Thursday, December 26, 2019

Proposed Inventor Rights Act Would Overrule eBay, Award Infringer's Profits

As reported earlier on Patently-O (here and here) and on IP Watchdog, Representatives Danny Davis and Paul Gosar recently introduced a bill titled the Inventor Rights Act of 2019.  The bill appears to be a variation on the Inventor Protection Act, a bill I blogged about a little over a year ago.  Like that bill, which went nowhere, the present bill would be something of a train wreck, though fortunately I think it has little chance of passing.  The bill defines an "inventor-owned patent" as "a patent with respect to which the inventor of the invention claimed by the patent or an entity controlled by that inventor—(1) is the patentee; and (2) holds all substantial rights." It would add a new section 330 to the U.S. Patent Act that would, among other things, prohibit the PTAB from conducting IPRs, PGMs, or CBMs with respect to inventor-owned patents, without the consent of the inventor ("The United States Patent and Trademark Office shall not undertake a proceeding to reexamine, review, or otherwise make a determination about the validity of an inventor-owned patent without the consent of the patentee"); and would largely overrule TC Heartland by allowing inventors to file suit in any venue in which "an inventor named on the patent in suit conducted research or development that led to the application for the patent in suit," or "where a party has a regular and established physical facility that such party controls and operates, not primarily for the purpose of creating venue, and has—(A) engaged in management of significant research and development of an invention claimed in a patent in suit prior to the effective filing date of the patent; (B) manufactured a tangible good that is alleged to embody an invention claimed in a patent in suit; or (C) implemented a manufacturing process for a tangible good in which the process is alleged to embody an invention claimed in a patent in suit . . . ."  As for remedies, sections 330(c) and (d) would largely overrule eBay and would allow for awards of infringer's profits:
(1) PRESUMPTION.—Upon a finding by a court of infringement of an inventor-owned patent not proven invalid or unenforceable, the court shall presume, respectively, that—
(A) further infringement of the patent would cause irreparable injury; and
(B) remedies available at law are inadequate to compensate for that injury.
(2) OVERCOMING THE PRESUMPTION.—A presumption described under subparagraphs (A) or (B) of paragraph (1) may be overcome if the infringing party shows clear and convincing evidence that the patentee would not be irreparably harmed by further infringement of the patent, including evidence of unreasonable delay by the patentee from the date on which the infringement was known or reasonably could have been known to the patentee.
(d) RECOVERY.—A patentee that asserts a claim for infringement of an inventor-owned patent in a civil action under subsections (a), (b), (c), (f), or (g) of section 271 may elect, at any time before final judgment is entered by the court, recovery under this subsection in lieu of damages under section 284. If an election for recovery under this subsection is made, the following provisions apply upon a finding of infringement:
(1) PROFIT DISGORGEMENT.—The court shall award the patentee the profits from the use made of the invention by the infringer. In assessing profits the patentee shall be required to prove only the infringer’s revenues resulting from the infringement; the infringer must prove all elements of cost or deduction claimed.
(2) INTEREST AND COSTS.—The court shall award the patentee the costs described under section
1920 of title 28.
(3) INFRINGEMENT FOUND WILLFUL.—If the court finds the infringement to be willful, the court may award the patentee damages equal to no more than three times the amount of the profits found in paragraph (1).
(4) ATTORNEYS FEES.—The court shall award the patentee any amount of their attorneys fees that exceeds 10 percent of the amount of the profits and damages of paragraphs (1) to (3).’’
Most of what I said in 2018 about the Inventor Protection Act applies here, so I'll just repeat it:
This just boggles the mind.  Although, as I have written elsewhere on several occasions, there is a theoretical argument to be made in favor of requiring an intentional infringer to disgorge its profits attributable to the infringement (that is, the profit it earned above what it would have earned from the use of the next-best available noninfringing alternative), perhaps as an alternative to enhanced damages, I don't think it makes sense as a remedy for infringement generally due to its potential overdeterrent effect.  And as the above text indicates, the bill contemplates that courts could award disgorgement and still award (up to) treble damages for willful infringement . . . . Would any of this be tied into the economic value of the invention, that is, the value to the user over and above the value the infringer would have accrued from using the next-best noninfringing alternative?  
More to the point, have any of the sponsors of this bill thought at all about the rent-seeking and gaming that would ensue from enacting a class of protections solely for the benefit of inventor-owned patents?  Or about how any of this would affect consumers?  
I certainly understand that patent litigation (including, most definitely, the damages portion of trial) can be enormously expensive, and that there may be benefits in considering reforms that would simplify some aspects of it, particularly when the stakes are comparatively small.  (I talk about some of this stuff in my Patent Damages Heuristics paper; and I would suggest in addition that reforms such as creating a small(er)-claims-type court patterned after the Intellectual Property Enterprise Court in the U.K. might be worth considering.)  But the proposals floated . . . strike me as rather poorly thought out.
For more of my thoughts on why we don't need to introduce a presumption of irreparable harm (e.g., because the evidence suggests that eBay has had, if anything, a positive impact on innovation), see my testimony before the U.S. Senate Subcommittee on Intellectual Property Rights (here and here), and my follow-up responses to questions.  For discussion of disgorgement, see this chapter from Patent Remedies for Complex Products.  Finally, for information from an organization that favors the law, see here; I would note that the webpage seems a bit inaccurate in implying that, under the bill, disgorgement would apply in the case of willful infringement.

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