Manus Cooney Part II – The Future of Patent Reform

Last week I published part 1 of my conversation with Manus Cooney (pictured left) who is one of the preeminent intellectual property lobbyists in Washington, D.C. Cooney, a former Chief Counsel to the Senate Judiciary Committee, is currently a partner with American Continental Group and was intimately involved in lobbying Congress relative to the America Invents Act (AIA), primarily on behalf of his client Tessera Technologies, who aligned themselves with the Innovation Alliance.

In part 1 we discussed lobbying in general, shining some light on the process as a whole and explaining why it is unrealistic to expect you can enter the debate near the end and have any hope of affecting change. In part 2, which is reproduced below, we discuss the specifics of lobbying the AIA, as well as the fight against further erosion of patent rights. And you thought that patent reform was over. Sadly, the fight continues.

COONEY: Going back to the AIA, when it comes to passing legislation, it’s important to know how each of the Congressional bodies work. It may be an oversimplification but it is usually the case that whatever the House Majority Leadership wants to pass, it usually gets done. In the Senate, however, it’s different because of its rules. There, whatever the Majority wants to pass has a shot at getting done. In other words, if the House Leadership, the Republicans in this case today, and the Chairman of the Committee want to see a particular measure passed, more often than not, particularly on an issue as esoteric and complex as patent law, the party members of the majority party are going to adhere or defer to the wishes of Leadership, And as a result, you’re trying to either create a situation in advance of the House measure coming to the floor where you have the support of the Leadership or you have created an environment where it’s less certain to the House Leadership and the Chairman that they will in fact be able to prevail, and thereby create an environment where they have to negotiate. Oftentimes in the House, your laying the foundation for a fight in the Senate where there is less deference to the Leadership. The rules are such that, in theory, any Senator can offer an amendment to any bill at any time, and you have a better shot at winning on the merits, so to speak. That has a way of forcing consensus. So realizing that those tend to be the ground rules, the landscape you’re dealing with, you develop a strategy for your clients.

QUINN: Are you hearing anything about any technical amendments to the AIA? I’ve heard that off and on a little bit. And it would seem that naturally with any piece of legislation as meaningful as this and as large as this there’s going to have to be some kind of technical amendment.

COONEY: Yes, there was an effort earlier this summer where some legislation was floated. It was the product of some meetings of the sort that I alluded to earlier. The PTO, the House and Senate Judiciary Committee staffs, and some segments of the patent community, mainly those that were supporters of the AIA, had drafted a a proposed technical corrections bill. Obviously, if a proposed change is purely technical in nature, there shouldn’t be a lot of trouble passing it, but what is technical and what is not technical can be a rather subjective test. There has been some talk about efforts to change the AIA in ways that would have substantive effect on the law . And it’s those issues that have garnered some attention in recent months. There was some discussion about changing the estoppel standard for the post grant review provisions of the AIA, and there have been some proposals regarding a proposed expansion of prior user rights being kicked around as well. If those are on the table or appear in a technical corrections package, “technical” in quotes, I think it would be difficult to pass such a measure this calendar year. Nevertheless, that doesn’t mean that those who support those changes won’t continue to press for them and try to see them enacted, if not this year maybe next year. We’re at the point now in this Congress where the Congress will not be in session prior to the election for a very long period of time. And then after the election Congress will be back in for a Lame Duck session where attention will be focused on avoiding the fiscal cliff. What Congress will or will not be able to accomplish will be driven significantly by what happens in the election, of course. And so the sense is that it will largely be consensus, unanimous consent types of measures that will be taken up during the Lame Duck.

QUINN: Now that also leads me to ask you a question about the Patent SHIELD Act that was co-sponsored by Congressman Chaffetz, who I like a lot. And he actually took time to sit down for an interview with me, so I like him even more for that.

COONEY: That’s a good reason.

QUINN: It struck me when this was getting submitted, aside from the merit of the issues, which obviously would have to get discussed and there would have to be hearings and so forth – it seems like there’s no chance of this getting through so late in the Congressional term, means it’s just going to have to be reentered next Congress. So why would members do something like that? I’m sure there’s some kind of strategy.

COONEY: Well, first of all that’s a great question. I think that there’s this perception outside the beltway that one doesn’t introduce a bill unless she intends to see it enacted. Oftentimes, however, legislation is introduced to set a marker and to become the centerpiece around which a debate or discussion over related policy issues can be held. The popular view among those who follow the Judiciary Committee is that the Shield Act will almost certainly not move this year or anytime soon. And that if it does receive any attention in the form of a hearing, that will happen perhaps next Congress. And that if it does ever move, meaning be formally considered in the form of a markup that it will have to undergo significant changes given that there’s a pretty broad, strong set of concerns and opposition developing to it. Whether it moves or not, the bill’s existence will serve as evidence for patents system critics that the system is “broken” and needs reform. After all, if there’s a proposed solution, there must be a problem, right? Regardless of where one may be on the issue of loser pays, the notion that only plaintiff patent losers pay seems a little—

QUINN: It’s just unfair.

COONEY: It seems unfair.

QUINN: If this is so great, why have it only apply to a subset?

COONEY: Right. And I think that it comes back to a problem that I alluded to earlier in our discussion. Some large IT importers, some of whom are very successful, prominent, and wonderful American based international companies who we all admire, are advancing policy reforms that are consistent with their business interests. That is their right. One of those business interests is arguably to wmake patents harder to enforce. This allows them to bring their products into the US market more quickly and with less cost or risk. Many of these companies have for years created and defined one of the major policy issues for policy makers in the IP space today – dealing with “the patent troll problem.” And they define trolls and NPEs fairly broadly to the point where they can include legitimate US licensing companies, startups, and universities. They have convinced many in Congress that it’s a significant problem for innovators despite the lack of comprehensive data to support their contentions. To their credit, after years of engagement and lobbying and a coordinated media campaign, Members of Congress believe that it’s in America’s economic interest to resolve the “troll problem” and the “problem” may be sufficient justification for advancing some fairly radical changes to patent law. The concern I have is that, while Congress may think it is solving one problem they may risk killing or doing great harm to the patent system that helps the nascent startup company, the innovator, or the entrepreneur who are still studying, earning his or her PHD at a major university today. I don’t believe the long-term implications of some of these proposed “reforms” have been sufficiently studied and thought through. And while they may be in the near term interests of some international U.S. based companies, they arguably aren’t in the long-term interests of America’s innovation based economy. In the end. Which is more important to our long-term economic interests: consumer access to cheaper (abliet infringing) smartphones today or maintaining an equitable and enforceable IP regime that encourages invention and the investment therein?

QUINN: So is it’s not probably accurate to say that this is a trial balloon, but it would be very, very early in the process.

COONEY: Yes, insofar as the Shield Act is concerned, I think that if there are stakeholders out there that are concerned about it, they shouldn’t view this particular bill and say, “look at this thing, there’s so many holes in it, we know that it’s not going to become law so we can afford to ignore it.”

The Shield Act is part of a coordinated effort on the part of some in IT to further marginalize and create skepticism – if not hostility – in Washington towards anyone seeking to enforce a patent. Folks who care about the patent system as it exists today should pay attention because it’s a symptom of a deeper problem that we are seeing here in Washington. We have a combination of IT companies and academics, all for different reasons, working together to try to convince the Congress and the American public that notwithstanding the strategic decision we made decades ago to invest in a strong intellectual property body of law and to promte its adoption around the world, we should start tinkering with it and abandoning some of its core principles.

If one looks at Sheild as part of a patchwork of legislative proposals, for example reopening AIA, proposed changes to the ITC statutethat would make it easier for infringing products to be imported into the United States, and making certain categories of patents unenforceable, the picture becomes clearer. These proposals are being advanced by marketplace incumbents that have a near-term business interest in weakening and diminishing the enforceability of others’ patents. And they are working in coordination with academics who just don’t like IP to begin with in many cases. I fear that if it is not responded to and is ignored some version of their agenda will be implemented – if not by the Congress, by the courts or regulatory agencies. That is a very real risk.

We’re seeing, for example, some legislative proposals floated that would amend the Tarrif Act to change the standards for the issuance of an exclusion order in cases involving products that infringe U.S. patents. Does anyone today believe that those proposed changes to the law are going to become enacted in the very near future> It’s very unlikely because they are quite controversial. But the legislation’s existenceto the extent it is cited , along with editorial comments, studies from friendly think tanks, and letters and hearings from the Hill, does send a message to the ITC and the Courts that the ITC is broken, just like the patent system is broken. To the extent that they can create enough of an echo chamber, do they stand a chance of getting the ITC and eventually Congress to implement reforms? Sure. I think that’s an objective that’s achievable.

If anyone believes that that is not an objective on the part of some, just take a look at the eBay case and some of the cases that are facing the Supreme Court or heading to the courts today. Initially, in the original patent reform bill, IT proposed changes and amendments to the patent code to limit the availability of injunctions. While passage of the legislative reform might have been ideal, a parallel objective was to create a debate and discussion in Washington that caught the attention of the Judicial Branch and to move the test case through the courts. Eventually, IT achieved much of what they had originally proposed in legislative form through the courts in the eBay case.

So a lot of the noise that one hears in the halls of the Congress is part of a achieving long term policy outcomes. And the enactment of legislation isn’t always or necessarily the true objective. If critics of the patent system achieve their policy goals through other means, be it a court decision, or a regulation, or a consent decree that’s forced on a company by a regulatory agency, they’ll take that.

QUINN: One of the things that I hear a lot from attorneys is the belief that this is it, the AIA, it’s over, this was the once in 50 years, or the once every hundred years shakeup of patent laws, and now we’re just going to have to figure out what all this means through the normal process of court interpretation and so forth. But when I look at it, and sit here and listen to you and I understand the proposals about the ITC and I know that some of what I’ve heard may be in technical amendments to the AIA don’t sound so technical to me and then the Patent Shield Act comes up. It seems to me as if there is over the next year or two or three a potential to have other shoes dropped and people who think that this was it and that it is now safe to go back in the water are going to wind up being sadly mistaken.

COONEY: Well, first and foremost I think that there is a tendency on the part of engineers and patent lawyers to view the laws as static. And that’s clearly not the case. And just because a court has handed down a particular decision and it applies a certain way today doesn’t mean that there won’t be efforts to change the law through legislative process or the courts or to regulatory fiat. And the more market incumbents invest in advancing change in the IP space, the more likely continued changes are to occur. And so I think that it’s become pretty clear that there are many in the IT space in particular taking the position and have invested in telling the public and the Congress that the patent system is broken. For a variety of business reasons they believe that they would be better off with a less reliable and less enforceable patent system. and And that’s just something that stakeholders need to remain vigilant with respect to. My own instincts are that we’re seeing a global effort to take the IP protection standards, the high bar that we set in Europe and the United States, and lower those as a means towards achieving some sort of global harmonization rather than continuing to encourage other countries to increase their level of patent protection and make patents more enforceable internationally. And that is ongoing and all you need to do is open up the newspaper to see the sort of scrutiny and cries from some in industry over the decision in Apple v. Samsung. The decision ins the Apple caseis what we planned for and it’s what our economy is going to be increasingly dependent upon – strong IP protection. But there are those who believe, for whatever reason, that needs to change. And they’re not going away.