Huge Changes to Senate Patent Reform Bill Announced

By Gene Quinn
March 31, 2009

The Senate Judiciary Committee Executive Meeting on the Patent Reform bill presently working its way through the Senate just ended, at approximately 10:30 am.  Last week, on Thursday, March 26, 2009, Senator Arlen Specter announced that compromise was close, and that changes to the patent bill would be “very significant.”  It would appear as if Senator Specter was not just blowing smoke.  This morning Senator Leahy, Senator Specter and Senator Feinstein all agreed that an agreement is very close on all the contentious issues, including patent damages, willful damages, inequitable conduct, best mode, post-grant review, interlocutory appeals and venue.  The changes to the patent reform legislation sound extremely significant, and it would seem that patent reform is going to happen and very soon.

Although the agreements were discussed, the specific language has not been announced as yet, but will be forthcoming.  Senator Leahy explained that the Senators and their staff are still working over the exact language that will be put in place prior to the next meeting, which will take place on Thursday, April 2, 2009.  The language is apparently going to be circulated prior to the next Executive Meeting on Thursday, April 2, 2009, so that the stakeholders can have an opportunity to be heard regarding the changes.

Here are some of the changes that seem to be agreed to by Senators Leahy, Specter and Feinstein:

  • Senators Specter and Feinstein each explained that the patent damages provisions of the legislation will include a “gatekeeper” provision that will allow parties to submit summary judgment motions on damages, but will not change the existing law.  The existing law of damages will be codified.
  • Senator Specter explained that the best mode requirement will be maintained, but failure to disclose the best mode will not be grounds for invalidating patent claims.  If what Senator Specter said relevant to best mode is accurate, this would be a significant departure from current patent law.
  • According to Senator Specter, universities receiving money under Bayh-Dole will allow universities to keep more royalties.
  • According to Senator Kyl, who admitted to not having seen any draft language but basing his statements on discussions with staff and other Senators, the post-grant review provisions agreed to by Senators Specter, Leahy and Feinsteing reverts to House language of 2007 on post-grant review, and would require the petitioner to raise only “an interesting question” regarding the patent, rather than a substantial new question of patentability.  Senator Kyl further explained that the “interesting question” would not need to be enough to suggest an error in granting the claim in order to institute post-grant review.  Senator Kyl said that in discussions with the Patent Office they are quite worried about this because they would have no ability to administer such a review, and would be overwhelmed because virtually every petition would have to be granted.

Senator Kyl also expressed concern that the patent reform legislation that is about to leave the Judiciary Committee does nothing to address problems within the system, namely the real and systemic problems within the Patent Office.  He said he was concerned by this because with such sweeping changes to the patent system Congress will likely not take up patent reform any time soon after passage of this bill, and there remains substantial problems facing the Patent Office and the patent system.  It is hard to argue with Senator Kyl on this point.  I have written in the past that as sweeping as these changes to the patent laws may be, patent reform is simply ignoring the 800 pound gorilla in the room.  The Patent Office is dysfunctional and overwhelmed, and it is terrible to think that there will be patent reform without making the patent system any better.  Sadly, Senator Kyl is correct. 

I agree with Senator Kyl when he says that passage of this patent reform legislation will not solve any problems, and could make the patent system worse in the long run.  This is not to suggest that I don’t like any of the reform ideas.  I will, like everyone else, need to see the actual language before offering any real or constructive criticism or support.  Nevertheless, with so many changes to the patent laws, particularly adding onerous post-grant review to the Patent Office plate, will only make the Patent Office more overwhelmed.  This is likely to accelerate the number of rules packages aimed at pushing off work onto applicants, which will have severe consequences for the patent system as a whole, the US economy and innovation.  If patent reform also addressed the problems facing the Patent Office, and the problems within the Patent Office, this could be the point in time that we look back on years later as the turning point for the US economy and innovation.  Unfortunately, punting on systemic issues facing the Patent Office does not help, and will make things worse.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 11 Comments comments.

  1. Anon March 31, 2009 10:34 am

    What does the new venue provision look like? Can they really force patent holders to only bring suit in the defendant’s jurisdiction? That is just not consistent with other areas of the law and is totally prejudicial.

  2. Anonymous March 31, 2009 4:13 pm

    I completely agree with you, Gene

  3. Gene Quinn March 31, 2009 4:28 pm

    Anon-

    I don’t know what the new venue provisions will look like because the language is still being finalized. I am not sure this is even necessary since the Federal Circuit decision in TS Tech. The answer is that Congress could change venue provisions to more clearly require cases to be brought in the most appropriate location. What has happened is so many patent plaintiffs (typicall so-called patent trolls) file suit in the Eastern District of Texas. Neither party is from there, no witnesses are from there, the technology was invented elsewhere, manufacturing is elsewhere, and maybe one or two infringing sales were there. That is a tenuous relationship that case law says doesn’t support venue. The reason to file in the Eastern District of Texas is because when there is a jury award it could be huge. That is not a reason to inconvenience a defendant, witnesses, make it harder to produce evidence and raise the cost in terms of attending hearings and the trial.

    -Gene

  4. EG April 1, 2009 7:27 am

    Gene,

    Mark Twain was right, Congress is the “insane asylum for the helpless.” Just when you thought Congress couldn’t do anything dumber, it surprises you with a new level of rhetorical nonsense: “an interesting question.” What in the world is that supposed to mean?

  5. BK April 1, 2009 9:51 am

    If there must be “reform” on the damages issues, the proposed provisions appear to be the less offensive than the earlier proposals. In the end, I am not sure that they will change the outcome in any damages case. But, they are likely to make getting to an award more costly for both sides.

  6. Anon April 1, 2009 9:59 am

    Gene-

    With all due respect, the reason entities (both NPE’s and Corps) file in Texas is not because of the chance of a big award. The facts do not support that conclusion. The reason is that the Judges understand patent law and a patent holder is more likely to get a fair trial. Smart Judges, smart rules (no discovery games) and a jury pool that appreciates property rights are the reasons why patent holders bring actions there. In fact, most of the big tech companies arguing for patent reform (and venue reform) choose Texas when they are plaintiffs for these very reasons. They argue its inconvenient when they are defendants but convenient when they are plaintiffs! Isn’t is curious that the proposals all retain the ability for practicing entities to continue to choose Texas!

    Tech companies are no better than Wall Street bankers.

  7. Gene Quinn April 1, 2009 6:01 pm

    Anon-

    With all due respect to you, you are wrong. Patent trolls file in Texas because of potential for huge jury awards, and prior to everyone filing there they not only could get lottery winnings but swift justice. To say that the Judges there understand patent law misses the point completely. The Court that understands patent law best is the District of Delaware. They are reversed less than any other district court by the Federal Circuit. Approximately 90% of their rulings are upheld on appeal, and they have about 100 active patent cases on their docket at any given time. So that is the best court to use if you are looking for judges that understand patent law and want a fair, just and certain result. The fact is that trolls never file in Delaware though, so obviously it isn’t because they are looking for the best judges.

    We do agree though, tech companies are no better than Wall Street bankers. They want the deck stacked in their favor.

    -Gene

  8. Ian H April 2, 2009 12:05 am

    A radical reorganisation …

    … of the deckchairs on the titanic. The problem however is in the engineroom. Fundamentally patents are just a bad idea. No amount of lipstick on this pig is ever going to make it fly.

    Fixing the patent system is actually quite easy. Abolish them.

  9. EG April 2, 2009 6:18 am

    Gene,

    My comments on the proposed amendment:

    Damages: Appears to be acceptable. At least the judge has the flexibility to determine which “methodologies and factors” go into the damage calculation equation.

    Willful Infringement Defense: Appears to be acceptable; at least the criteria for the defense are now statutory, not based exclusively on what has been “ever changing” court-based criteria.

    3rd Party Statements. I’m not fond of this provision, but the amendments get rid of a very concerning language that would have allowed “other evidence” beyond “patents and publications” to be submitted. The USPTO, and especially the examining corps., doesn’t do well with “other evidence” that isn’t a “patent or publication.”

    Interlocutory Appeals of Claim Construction. I’m still not fond of this provision for reasons expressed by Chief Judge Michel of the Federal Circuit. While the modified tries to restrict such interlocutory appeals to those “which may materially advance the ultimate termination of the litigation,” that could be potentially said of almost any claim construction decision. I also predict that the Federal Circuit will interpret this “materially advance” provision very restrictively, meaning they’ll likely repeatedly bounce such interlocutory appeals to discourage them, to the extent that the current situation won’t change (trust me, Michel is going to “ride herd” with the other Federal Circuit judges on this provision).

    Failure to Disclose Best Mode. Again, this seems to make requiring the “best mode” or at least any incentive to disclose it superfluous. In fact, expect an increase in allegations of “unenforceability” (the statute by its language only explicitly precludes “invalidity” which is or could viewed as different from “unenforceability”) of patents for failure to disclose the “best mode” based on inequitable conduct.

    Pilot Program for Certain District Courts. No comments.

    That’s it from me on these proposed “modifications.”

  10. Carol April 2, 2009 2:07 pm

    While there is currently a requirement to disclose the best mode, it need not be distinguished from the other examples as the best mode.

  11. ike April 4, 2009 6:07 am

    Thanks for covering this – this in particular is a terrible provision:

    “According to Senator Specter, universities receiving money under Bayh-Dole will allow universities to keep more royalties.”

    http://community.nytimes.com/blogs/comments/dotearth/2009/03/26/energy-chief-seeks-global-flow-of-ideas.html

    As far as the patents, one central problem is that early patenting – patenting of basic scientific concepts – tends to stifle innovation more than promote it. Patenting working prototypes and specific industrial processes, on the other hand, aids innovation by rewarding the inventor with a head start on any competitors.

    For example, patenting the very concept of a silicon-based computer ship would stifle innovation, while patenting individual chip designs promotes innovation. Unfortunately, apparently due to scientific ignorance at the Patent Office, there have been very broad biotech patents granted, often coming out of academic-private partnerships. GE is also deeply involved in that entire area.

    Another basic issue is that patents developed with taxpayer dollars should not be exclusively controlled by GE or any other private business entity – rather, such patents should be available under non-exclusive licenses, and as a gesture of goodwill, they could also be made available for free to developing countries – again, that would only apply to taxpayer-financed research – including all research done under the guise of public-private partnerships.

    One example of that is the relationship between General Electric and the University of California via the QB3 public-private collaboration, involving venture capitalists, large biotech and pharmaceutical firms, and various UC research departments and other UC biotech affiliates in the region. This is similar to the BP relationship at UC Berkeley, the Energy Biosciences Institute, and various other public-private academic-corporate partnerships. They have diverse structures, but a common theme is that any patentable research is exclusively licensed to the corporate partners, with the school and the professor getting a percentage of the royalties. This leads to massive and unacknowledged conflicts of interest in academic research, which has been steadily spilling over into the news media in the form of more frequent fraud cases (Reuben and Pfizer, for example) and a rising lack of public trust in academic research (especially medical research).

    The bottom line is pretty simple – there need to be divisions between academic research, which relies on the open exchange of information and transparency, and industrial research, which generates trade secrets aimed at giving the business a competitive advantage – wasted effort if the information is shared.

    Obviously, the two worlds are incompatible in practice, and what has happened is that “trade secret mentality” has infected much of academic research, where “proprietary” is the new buzzword. This has all kinds of negative effects – delayed research, unwillingness to publish negative results, etc.

    This has lead to a rather unhealthy situation in U.S. academic institutions and also in their private partners – something that neither member of the partnership wants to talk about. For example, who gets to join the “partnership”? What political factors go into that decision? It’s also not too encouraging to see the Treasury label their rescue plan a “public-private partnership”, either. The very concept is as ridiculous as a “military-civilian partnership” – what set of rules are followed? The most convenient ones?

    If the Bayh-Dole patent laws of the early 1980s were repealed, it would still allow academics to engage in traditional consulting activities with private industry – but it would not allow either group to earn millions via their exclusive control of taxpayer-financed research.

    — Ike Solem