June 2015: Congress Targets Patent Trolls and Abusive Litigation

Washington Watch | June 2015
By Bruce Moyer

Last month’s column reported on an uptick in congressional concern about perceived “abusive” litigation arising in the federal courts. That column focused on legislative proposals aimed at curbing abusive or frivolous lawsuits through the statutory restructuring of Rule 11 of the Federal Rules of Civil Procedure.

In response, the Federal Bar Association has expressed concern to Congress about attempts to statutorily amend Rule 11 that circumvent the Federal Judiciary’s rulemaking process, particularly through the reinstatement of an earlier version of Rule 11, existing between 1983 and 1993, that triggered massive satellite litigation. The FBA has consistently insisted that Congress exercise respect for the federal judiciary’s independence and its authority under the Rules Enabling Act to create rules and mechanisms that apply sanctions against abusive litigation practices.

FBA’s Comments on the Innovation Act, H.R. 9
Those sentiments were echoed last month in the FBA’s comments filed with the House Judiciary Committee about legislation aimed at curbing abusive patent litigation in the federal courts. The legislation, called the Innovation Act, H.R. 9, would create sweeping changes in the patent litigation system. One of the most controversial provisions of the bill would require plaintiffs to pay the defendants’ legal fees if they are found by a court to have pursued a frivolous claim.

The House of Representatives passed with bipartisan support a a similar version of H.R. 9 during the last Congress, and is likely to pass the bill once again this spring. The measure is likely to encounter resistance in the Senate, however, where a more narrow, bipartisan approach is likely to emerge.

Pursuing Patent Trolls
The push for patent litigation reform has focused foremost on the largely undefined yet vilified entities called patent trolls—parties that bring frivolous patent challenges against legitimate patent holders with the aim of producing a lucrative settlement. Proponents of troll-bashing legislation, particularly high-tech and biotechnology firms, point to the exploding litigation costs and increasing frequency of patent lawsuits brought by trolls. But just how much of a real problem these lawsuits present is a matter of disagreement. Some House lawmakers and critics have questioned the need for legislative action. The issue has been complicated by the willingness of universities, small technology firms, and inventors to protect their patents in legitimate, nonabusive ways through the filing of patent infringement lawsuits, particularly when they lack the capital and manufacturing capacity to immediately bring their patent to market.

A “Balanced Approach” Toward Patent Litigation Reform
In a March 26 letter to the House Judiciary Committee, Federal Bar Association President Matthew Moreland called for a “balanced approach” by Congress toward patent ligation reform that reins in abusive patent litigation while promoting a patent system that provides incentives for innovation and technology.

President Moreland’s letter devoted attention to three areas of concern in H.R. 9: the bill’s heightened pleading requirements; its changes in the statutory framework governing fee-shifting to presume a fee award, absent specific findings by the court to the contrary; and the bill’s requirement that the Judicial Conference, the policymaking body of the federal judiciary, install an extensive number of patent-specific rules of procedure governing discovery and case management. This last area involves the displacement of judicial discretion and a host of district-specific rules governing patent litigation. As President Moreland noted, the legislation “sets aside a tradition of Congressional deference to the authority of the courts to establish subject-specific procedural rules, as recognized under the Rules Enabling Act.”

As the letter noted, the Judicial Conference is preparing a package of proposed amendments to the Federal Rules of Civil Procedure, applicable to all civil litigation, that includes new limits on discovery regarding proportionality and the allocation of the cost of discovery. The Federal Bar Association believes that these new tools, achieved after substantial consideration, will allow courts to manage discovery in the normal, case-specific manner, but with a greater flexibility to prevent excesses. Because these major changes have the potential to achieve the same aims sought by H.R. 9, they should be given adequate time, at least several years, to work, President Moreland advised the House Judiciary Committee. “As a result of these developments, we are even more concerned that some of the measures under consideration over the past year go far beyond what is necessary or desirable to combat abusive litigation,” Moreland said.

Bruce Moyer is government relations counsel for the FBA. © 2015 Bruce Moyer. All rights reserved.

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