Patent Reform Reportedly Top Priority in Congress

It seems that patent reform will once again be on the Congressional agenda during the 111th Congress, perhaps as early as late winter or early spring. See National Journal, by way of Patently-O.  It is hard to imagine that the Congress would be willing to so quickly take up such a thorny issue, and one that has largely pitted the high tech community in one corner and facing off against manufacturing, pharma, biotech and entrepreneurial inventors in the another corner. At a time when President Obama and the Congress seem to be willing to bet the house on a hastily thrown together “stimulus” plan, it doesn’t make sense to me that patent reform would be so high on the list of things that need to be accomplished that it would work its way into the first 100 days of the Obama Administration, but what do I know? I found it impossible to believe that President Obama was so interested in open source software that within the first 48 hours of his Administration he would commission a special study aimed at potentially moving away from proprietary software. I also found it impossible to believe that President Bush would abandon free-market principles to save the free market. We live in strange times no doubt.

Let’s assume that the reports are accurate and patent reform is really going to rear its head over the next few months. What is left for Congress to do? As the Coalition for 21st Century Patent Reformputs it, the courts have been busy addressing many of the alleged problems of the patent system so many of the legislative initiatives of the last several years are no longer necessary. The 21st Century group, which consists of cross-section of interested manufacturers, pharmaceutical companies, bio-tech companies, a few high-tech companies like Motorola and SanDisk and the American Intellectual Property Association says:

[T]he responsiveness of the courts to issues arising in litigation has been no less than remarkable during the past four years. In Seagate, treble damage awards were limited. In ATT v. Microsoft, offshore infringement liability was reined in. In Volkswagen, a venue abuse was addressed. In Bilski, the criteria for patenting “business methods” were clarified. In eBay, the traditional four-factor test was confirmed as the appropriate test to use when considering the grant of an injunction under the Patent Act. In KSR, the non-obviousness standard was reinforced. In brief, the courts have gone a long way towards eliminating any need for Congress to address these issues-some of which had been the subject of controversial legislative proposals over the past four years.

It should not come as a shock to anyone who regularly reads my articles that I tend to be in agreement with the 21st Century group far more than any other group. While I personally detest what the Supreme Court did in KSR v. Teleflex, because they have effectively left us without an objective obviousness test, I believe this particular group of companies have a much better idea of what the patent system needs than, for example, the Coalition for Patent Fairness.

The Coalition for Patent Fairness is really a horribly misnamed organization, because it seems that what they are interested in is reform that would only benefit themselves and which would throw all other interested stakeholders under the proverbial bus. I don’t begrudge anyone from taking a position that benefits themselves, and even lobbying for changes that would be of benefit, but I do blame the Coalition for Patent Fairness for the fact that patent reform has not happened to date. You just cannot take positions that would undermine everyone else and expect that Congress will come into line and enact reforms that would seriously undermine the ability of all other companies to effectively protect their innovations. The Coalition for Patent Fairness is not doing it s members any good because they are unlikely to persuade anyone in Congress to give them what they want.  This is particularly true when Congressmen and Congresswomen also represent constituents with other interests, and sometimes even have constituents from both sides in their districts.

It will be interesting to see what proposals work their way into legislation this next time around. The 21st Century group wants there to be hearings before any legislation is drafted and circulated, which seems reasonable enough if you stop and think about it. Unfortunately, during 2008 there were no hearings prior to draft legislation, and we all know there have been no hearings prior to the drafting of what will ultimately be a $1 trillion spending package that will hopefully have at least some stimulative effect. It would seem that we are ushering in a new era in Washington, DC where draft legislation is written behind closed doors and no hearings are held. I would have believed this to be unthinkable in the not too distant past, at least with respect to such important and sweeping legislation, but now I really don’t know what to think.

One thing is for certain though, and that is that half of the goals of the Coalition for Patent Fairness have been achieved through the courts. One of the other items is just a bad idea, and the other of the four goals already exists and needs tweaking at best. These goals are:

1. When calculating damages, courts should be required to focus on the value that is attributable to the patent in question, and not on the full value of the entire product.

The trouble with this is that it makes perfect sense in the high tech arena, and virtually no sense anywhere else. What about items of manufacture where one patentable feature makes the entire unit more desirable than other units without that feature? There have been cases in the past where infringement has occurred in this situation and the infringer’s sales campaign was focused on the one patentable feature, explaining the customers needed to buy new because that one feature was so superior. In this situation, and many others, apportionment of damages makes no sense.

2. The standards for assessing “willful infringement” – which can trigger a tripling of ordinary damages – should be reformed.

Willful infringement damages should only be awarded in situations of truly egregious conduct.
This has already been address by the United States Court of Appeals for the Federal Circuit in Seagate.

3. Patent reform legislation should establish a new administrative procedure for review of patent decisions so that wrongfully-issued patents can be effectively reviewed and redressed within the USPTO, rather than in the courts.

The Patent Office already has a reexamination procedure. The reexamination procedure is hardly perfect as it stands, but there is absolutely no need to create a new procedure. The major flaw in the current reexamination procedure is that only printed publications and patents can be introduced to challenge the validity of a particular claim. This means that much great evidence, such as prior public use, knowledge and offers for sale are unavailable to be considered by the Patent Office during reexamination. All that needs to be done is to change the rules to allow the Patent Office to consider any known prior art when determining if a claim is valid.

4. Venue standards should be designed to preclude “gaming the system” through “forum-shopping.”

This matter has been addressed by the Federal Circuit in TS Tech and plaintiff’s are now required to bring patent infringement actions in an appropriate venue or the district court must transfer the case.

My hope is that thoughtful patent reform will be discussed openly and fairly if and when Congress can divert its attention to this matter. But the fact remains, there is no need for sweeping patent reform that would compromise the rights of those who employ many Americans. The type of reform that we need is that which targets the real problems faced by the Patent Office; namely the over 1.2 million case backlog that is threatening to ruin our patent system and drive innovation into the closet. That would not benefit anyone, and would be completely against the Constitutional directive on intellectual property protection for the good of society.

About the Author

Eugene R. Quinn, Jr. President & Founder of IPWatchdog, Inc. US Patent Attorney (Reg. No. 44,294) B.S. in Electrical Engineering, Rutgers University J.D., Franklin Pierce Law Center L.L.M. in Intellectual Property, Franklin Pierce Law Center Send me an e-mail

Gene is a US Patent Attorney, Law Professor and the founder of IPWatchdog.com. He teaches patent bar review courses and is a member of the Board of Directors of the United Inventors Association. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, CNN Money and various other newspapers and magazines worldwide