According to Reuters, Senator Orrin Hatch (R-UT) says that the House and Senate are close to agreeing on language for a patent reform bill that would virtually ensure its passage. According to Hatch, patent reform will happen this year, saying that he would be shocked if patent reform was not enacted in 2009. Hatch says “[th]is is the closest we’ve come to really doing this job.” So what is the good news? Hatch also says that the Senate is going to agree to language that would make it much more difficult for courts to find inequitable conduct. According to Reuters, the language would mean that inequitable conduct could be found only if there were real fraud during the patent acquisition process, rather than allowing a defendant to point to an error made in a “complicated process.” What this actually means time will only tell, but if this means that patent reform would adopt the Patent Office view of inequitable conduct and enact Rule 56 that would be an enormous step in the right direction. This is what I have been suggesting for months, it would force certain Federal Circuit judges to abandon their myopic view of inequitable conduct and it would open the door to make Patent Office reform possible. By limiting inequitable conduct to real fraud it would be possible for patent attorneys and agents to have real conversations with patent examiners and lead to a more open and less adversarial process, perhaps even allowing for the cooperative approach to patent examination I recently discussed when I suggested a change in Patent Office philosophy.
So what is the bad news? According to Reuters the patent reform legislation would still include provisions that would limit the damages available for successful patent owners who demonstrate a defendant had infringed. As long as apportionment of damages remains in the patent reform legislation its passage is far from certain, regardless of what Senator Hatch believes. A patent system that makes it easier for infringers to choose stealing patent rights rather than licensing or innovating around patents is simply a bad idea that will never be adopted. Limitation of patent damages only benefits those Silicon Valley companies that so desperately want to infringe, and do irreparable damage to the patent portfolios of pharmaceutical, biotech, green-tech and manufacturing companies, not to mention small businesses and start-up research and development companies. Why would Congress enact a provision that would destroy so many jobs and so many industries all to benefit one segment of an industry that wants to infringe and not have to pay? It is particularly alarming that damages provisions still remain in the patent reform legislation when there is simply no need for such provisions. If Silicon Valley wants help in dealing with the so-called patent troll problem you do not need to limit damages, you just need to fix the problem. The Federal Circuit has already done away with the forum shopping that lead so many patent trolls to run to the Eastern District of Texas in search of huge potential windfall profits from juries who love any patent owners, even those who are trolls. But we do not need to gut the patent system and needlessly risk massive loss of research and development funds and US jobs. What we need to do is make it so that only legitimate patents can be asserted in legitimate forums. In order to do that what Congress needs to do is insert provisions in the patent reform legislation that require patent owners to go back to the Patent Office to get patent claims thoroughly reviewed prior to being allowed to file infringement actions.
If you have an employment discrimination claim you need to get a right to sue letter from the EEOC before you can file a claim in federal court, and we need to adopt that, or something similar, in the patent context. This proposal has enormous potential. We know that most patents, in fact 98% of patents, are not commercially relevant. So why should we engage in patent prosecution on all patents as if they are commercially relevant? The answer is that it makes no sense. We could plow through the backlog if patent prosecution were streamlined and best efforts were made to ensure that within reasonable limits patents are new and nonobvious. But we ought not to thoroughly examine each and every patent prior to issuance. We also should not be rejecting 58% of applications. The Patent Office needs to become the Patent Granting Authority again, issue patents based on a reasonable, but quick review. This will allow the backlog to be addressed and resources put into thorough examination of those patents that are about to be litigated. Patent litigation is an expensive proposition, and lawsuits are brought only when real money is at stake. Prior to patent owners being allowed to file a patent infringement lawsuit the patent should be subject to real, thorough and complete review by the Patent Office. This is hardly any different than what would occur during litigation. The patent and all the claims will be picked apart, but by a judge who is hardly an expert in patent law. Why not have the Patent Office play that vital role of working up the patent claims, reviewing the prior art, and deciding whether the patent claims are valid? This is what the Patent Office specializes in, and the inquiry used to determine whether a patent should issue is the same inquiry used to determine whether a patent claim should have issued or whether the claim is invalid. The Patent Office should be doing that, and the decision of the Patent Office should be immediately reviewable by the Federal Circuit. If the Patent Office finds the claim valid, and the Federal Circuit agrees, then and only then should the case go to the District Court for determination of infringement and damages. We might even be able to allow the Patent Office to engage in claim construction, which would be reviewable by the Federal Circuit. So District Courts would be free to do what they do best, which is determining liability and awarding damages. The process would be streamlined, the Patent Office would be alleviated of the unreasonable burden to thoroughly examine all applications and the endless stream of appeals, reversals, appeals and reversals would end. Finality could actually happen in patent litigation, which could only be a good thing for industry and innovation.
This proposal is so perfect because it solves all of the problems facing the patent industry. It would also mean that the Patent Office is open again for business, and can grant patents rather than reject, reject and reject. Assets would be created, thereby increasing wealth. After all, the issuance of a patent is akin to instantly creating wealth. It is the only way that the federal government can create wealth without printing money and without the risk of inflation. Patents need to issue to independent inventors, start-ups and small businesses so that they can attract investors and raise capital necessary to expand. It is the creation of small businesses and the expansion of existing small businesses that will lead to jobs and jobs are what will get us out of this recession. It is a no-brainer!
If you have a dog in this fight, or a horse in this race, or are interested in innovation at all you need to contact your Representatives and Senators. Tell them that inequitable conduct reform is necessary, patent apportionment will hurt the US economy, and a thoughtful innovation policy that will turn the Patent Office into a Patent Granting Authority will lead to the creation of wealth and the creation of jobs. We all have an interest in the government getting this right, so call, write and e-mail your government officials. This is far too important for those who really don’t understand the patent system to make a mistake that could only prolong this recession.
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 CenterSend 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