Bill Would Punish Patent Owners, Let Infringers Off the Hook

You’d suppose a substantive patent system issue doesn’t relate to the National Defense Authorization Act. And you’d be right.

You also might think that rushing half-baked legislation that significantly affects something as important and complex as the patent system, glommed onto unrelated or general end-of-session legislative packages, is unwise and shouldn’t be done. Again, you’d be right.

Sen. Pat Leahy, D-Vt., the author of much damaging patent legislation over the years and who is retiring, is attempting to hammer a few more nails in the coffin of the American patent system.

The legislation so unfriendly to inventors and patent owners includes the Patent Trial and Appeal Board (PTAB) Reform Act (S. 4417) (previously titled the Restoring the America Invents Act), the Patent Examination and Quality Improvement Act (S. 4704) and, the subject of this blog, the Pride in Patent Ownership Act (S. 2774 & S. 4543). (There’s also the detrimental Interagency Patent Coordination and Improvement Act (S. 4430), by a usual ally of inventors and good patent policy, Sen. Dick Durbin.)

The Pride in Patent Ownership Act would create a requirement that patent ownership be recorded and kept updated. This information would be made publicly available on a searchable database.

Any change in a patent’s ownership not recorded within 120 days would ding the patent owner with the loss of substantial monies in enhanced damages assessed against willful infringers. For the period of lagging recordation, willful infringers would only be liable for standard damages.

PPOA’s punishment far exceeds the error, like getting a 20-year prison sentence for a form-and-manner violation. With willful infringement, something that’s proven in a court of law, the patent infringer deliberately steals the use of someone’s patented invention.

Losing access to punitive damages for such malicious conduct means the infringed patent owner can’t get just, appropriate punishment applied to the infringer. It likely means the loss of millions, even billions of dollars that the infringer ought to owe.

PPOA has been called “one-sided nonsense.” Indeed, it is. The bill burdens the patent owner, who may not be aware of a given patent's transfer through a complex transaction for quite a while. PPOA does nothing to require the predatory infringer’s timely disclosure of real parties in interest on its side.

Rather, the burden on new owners rewards infringers by saving them discovery costs not alleviated for patent owners. This litigation savings advantage for infringers and costs on owners defending their patents would come into play not only in infringement court cases, but also in multiple challenges in federal court and in administrative "patent death squad" proceedings.

Suffice it to say, PPOA is consequential patent legislation. Yet, Sen. Leahy filed the utterly nongermane bill as an amendment to the NDAA. Tellingly, it isn’t contained in the Armed Services Committee’s NDAA manager’s amendment.

There’d been zero legislative action through normal channels except for an eleventh-hour, figleaf hearing Oct. 19, featuring a panel stacked 3-1 for the Infringers Lobby. Neither the Senate IP Subcommittee nor the Judiciary Committee moved PPOA through markup, where it might have been substantially amended or defeated. It certainly hasn’t been considered by the full Senate.

Further, it’s not like PPOA is some noncontroversial, consensus measure. Sen. Leahy’s colleagues at the hearing raised concerns. Some senators let Senate Armed Services leaders know of their concerns about putting PPOA in the NDAA. Rep. Bill Posey and several House colleagues weighed in with House leadership expressing similar concerns about PPOA’s recklessness.

Of all the changes that might be made to remediate the many harms Sen. Leahy, Congress, executive bodies and courts have done to U.S. patents and our private property rights-based patent system, a gratuitous proinfringer, antipatent recordation scheme isn’t one of them.