	Introduction1

Congress has shown significant interest in altering the current patent system in response to concerns about entities that engage in patent litigation tactics that have been criticized as abusive or deceptive. In June 2015, the House Judiciary Committee approved the Innovation Act ( H.R. This report describes how the major provisions of current patent litigation reform legislation, with a particular focus on these two bills that have seen the most legislative activity, would change existing patent law to address the perceived problems in the patent litigation system. Three trial proceedings comprise the current system of administrative patent challenges: inter partes review (IPR), post-grant review (PGR), and the transitional post-grant review for covered business method patents (CBM). The Innovation Act, H.R. Like the Innovation Act (as reported), the Senate's PATENT Act would require a court to stay discovery pending the resolution of preliminary motions (which must be filed prior to the first responsive pleading), including the motion to dismiss, the motion to transfer venue, and the motion to sever accused infringers. Upon the filing of an initial complaint for patent infringement, plaintiffs would be required to disclose to the USPTO, the court, and all adverse parties the following information relating to entities that own or have a financial interest in the patent:
1. the assignee(s) of the patent(s) involved in the case; 2. any entity with a right to sublicense or enforce the patent(s) at issue; 3. any entity, other than the plaintiff, that the plaintiff knows to have a financial interest in the patent(s) at issue or in the plaintiff; 4. the ultimate parent entity of any assignee, or the entities identified in #2 and #3 above; 5. a clear and concise description of the principal business, if any, of the party alleging infringement; 6. a list of each complaint filed, of which the party alleging infringement has knowledge, that asserts or asserted any of the patents identified above; 7. for each patent identified, a statement as to whether the patent is subject to certain licensing requirements (imposed by the federal government, a foreign government, or by a standards development organization). Section 5 of the Innovation Act would codify a modified version of the customer suit exception by amending the Patent Act to require a court to suspend or postpone litigation against a customer of a product or process that contains allegedly infringing technologies, if several requirements are satisfied:
1. the manufacturer is a party to the civil action or a separate action involving the same patent(s); 2. the customer agrees to be bound by the decisions of the court in the action involving the manufacturer, with respect to any issues that the customer and manufacturer have in common; and 3. the customer requests the court to stay the action no later than the later of (a) 120 days after the date on which the first pleading in the action is served (if such pleading specifically identifies the product or process that is the source of the customer's alleged infringement of the patent, and the pleading specifically explains how the product or process is alleged to infringe the patent), or (b) the date on which the first scheduling order in the case is entered. In addition, Brooks Furniture held that the prevailing party must prove its entitlement to attorney fees by "clear and convincing evidence." Section 3(b) of the Innovation Act would amend Section 285 to require a court, in any patent case, to award attorney fees to a prevailing party (plaintiff or defendant), unless the court finds that either
1. the nonprevailing party's position and conduct are "reasonably justified in law and fact" or 2. there are "special circumstances (such as severe economic hardship to a named inventor) [that] make an award unjust." Unlike the Innovation Act's creation of what appears to be a presumption of an award of attorney fees, Section 7(b) of the PATENT Act would require the prevailing party to first make a motion for the fees, after which the court must determine whether the position of the nonprevailing party was "objectively reasonable in law and fact, and whether the conduct of the nonprevailing party was objectively reasonable." If the court finds that the nonprevailing party's position and conduct does not satisfy these standards, the court must award reasonable attorney fees to the prevailing party, unless special circumstances would make an award unjust. Section 3(c) of the Innovation Act would establish mandatory joinder rules when the nonprevailing party alleging infringement is unable to pay the fee award ordered by the court and other expenses. The PATENT Act contains a mechanism for recovering fee awards from interested parties that is similar to the Innovation Act (as reported). The Innovation Act states that it is the "sense of Congress" that "it is an abuse of the patent system and against public policy for a party to send out purposely evasive demand letters to end users alleging patent infringement." H.R. 1896 , the "Demand Letter Transparency Act of 2015," outlines both content and disclosure requirements for demand letters. Under both the TROL Act and the STRONG Patents Act, the Federal Trade Commission would enforce any violations of the provisions above. The Senate's PATENT Act addresses both abusive demand letters and demand letters sent as pre-suit notification. Instead, the Innovation Act and PATENT Act (as reported) would require that the PTAB, in IPR and PGR proceedings, use the same claim construction standard that is applied by federal courts; that is, the PTAB would need to construe a patent claim "in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent." The Innovation Act and the PATENT Act (as reported) would also require the PTAB to consider prior claim construction by a court in a civil action in which the patent owner was a party. Section 9 of the Innovation Act and Section 14(a) of the PATENT Act would narrow the estoppel effect arising from a PGR by removing the phrase "or reasonably could have raised" in the statute. However, the PATENT Act (as reported) does not change the evidentiary standard for proving unpatentability, as the STRONG Patents Act would. Sections 102(d) and 103(d) of the STRONG Patents Act would provide even more stringent standing requirements for persons wanting to initiate a PGR or IPR. The STRONG Patents Act would put an end to USPTO fee diversion. The Innovation Act (as reported) would effectively overturn VE Holding Corp. by imposing limitations on the judicial districts in which a civil action may be brought for patent infringement or for a declaratory judgment that a patent is invalid or not infringed. Provisions Concerning Small Businesses

The patent reform litigation legislation introduced in the 114 th Congress contains several provisions designed to help small businesses that are involved in the patent system either as patent owners or as defendants in infringement lawsuits.
This report describes how current patent litigation reform legislation would change existing patent law to address the perceived problems caused by entities that engage in patent litigation tactics that have been criticized as abusive or deceptive. The bills introduced in the 114th Congress include the Innovation Act (H.R. 9), Protecting American Talent and Entrepreneurship Act (PATENT) Act (S. 1137), Demand Letter Transparency Act of 2015 (H.R. 1896), Targeting Rogue and Opaque Letters (TROL) Act (H.R. 2045), and the Support Technology and Research for Our Nation's Growth (STRONG) Patents Act of 2015 (S. 632). The legislation includes the following changes to the patent system:
Heightened Pleading Requirements: The Innovation Act and the PATENT Act would require parties alleging patent infringement in a civil action to include in the court pleadings specified details concerning each claim of each patent infringed, and the acts of the alleged infringer.
Limits on Discovery: The Innovation Act (as reported by the House Judiciary Committee) and the PATENT Act propose limitations on discovery pending the resolution of certain motions, including motions to dismiss, transfer venue, and drop parties.
Transparency of Patent Ownership: The Innovation Act and the PATENT Act would require plaintiffs in patent cases to disclose to the United States Patent and Trademark Office (USPTO), the court, and all adverse parties information relating to entities that own or have a financial interest in the patent.
Customer-Suit Exception: The Innovation Act and the PATENT Act would allow a court to stay litigation against a customer of a product that contains allegedly infringing technologies, if the manufacturer of the product is a party to the same or other action on the same patent and other requirements are satisfied.
Shifting of Attorney Fees: The Innovation Act would require a district court to award attorney fees to a prevailing party in patent cases, unless the court finds that the nonprevailing party's position and conduct "were reasonably justified in law and fact or that special circumstances ... make an award unjust." The PATENT Act would require the prevailing party to make a motion to the court to determine whether the nonprevailing party's position and conduct were "objectively reasonable"; if they were not, then the court must award reasonable attorney fees to the prevailing party unless there are special circumstances that would make an award unjust.
Fee Recovery: The Innovation Act and the PATENT Act contain provisions that address the situation when the nonprevailing party alleging infringement is unable to pay the fee award and other expenses. The Innovation Act (as reported) and the PATENT Act would allow a defendant to submit a statement early in the litigation claiming that the plaintiff's primary business is the assertion and enforcement of patents; the plaintiff would then need to certify that it has sufficient funds to satisfy any potential award of attorney fees that may be assessed, and to identify (and provide notice to) any "interested parties" that could be held accountable for the award if the plaintiffs are unable to pay it.
Demand Letters: Several bills propose various approaches to address demand letters. The STRONG Patents Act and the TROL Act would impose specific enforcement and content requirements for demand letters. The Innovation Act expresses the sense of Congress that purposely evasive demand letters are abusing the patent system in a manner contrary to public policy. The Demand Letter Transparency Act proposes both disclosure and content requirements directed towards "abusive" demand letter practices, and the PATENT Act focuses on pre-suit notifications.
Post-Grant Review Reforms: The Innovation Act, PATENT Act (as reported by the Senate Judiciary Committee), and the STRONG Patents Act would mandate that the Patent Trial and Appeal Board (PTAB), in inter partes review (IPR) and post-grant review (PGR) proceedings, follow the same claim construction standard used by district courts. The Innovation Act and the PATENT Act (as reported) would require the PTAB to consider prior claim construction by a court in a civil action in which the patent owner was a party. In addition, the Innovation Act and the PATENT Act would narrow the estoppel effect arising from a PGR. The Innovation Act (as reported) and the STRONG Patents Act would heighten the standing requirements for persons wanting to initiate a PGR or IPR. The STRONG Patents Act would also require the IPR/PGR petitioner to prove unpatentability of a patent claim by "clear and convincing evidence."
Elimination of USPTO Fee Diversion: The STRONG Patents Act would permit the USPTO to spend all fee revenue that it collects without further appropriation action or fiscal year limitation.
Venue: The Innovation Act (as reported) would impose limitations on the judicial districts in which a civil action may be brought for patent infringement or for a declaratory judgment that a patent is invalid or not infringed.
Assistance for Small Businesses: The Innovation Act, STRONG Patents Act, and the PATENT Act contain provisions designed to help small businesses that participate in the patent system either as patent owners or as defendants.