PALS Act

To impose requirements in certain actions for patent infringement, and for other purposes. 1. Short title This Act may be cited as the Prevent Abuse of the Legal System Act PALS Act 2. Covered infringement actions (a) Definitions In this section— (1) the term affected proceeding 19 U.S.C. 1337 (A) a patent issued by the United States Patent and Trademark Office is a subject of the proceeding; and (B) a designated entity— (i) is the owner or exclusive licensee of the patent described in subparagraph (A); (ii) has a financial interest in the outcome of the proceeding; or (iii) has direct or indirect control over the conduct of the litigation of the matter by the holder of the patent described in subparagraph (A); (2) the term covered regulations (3) the term designated entity (A) an entity on the entity list maintained by the Bureau of Industry and Security of the Department of Commerce and set forth in Supplement No. 4 to part 744 of title 15, Code of Federal Regulations; or (B) any parent, subsidiary, or affiliate of an entity described in subparagraph (A). (b) Conduct of affected proceedings Notwithstanding any other provision of law or regulation, the following requirements shall apply with respect to an affected proceeding: (1) The pleadings alleging infringement of the patent shall, with respect to each patent in which a designated entity has an interest— (A) state with particularity the facts and circumstances constituting that infringement, including— (i) all patent claims alleged to be infringed; and (ii) all products and services alleged to be infringed; (B) provide a detailed identification of the specific elements of each patent claim that is found in each product and service identified under subparagraph (A)(ii); and (C) state with particularity all damages or other remedies sought in the proceeding. (2) Excluding legal counsel for the designated entity involved, neither the designated entity nor the agents or representatives of the designated entity may obtain through discovery, or by other means, any non-public information of any entity or person related to any technical features or operation of a product or service. (3) Upon the filing of the affected proceeding, the designated entity involved shall provide notice of the proceeding to the Department of Justice and the United States Patent and Trademark Office. (4) The United States shall have the unconditional right to intervene as a party in the proceeding under rule 24(a) of the Federal Rules of Civil Procedure. (c) Restrictions on certain patent transactions Notwithstanding any other provision of law or regulation, the following requirements shall apply with respect to the sale or exclusive license of a patent issued by the United States Patent and Trademark Office: (1) The sale or license is prohibited if the sale or license is to a designated entity and the entity has not undergone review under section 721 of the Defense Production Act of 1950 ( 50 U.S.C. 4565 (2) The sale or license is prohibited if the sale or license is to or by a designated entity and the manufacture, sale, use, import, or export of a product or service that is subject to the covered regulations would infringe the patent, unless an appropriate license is granted under the covered regulations. (3) With respect to a patent not involving a drug or biological product, the sale or license of the patent to or by a designated entity to any foreign entity or affiliate shall require notification pursuant to rules under subsection (d)(1), and the waiting period described in subsection (b)(1), of section 7A of the Clayton Act ( 15 U.S.C. 18a (d) List The Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office shall maintain a publicly available list of all designated entities.

Summary: Prevent Abuse of the Legal System Act or the PALS Act This bill imposes restrictions on U.S. patent infringement actions and transactions involving entities covered by certain export regulations. Specifically, the bill's restrictions apply to all entities on a list maintained by the Department of Commerce under the Export Administration Regulations (EAR). Under the EAR, transfers and exports of certain items that implicate national security or foreign policy concerns are restricted when the transaction involves an entity on the list (i.e., a designated entity). In patent infringement actions involving a designated entity, the pleading alleging infringement shall (1) state with particularity the relevant facts and remedies sought, and (2) identify in detail how each patent claim is found in each allegedly infringing product or service. In such actions, a designated entity and its representatives may not obtain nonpublic technical information related to another entity's product or service, through discovery or other means. However, this restriction does not apply to a designated entity's legal counsel. A sale or exclusive license of a U.S. patent to a designated entity shall be prohibited if (1) the designated entity has not undergone a national security review; or (2) a product or service subject to the EAR would infringe the patent, unless an appropriate license is granted. Certain sales or exclusive license of a U.S. patent involving a designated entity and another foreign entity shall comply with certain antitrust provisions, including Federal Trade Commission notification requirements.