and over to the selection of remedy is an excellent reform.  The present “sliding scale” applied to materiality and intent is hopelessly vague, maleable, and effectively unreviewable.

In addition to the former examiner full-employment provision, the bill includes another aspect to grow domestic service industries.  It enables the USPTO to require by regulation that applicants “submit a search report.”  That prior art search “must be performed by …individuals who are United States citizens or by a commercial entity that …employs United States citizens to perform such searches.”

The bill is a good start to reforming and standardizing these litigated issues.