House Subcommittee Holds Second Hearing on Abusive Patent Litigation

The House of Representatives Judiciary Subcommittee on Courts, Intellectual Property and the Internet held its second hearing on Abusive Patent Litigation this afternoon. Six industry representatives spoke to address the issues related to cases brought by non-practicing entities ("NPEs") and the impact on competitiveness and job creation in the United States. Today’s hearing was focused on NPE litigation at the International Trade Commission ("ITC") and beyond.

The witnesses at today’s hearing included: Kevin Rhodes, VP and Chief IP Counsel, 3M Innovative Properties Co.; Jonathan W. Dudas, Former Under Secretary of Commerce for IP and Director of U.S. Patent and Trademark Office; Colleen V. Chien, Professor, Santa Clara University School of Law; Russell W. Binns, Jr., Associate General Counsel, IP Law & Litigation, Avaya, Inc.; Deanna Tanner Okun, Partner, Adduci, Mastriani & Schaumberg, L.L.P. and Former Chairman of USITC; and David Foster, Chairman, Legislative Committee, USITC Trial Lawyers Association.

Both sides of the spectrum were represented today and statements were made supporting patent reforms in an effort to minimize abusive litigation and others cautioning against too much legislative regulation of the patent system and the courts. Congress was clear that any proposed change must not adversely affect American innovators.

The inquiry focused on understanding the differences between litigating before the ITC and in federal district court, the nature of the available remedy (an exclusion order), and the additional considerations involved (domestic industry, public interest), as well as statistics regarding the types of entities that bring cases, their successes, and the general trend at the ITC. Recurring themes included cost control and proposed methods of reducing frivolous litigation, particularly at the ITC.

Several panelists noted that the Commission has shown awareness recently of the issues and has taken action in response to criticisms regarding the high cost of ITC litigation and alleged forum abuses, including issuing new rules and limits on discovery in ITC cases, as well as ordering an expedited hearing and initial determination on domestic industry – which had not been done before – last month in the 874 investigation. Another innovative approach suggested by one panelist is that the Commission consider staying cases against downstream product manufacturers and end-users in favor of cases against the manufacturer or supplier of the accused article itself.

Other comments focused on whether Congress should seek to reform the system based on an entity’s status as a NPE or patent assertion entity ("PAE"), or whether the focus should instead be on the conduct in question. Some of the solutions suggested by the panelists include limiting duplicative litigation in the ITC and district courts, limiting duplicative action in the courts and before the Patent Office, understanding the economic and business nature of NPEs and PAEs, and providing industries with access to data related to litigation and negotiations.

The first Subcommittee hearing on these issues was held on March 14, 2013 and addressed the impact of abusive patent litigation by NPEs on innovation and jobs in the U.S. as well as potential solutions, such as the SHIELD Act, discovery limits, cost shifting, utilization of intervention and impleader rules, staying suits against end-users, alternative damages calculations, stricter drafting requirements for patent claims, and mandatory recordation of assignments.

The witnesses during the March 14, 2013 hearing were: Mark Chandler, Senior Vice President, General Counsel and Secretary, Cisco Systems, Inc.; Janet L. Dhillon, Executive Vice President, General Counsel and Secretary, J.C. Penney Company, Inc.; John G. Boswell, Senior Vice President, Chief Legal Officer and Corporate Secretary, SAS Institute, Inc.; C. Graham Gerst, Partner, Global IP Law Group, LLC; Philip S. Johnson, Senior Vice President and Chief Intellectual Property Counsel, Johnson & Johnson; Dana Rao, Vice President and Associate General Counsel for Intellectual Property Litigation, Adobe Systems, Inc.