Patent Reform: Obama Favors Major Changes to Patent Law

By Gene Quinn
October 6, 2009

There has been something brewing for at least a couple weeks now on the patent reform agenda, and I have been trying to make sense of it all.  I am not sure I have my head wrapped around it yet, but the Wall Street Journal (via Dow Jones Newswire) is reporting that President Barack Obama is placing his support behind major changes to the patent laws and reopening the patent reform debate.  For some time now I have been writing that patent reform was dead and would not come back before the end of 2009, and that if it did not come back it would be difficult to do anything during 2010 due to it being an election year.  Patent reform is not susceptible to party politics, but there are major industries and large donors who are on both sides of the debate, which will make it exceptionally difficult for many Senators to cast a vote one way or another.  For that reason I do not suspect patent reform to be on the table in 2010 with what will be a very heated election cycle where every supporter and every dollar will matter.  I also did not believe patent reform would come back this fall because the health care debate was raging and splitting the country and Congress.

As we all know, health care proposals are moderating from what they once were, so widespread and sweeping changes seem unlikely at this point.  With this major battle largely off the plate of Congress I was starting to think that the Obama Administration would turn to its B-List priorities, and that is why the patent reform rumblings over the last several weeks seemed to be more than just chatter.  I have been calling around and no one really seemed to have any information or detail why there were rumblings, which became all the more alarming.  I have been asking folks to keep their ears and eyes open, because I get the sense that this has legs.  Then today the report from the Wall Street Journal.  It is time for everyone who has been opposed to patent reform to stand up and take notice, and to vigilantly make sure disastrously bad provisions are not tucked away into the bill and passed in the early morning hours, which has been known to happen with respect to patent reform legislation in the past.

Less than one week ago, on Wednesday, September 29, 2009, a group of five United States Senators, namely Senator Orrin Hatch (R-UT), Senator Robert F. Bennett (R-UT), Senator Mike Crapo (R-ID), Senator James E. Risch (R-ID) and Senator Michael B. Enzi (R-WY), wrote a letter to Senate Judiciary Chairman Patrick Leahy (D-VT) and Ranking Republican Member Jeff Sessions (R-AL) saying:

For nearly five years, Congress has been working on legislation to reform our patent system – a system that has not been significantly updated since 1952. We commend you for your leadership and foresight in this endeavor.

As members of the Senate Republican High-Tech Task Force, we are keenly aware of the important role that our country’s high-tech industry plays as the global leader in technology innovation. Our ever-increasing technology and knowledge-based economy creates good high-paying jobs in almost every state of the Union. Last year, as the recession took hold, the tech industry as a whole added 77,000 jobs. More than ever, it is vitally important that we enact policies that keep our high-tech sector at the forefront of the world’s economy and a leader in innovation.

We must ensure that our patent system is as strong and vibrant as possible, not only to protect our country’s premier position as world leaders in innovation, but also to secure our economic future. Reforming our patent system is critical to the ability of the high-tech companies to devote the maximum amount of resources possible to the development and deployment of new technologies. Conversely, a malfunctioning patent system will undermine that process of innovation through inadequate quality of issued patents; inadequate guidance for courts in critical areas such as calculation of damages, assessment of willful infringement, and choice of venue for suits; and the lack of more effective procedures to provide patentees the ability to seek a supplemental examination before the U.S. Patent and Trademark Office.

In April 2009, the Senate Judiciary Committee structured careful compromises on many of these issues when S. 515 was reported to the full Senate for consideration. While we do not argue there that these compromises are the best that can be achieved, we do agree that it is important to move the legislative process forward by building on that consensus – not by weakening the bill on key, pro-innovative provisions. We strongly urge you to be vigilant in preserving what has been achieved so far and resist any attempts to weaken technology-friendly provisions. We would oppose such erosion and stand ready to help in this regard.

It is paramount that patent reform legislation be done right. The future of our high-tech economy and our nation’s role as the leader in innovation depend upon it. In addition to the aforementioned policy concerns, we request that all members of the Senate have proper time and opportunity to fully consider the legislation when it is brought to the floor.

It seemed odd that this letter would surface amidst rumblings that patent reform was not dead. I say it this way on purpose, because at no point could the rumblings be attributed to say that patent reform was alive, but major changes to the patent laws have started to be discussed without specifics and in ways that made clear that it was not dead, and not even really on life-support. I am still getting used to how to weave through information as a journalist, but the pattern seems to be when there is non-specific chatter which is highly ambiguous in nature and sources who are typically in the know only acknowledge they have heard the same rumors/information, there is something there.

I don’t know what is there yet in this newly revitalized patent reform discussion, but Senator Hatch who has been at the forefront of patent reform for many years is cautioning that any changes must not do harm, so I am worried. Why would Senator Hatch and the others who signed the letter feel it necessary to caution against doing harm? Why would Senator Hatch and others feel the need to request appropriate time for the Senate to consider the legislation when it comes to the full Senate?  This could be really, really bad, I just don’t know.

One thing that I do know, however, is that the Wall Street Journal report signals one potentially troubling matter. Now I realize that the popular press frequently gets these stories wrong, so lets not make more out of this than should be, but absent any specifics we are left to read tea leaves and speculate. In any event, the report says:

The administration opposes one major piece of the bill that would require patent examinations to be performed in the U.S.

This could mean many things, but if it means what it actually says, that the bill should not require patent examinations to be performed in the U.S., this could be unbelievably bad. For a long time there has been discussions of work sharing and sharing resources, and I get that. Duplicating work relating to searching and the like is silly, but shouldn’t the actual examination of U.S. patents be done in the United States? Does this signal harmonization on steroids? As I have written over the last couple months harmonization is not an evil concept, but traditionally that means the U.S. abandons our approach and gives in and acquiesces to the way things are done in Europe and elsewhere. Change to conform to others is stupid, change that makes sense is smart, and if it happens to be how things are done abroad that is fine, but it needs to make sense.

The lack of concrete information makes it hard to know what exactly is being discussed presently, whether there are changes from what didn’t go anywhere in the Spring and Summer, or whether it is the same, old, recycled, bad reform ideas. Time will tell, but one thing is for certain — we all need to pay attention, and fast! Patent reform has been known at times to be tucked into the Omnibus Budget and/or otherwise rammed through. It is essential we get this right, and the High-Tech Republican 5 are exactly right, we must not do any harm.

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 13 Comments comments.

  1. OldTimer October 6, 2009 5:40 pm

    This is an “I told you so” moment for me. I predicted a few months ago, either here or on Patently-O, that the PTO will propose to outsource examination to other patent offices. Given that many of my inventors are from broader Asia or the Middle East and that many of my Examiners are from broader Asia or the Middle East, I can’t say this is completely irrational. Does it really make a difference if the Examiners are sitting in Washington, DC rather than Beijing, Bangkok, Seoul, or Bombay?

    This is outsourcing nirvana for big corporations. They will have inventions from their outsourced engineers in India prepared into patent applications by outsourcing firms in India, filed in the USPTO, examined and prosecuted in India, and issued as a U.S. patent. A patent will cost about $4000 and discovery will be impossible.

    Kappos will be a shill for large, corporate interests like IBM. Ditto for the “highly qualified” Barner. Small inventors who rely on innovation and patent protection will find themselves seriously screwed under this administration, as will pharma, biomed, and medical devices.

  2. Gene Quinn October 6, 2009 5:47 pm

    Old Timer-

    This could be even worse than I feared. Are you speculating about the India outsourcing? This is all happening so fast. Information is hard to come by, although I just received a copy of Secretary Locke’s letter of October 5, 2009. Any information or insight you have would be most helpful.

    Thanks.

    -Gene

  3. Mark Nowotarski October 6, 2009 6:01 pm

    Fascinating. There is already a patent pending on a method to outsource patent examination. http://bit.ly/2EuClL If you have any other ideas, file now.

    I have.

  4. Guest October 6, 2009 9:01 pm

    The WSJ reporter likely took Kappos’ comment out of context. The Patent Prosecution Highway (i.e. work sharing) has been around for several years.
    http://en.wikipedia.org/wiki/Patent_Prosecution_Highway

  5. scrappy October 7, 2009 7:52 am

    SO, examination is funded by applicant fees coming from all over the world… and we want to take the examination jobs and ship them overseas. In a recession! When unemployment is 9.8%! Amazing.

    Seriously, who’d have thunk?!!! I hope this administration doesn’t have the “We CAN’T do this attitude” that the Bush administration so aptly portrayed. Or else America is nigh unto history.

  6. Gene Quinn October 7, 2009 10:01 am

    Guest-

    Yes, I know that and work sharing is one thing, and it seems completely plausible that this was taken out of context. Nevertheless, I do think it is worthwhile for folks to look into this, what is actually in the bill and what the Obama Administration wants removed specifically. Sharing search resources and cooperation is one thing, yielding sovereignty and allowing prosecution and decisions to be made by an international body or outside the US is quite another.

    I would normally not give a second thought to a statement like this, chalk it up as definitely out of context and wrong, but some of what is being discussed openly about the US being willing and even encouraging the US Dollar not to be the international standard makes me very worried. If the Obama Administration is willing to give up on the US Dollar, or at least float the idea, then it seems plausible that they could want truly outsourced patent prosecution.

    -Gene

  7. NewExr October 7, 2009 10:17 am

    I’ve seen toys from McD made from China and your furniture made in Europe. What is wrong for outsourcing to elsewhere ?

  8. breadcrumbs October 7, 2009 11:34 am

    The comment appears NOT to be taken out of context.

    It appears to cover both the Patent Prosecution Highway as well as future unnamed actions.

  9. broje October 7, 2009 11:35 am

    I would think that outsourcing either or both of prosecution and examination is problematic because of the Export Administration Regulations (EAR). The USPTO can’t even hire personnel who are not US citizens to examine applications. As Dudas made clear in a notice in July of 2008, a foreign filing license does not constitute a waiver except for actual foreign filing of the application. So I think there are some obstacles to outsourcing of examination, including change of the EAR, at least..

  10. OldTimer October 7, 2009 11:41 am

    Gene,

    I don’t have a specific information about India. That was just an example.

    In my post a couple months ago I observed that the KIPO search option has become the norm for most big corporate clients when they file PCT applications, mostly due to the discounted search fees. It is a pretty small step to offer a similar discounted fee structure for an examination (or a preliminary examination) to be done in the KIPO. This might start with the PCT then progress to the USPTO. Alternatively, it would be a trivial matter to restructure fees such that applicants have an incentive to file PCT rather than USPTO direct. Once clients get used to examination in a foreign patent office this model can be applied to US applications.

    A few more off the cuff comments, since I don’t have a lot of time. First, I do not believe the current patent statute requires examination in the USPTO. I think this could be implemented right now–it’s not even clear to me that it requires a formal rule subject to APA rulemaking procedures. Second, outsourcing examination offers the PTO a way to address the backlog and cut costs in one nice little package. Third, large tech companies (like IBM) are going to love this. What exactly is the downside for Kappos?

    I’m similarly uncomfortable with outsourcing the examination function, but honestly, examination can’t really get much worse than it is right now. I wouldn’t blame any client for choosing to roll the dice in a foreign patent office.

    As to your comments on the dollar, two things are required in order for the dollar to maintain it’s status as a reserve currency. The first is an open and transparent banking system. The second is a federal government at least nominally committed to fiscal responsibility. This administration offers neither. Hence, the dollar is tanking with respect to other currencies and especially with respect to commodities.

  11. Gene Quinn October 7, 2009 12:05 pm

    Breadcrumbs-

    That is exactly what I am afraid of. I am starting to see exactly how Washington works. Open ended language that allows for what everyone believes is reasonable, but which also would/could allow future unnamed actions that many would view as unreasonable.

    -Gene

  12. Bemused October 7, 2009 5:10 pm

    Gene,

    This is a little off-topic but since we’re generally talking about patent reform and one of the most contentious issues is the damages apportionment issue, let me put this food for thought out there:

    If a patent-holder and an accused infringer can’t agree on a reasonable royalty (in the context of the Georgia Pacific analysis), allow for an offer to be made (by either party) to remove the accused infringing component from future products. If the accused infringer agrees, allow the jury to give greater weight to the accused infringer’s royalty rate and not award an on-going royalty for future damages. Conversely, if the accused infringer refuses to remove the accused infringing component going forward, allow the jury to give greater wieght to the patent-holder’s royalty rate (for past and future damages).

    I’m somewhat bemused about the entire damages apportionment issue because accused infringers always make the argument that the accused infringing component is SUCH A SMALL PART OF THEIR OVERALL INVENTION AND CERTAINLY NOT WORTH PAYING MUCH FOR. I say, if that’s true, put your money where you mouth is and agree to remove the accused infringing component if it’s just not worth that much to the overall value of your invention.

    I had a case where the accused infringer repeatedly told its customers (in product literature and at trade shows) about the benefits of using the component that we accused of infringing our patent. During the damages phase, they naturally took the position that this component was there merely as a convenience for the few customers that may have wanted that functionality. Interestingly, when we asked their technical people whether they would agree to remove that accused component, their response was that “We never remove features from our products.”

    Bemused

  13. biomed foods August 17, 2010 7:35 pm

    we do agree that it is important to move the legislative process forward by building on that consensus not by weakening the bill on key