Patent Reform Bill Implications

By Robert Ambrogi Esq
Long-debated legislation to overhaul the nation's patent system could be headed soon to a vote by the full U.S. Senate, after the Senate Judiciary Committee announced bipartisan agreement on a compromise bill.

Included in the bill are key provisions that could directly impact the use of expert witnesses in patent cases.

Most notably, the bill would require judges to be more watchful gatekeepers in advance of trials, screening out unfounded theories of damages. It also would allow them to break trials into sequences, hearing evidence on damages only after the patent's validity and infringement are established.

This judicial gatekeeping is unlikely to differ significantly from the gatekeeping function judges already perform with regard to expert evidence under Daubert, lawyers say.  However, greater judicial scrutiny of damages could result in greater demand for damages experts and an increase in pretrial hearings pertaining to damages.

The bill would also create a post-grant review procedure for challenging the validity of a patent in a proceeding before an administrative patent judge of the renamed Patent Trial and Appeal Board. It would abolish inter partes reexamination by patent examiners and substitute a procedure for inter partes review before the PTAB. Both of these changes could result in a greater need for expert testimony.

What many consider to be the bill's most dramatic change – converting first-to-invent to a first-to-file rule – would have little impact on the use of expert witnesses, lawyers say. However, a corollary change, the elimination of interference proceedings, would eliminate the need for expert testimony there.

A Compromise Bill

The Judiciary Committee announced the compromise bill March 4. With the bipartisan backing of Democratic senators Patrick Leahy (D-Vt.), Ted Kaufman (D-Del.) and Chuck Schumer (D-N.Y.), and Republican senators Orrin Hatch (R-Utah), Jon Kyl (R-Ariz.) and Jeff Sessions (R-Ala.), the bill is expected to move swiftly to a Senate vote.

If enacted, the bill would represent the most sweeping changes to the nation's patent system in more than 50 years. Among its major changes to the patent system, the bill would:

    Transition the U.S. from a first-to-invent to a first-to-file system, which would bring it in line with the practice in most other countries.
    Create an entirely new system of post-grant review designed to weed out patents that should not have been issued.
    Allow third parties to comment on pending patent applications and speak to the relevance of prior art.

"With this agreement, we are closer than ever to advancing patent reform legislation through the Senate," Sen. Leahy said in announcing this so-called Managers' Amendment to the Patent Reform Act (S. 515).          

A New Gatekeeping Role

With regard to the use of expert witnesses, the bill's most dramatic changes involve the assessment of damages for patent infringement.

The bill would provide judges with a more robust gatekeeping role. Judges would be required, in advance of trial, to assess the legal validity of the specific damages theories and jury instructions sought by the parties.

Specifically, the bill would require judges to "identify the methodologies and factors that are relevant to the determination of damages" and to consider only those methodologies and factors in making their decisions.

To that end, the bill would require:
  1. Parties to disclose before trial the legal and factual bases they propose for determining damages.
  2. Judges to consider, in response to a motion or on their own initiative, the legal sufficiency of damages evidence before allowing its introduction.
  3. Judges to make on-the-record findings of the "methodologies and factors as to which there is a legally sufficient evidentiary basis."

The bill further provides that any party to a patent-infringement case may request that the trial be sequenced. If such a request is made, the judge or jury would first decide questions involving the patent's infringement and validity. Only then would the issues of damages and willfulness be tried to the judge or jury.

With regard to the issue of willfulness, the bill would raise the bar by requiring clear and convincing evidence that the infringer acted with objective recklessness. "An accused infringer's conduct was objectively reckless if the infringer was acting despite an objectively high likelihood that his actions constituted infringement of a valid patent, and this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer," the bill states.

Evidence that the infringer had knowledge of an infringed patent is not, of itself, sufficient to prove willfulness, the bill says.                       

The Act's Impact on Experts

In requiring judges to play this gatekeeping role regarding damages, does the Patent Reform Act foretell stricter standards with regard to the use of expert witnesses? One law professor thinks not. In testimony submitted to Congress, Georgetown University Law Center Prof. John R. Thomas argued that these proposed reforms only underscore evidentiary standards that litigators already must follow in using expert testimony.

"Federal Rule of Evidence 702 currently requires expert testimony to be based upon sufficient facts or data and the product of reliable principles and methods," Thomas said. "Further, these principles and methods must be applied reliably to the facts of the case."

In other words, theories of damages – to the extent they involve expert testimony – are already subject to a gatekeeping process. "Accused infringers may file Daubert motions to exclude expert testimony that fails to meet standards of relevancy and reliability," Thomas noted.

Edward M. O'Toole, a patent litigator with the intellectual property firm McCracken & Frank in Chicago, offered a similar opinion. "I don’t think the Patent Reform Act, as currently worded, will affect the role of damages experts."

Federal rules already require litigants to identify expert witnesses and submit an expert's report in advance of trial, and experts are already subject to being deposed by opposing parties, O'Toole noted.

"In most jurisdictions I have been in, these pretrial activities control what will be allowed into evidence at trial," he said. "In other words, Daubert, as expanded, will still be the test."

But while the act might not change the role of the expert, it could lead to an increase in the demand for experts in the fields of economics, finance and accounting. With judges required to engage in stricter scrutiny of damages claims and to conduct that scrutiny in advance of trial, there is likely to be an increase in damages contests and an increase in pretrial hearings related to damages.

Simply put, if the Patent Reform Act becomes law, damages experts will be more critical to patent litigation than ever before.       

Administrative Proceedings

The act's proposed post-grant review process could result in a greater need for expert witnesses in those proceedings, but the greater demand for experts is likely to come under the revamped inter partes process, says Robert Ashbrook, a patent lawyer at Dechert LLP in Philadelphia. Both procedures expressly allow introduction of expert opinions, but the post-grant review process limits discovery to factual issues, while there is no such limit for the new inter partes reexamination.

"Using the new inter partes reexam procedure, an accused infringer can litigate validity before the PTAB and get a determination in a year – by which time the patentee's corresponding infringement suit in district court might not even be through discovery," notes Ashbrook. "That speed advantage might make the new inter partes reexam quite popular with defendants, and as a result bring about more expert work."

While the change to a first-to-file rule is unlikely to have any major impact on the use of experts, the corollary elimination of interference proceedings would. "Experts who testify in interference matters would no longer be needed," said Judith Szepesi, a patent attorney at Blakely, Sokoloff, Taylor & Zafman in San Francisco.

All in all, it appears that the Patent Reform Act would increase the need for experts in some proceedings, reduce the need for them in other proceedings, and perhaps give more prominence to experts in determining damages for infringement.

Robert Ambrogi Esq

We are proud to partner with an author of Bob’s caliber to provide exclusive articles for our legal clients and leading industry experts. Robert J. Ambrogi is a news media veteran and the only person ever to hold the top editorial positions at the two leading national U.S. legal newspapers, the National Law Journal and Lawyers Weekly USA. He is currently a Massachusetts lawyer who represents clients at the intersection of law, media and technology. He is also internationally known for his writing and blogging about the Internet and technology. Media and Technology Law Bob represents a range of businesses and individuals, concentrating in print and electronic media companies and the editorial, sales, marketing and technology professionals who work in them. He also counsels businesses and individuals in employment matters. Arbitration and Mediation An established professional in alternative dispute resolution, Bob has been an arbitrator since 1994, focusing on labor and employment and securities disputes. A mediator in a range of civil disputes, Bob completed the training required by Massachusetts law to protect confidentiality.

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