Federal Judiciary Change Restores Balance in Patent Litigation, Resolves Legislative Controversy

On December 1, new procedural rules adopted by the Judicial Conference of the United States, the national policymaking body of the federal courts, went into effect. These new rules heighten pleading standards and resolve one of the key issues raised in pending patent legislation. We applaud the judiciary for taking action to correct its procedures, curb excesses, and restore a centrist balance in the complex area of patent litigation.

Few innovative companies are surprised to receive occasional patent infringement complaints. They are a fact of life in our highly interdependent world, where each new idea builds on many others preceding it. However, what does often surprise recipients of patent infringement complaints is the vagueness of some of the charges filed against them, and the ability of nebulous pleadings to survive summary dismissal that otherwise should serve as a legitimacy filter for the courts.

This lack of specificity in patent infringement complaints has garnered particularly strong condemnation in recent years. Some abusers “game” the system and file general lawsuits in the courts asserting imprecise claims, making it difficult for defendants to gauge either the likelihood or extent of their liability. This tactic enables abusive plaintiffs to extract undue settlements from manufacturers who fear the outsized costs of litigation, or simply lack the risk appetite to weather uncertain liabilities, despite confidence that their products or practices are non-infringing. Clearly, the plan to raise federal pleading standards on December 1 was welcome.

Even for companies that have the will to fight fuzzy infringement claims, the law has not been on their side. When Audi of America was sued by Velocity Patent LLC in August 2014 for allegedly infringing a patent covering “optimizing operation of an engine-driven vehicle,” the complaint stated little more than the name of the patent and the assertion that Audi sells cars with radar, information displays and manual gear shifting features. Audi moved for dismissal, asserting that the claim of alleged infringement was too vague. However, Audi lost the motion as the court found that Velocity’s interpretation of Form 18—the form that specifies the information necessary to file a patent infringement suit—was, in fact, accurate. Form 18 requires no more than sparse claims asserting: (a) proper jurisdiction, (b) subsisting patent ownership, (c) that infringement has taken place, (d) prior notice of infringement and (e) a demand for relief.

Addressing these vague pleading standards has been one of the priorities in pending patent reform bills before the Congress. The most prominent of these bills would significantly restrict judicial flexibility, dictating how judges must manage pleadings in patent cases brought before them. These rigid legislative proposals have met with concerns voiced by judges, scholars, and innovators over inflexible rules that would deprive judges of the ability to exercise judgment, and would amount to Congress micromanaging the judiciary in tension with our Constitutional separation of powers.

Thankfully, these proposals are no longer necessary. The judiciary has heard and responded to the concerns of Audi of America and countless other defendants, many of which had previously looked to Congress to put an end to summarized, general pleadings in patent litigation.

As controversy around new patent reform legislation has grown on Capitol Hill, the judiciary did something it does well: quietly and deliberatively working through its procedures to put its own house in order.  It has accomplished that reordering—issuing a major rule change that solves the patent pleading problem the right way—for all stakeholders.

One month after Audi lost its motion, the federal Judicial Conference recommended the abrogation of Rule 84 of the Federal Rules of Civil Procedure, and the official forms for which it provides, including Form 18. This proposal was approved by the U.S. Supreme Court and, as of December 1, 2015, Form 18 was abolished. Without fanfare, the judiciary has deftly and swiftly removed both Form 18 and also the need for legislation.

The federal judiciary deserves high praise for listening and taking action, and for striking an appropriate balance in addressing the faults of the current pleading requirements for initiating patent litigation. The new pleading standards recognize the need for specificity as well as the need for flexibility in pleadings, requiring the information that will stop abusers from filing vague claims. They will also fairly enable defendants to evaluate the claims brought against them, and preserve the integrity of the judge’s prerogative to exercise judgment. Importantly, they also avoid burdening legitimate patent plaintiffs with undue hardship in protecting their rights by forcing them to plead details which are often not publically available.

This issue can now be considered resolved. Our federal government can score-up another success, with Congress playing its role of spotlighting and debating an issue, and the judiciary playing its role of deliberatively finding a balanced resolution.  And another contentious issue can be retired from Congress’ busy legislative agenda.

David J. Kappos served as Under Secretary of Commerce and Director of the United States Patent and Trademark Office (USPTO) from 2009-2013. Paul R. Michel served as the Chief Judge for the U.S. Court of Appeals for the Federal Circuit from 2004-2010. 

Morning Consult