Here is an update on the patent legislation now pending in the U.S. Congress (S. 515, H.R. 1260). This topic has been off the front burner for a couple months, but work continues behind the scenes. Many of you in DC are already aware of the situation, but the information below may be helpful to people outside the DC area.
As you recall, the House and Senate both reintroduced legislation earlier this year to make dramatic changes to the U.S. patent system. The legislation continues to be controversial, with opposition arising to the damages, post grant review/inter partes reexamination, and other aspects of the bill.
The House has held one hearing on its bill and otherwise has waited to see if the Senate can pass the bill. (Recall that in the last Congress the House passed a bill and the Senate did not, so it is logical for the House now to take a wait-and-see stance.) House staff continues to be actively involved regarding the legislation, however, meeting frequently with proponents, opponents, the Senate and the PTO.
In the Senate, an agreement occurred in the Judiciary Committee which resolved opposition to the damages provisions of the bill. That agreement did away with the “apportionment of damages” language, replacing it with a “gatekeeper” approach giving judges the obligation to better inform juries of the relevant factors to consider in each case. (Note that proponents of the legislation have not given up regarding damages, but are actively lobbying House Members to resist the Senate compromise. Most observers believe the Senate compromise will hold, but we cannot be sure until the House proceeds with formal action on the bill.)
With damages resolved in the Senate, the primary point of debate there has become the “post grant review” provisions – i.e., patent validity challenges at the PTO. The bill contains a new 12-month challenge window called “post grant review” and makes the existing “inter partes reexamination” process friendlier to challengers. The concern raised by many organizations, including my company, is that the provisions could be abused by infringers seeking to impose costs and delays on patent holders.
Senator Jeff Sessions (R-AL), Ranking Republican on the Senate Judiciary Committee, has sought changes to the post grant provisions to alleviate these concerns. Sessions’ staff has been meeting with staff of Chairman Leahy (D-VT), as well as PTO officials and House staff in an attempt to come to an agreement in that regard. We understand that they are making progress, but we do not expect that they will resolve all areas of concern. For example, assuming they are able to reach an agreement, it may not improve the “estoppel” standard in the bill. Current law estops a party from challenging a patent a second time on grounds which were “raised or could have been raised” the first time. The legislation would remove the “could have been raised” aspect, leaving only a prohibition against arguments that were actually “raised” in the first forum. The concern with “raised”-only estoppel is that it will save arguments for a second challenge in court after losing at the PTO, thereby imposing cost and delay on the patent holder. A middle ground compromise has been offered but not accepted, so we continue to make our case on this issue.
Others have raised concerns regarding issues such as first to file, the absence of inequitable conduct reform, and the absence of a prohibition on PTO fee diversion.
The Senate calendar is increasingly tight as it attempts to pass health care reform and appropriations bills by the end of the year. For the patent legislation to get Senate floor time this year would require unanimous agreement that the bill is ready for debate and that the debate would not take long – probably no more than a few hours. If an agreement does not occur this year, Senate negotiators could find some success in early 2010.
For that reason, patent stakeholders are encouraged to continue to share their views on the legislation with their Members of Congress.
For additional information on the state of play with the patent bill, please see the recent articles below.
Thanks for your interest in this crucial issue.
Stan Fendley
Director, Legislative and Regulatory Policy
Corning Incorporated
325 7th Street NW, Suite 600
Washington, DC 20004
· NOVEMBER 4, 2009
Proposed Change in Patent Policy Pits Big Firms vs. Small
WASHINGTON -- Congress is considering an overhaul of U.S. patent policy that would bring the first major changes in more than half a century. But a disagreement between big and small companies over one aspect of the bill could derail its passage.
The effort marks the third time in five years that lawmakers have tried to change the nation's patent laws, as they have struggled to balance the competing interests of big technology companies, small start-ups and individual inventors. The bill would seek to bring the U.S. patent system in line with international standards and streamline the operations of the U.S. Patent and Trademark Office, which is facing a backlog of applications.
The Senate Judiciary Committee approved one version of the bill in April, shortly after the introduction of a similar measure in the House. Democratic and Republican staff members from the House and Senate committees are negotiating changes, and hope a widely acceptable version will hit the Senate floor this fall.
The most contentious aspect of the bill concerns what happens after the patent office approves an application. The Senate measure proposes expanding the avenues for challengers to ask the patent office to examine already-granted patents.
The office currently has two systems for reviewing approved patents. One method permits challengers to remain more involved in the review, while the requester has only limited participation in the other. In the last fiscal year, there were 2,120 pending re-examinations, including both types.
The new re-examination process would bring complaints on a broader range of challenges in front of patent judges rather than patent examiners to create the atmosphere of a court inside the patent office, but without the expense of litigation. Rulings would occur on a tight timeline: within a year from the filing date. The new bill would also change the way subsequent challenges to the same patent can be made. Critics say it would become easier to launch serial attacks.
The proposed new review process is pitting larger, established companies against smaller or start-up firms.
Many big technology companies argue that the proposed process would strengthen the patents that make it through. The review would be "essential to maintaining high-quality patents because it allows the validity of questionable patents to be tested," said Horacio Gutierrez, deputy general counsel of Microsoft Corp. International Business Machines Corp. in a statement called the process "a low-cost alternative to litigation."
Many small companies and research universities fear that deep-pocketed businesses could attempt through the review to keep innovative products from hitting the market. The National Venture Capital Association and other critics said it could be harder for start-ups to secure funding if their patents were targeted by repeated attacks.
"This may be catastrophic for a start-up or small inventor," said Dean Kamen, inventor of the Segway, a personal electric scooter. "You get this young guy who quit his job to make this gizmo and he shows up at the bank or to his father-in-law. The first thing the bank or that venture capitalist will say is, 'Do you have a patent?'"
A dozen Republican senators voiced support for the smaller firms in an Oct. 15 letter to leaders of both parties. Congressional aides said that unless both sides could reach agreement, lawmakers were unlikely to introduce the bill for a floor vote in the Senate, which is tackling health care and other issues.
David Kappos, director of the U.S. patent office, said he had urged lawmakers to set a high threshold for reviews. He also wants safeguards against serial attacks on patents.
A coalition of major technology companies, the Coalition for Patent Fairness, voiced disagreement in a letter to Mr. Kappos in September. "We would very strongly oppose changes to the Senate and House bills that would dilute in any way the efficacy of post-grant challenges," the letter said.
If this Congress doesn't pass patent legislation, it won't likely come up again soon. In the two previous congressional sessions, attempts at passing patent legislation collapsed.
Senators, Inventors Criticize Patent Bill Favored By Tech Cos
By Kristina Peterson
Of DOW JONES NEWSWIRES
http://online.wsj.com/article/BT-CO-20091015-718144.html
WASHINGTON (Dow Jones)--Twelve Republican U.S. senators on Thursday sent a letter to Senate leaders criticizing pending patent legislation, saying the bill "threatens to diminish the value and enforceability of U.S. patent rights."
The Oct. 15 letter backs criticism against the legislation being levied by independent inventors and academics who argue the bills favor major technology companies. If approved the legislation would be the most sweeping rewrite of federal patent law in 50 years.
Critics say two similar bills now in Congress would broadly make it harder for individuals, universities and start-ups to defend their inventions against companies with deeper pockets. Opponents are also upset that Obama administration officials with past ties to International Business Machines Corp. (IBM) and Microsoft Corp. (MSFT) are supporting the bill.
At issue is a provision giving outside challengers expanded ability to initiate review of newly approved patents. "These so-called post-grant review provisions, as currently crafted, are quite problematic," the Republican senators said in the letter written by Sen. Sam Brownback, R-Kan., and signed by 11 other Republicans.
Microsoft and IBM are two of the most active companies involved in filing patents; IBM, for example, earns over $1 billion each year in intellectual property-related income. Both companies have ties to top government officials with authority over patent policy, including U.S. Patent and Trademark Office Director David Kappos.
In testimony before Congress last March, Kappos - who was, back then, the head of intellectual property at IBM - praised the post-grant review. Kappos, who spent 26 years at IBM, said in an interview Thursday that he recuses himself from IBM-specific matters and has taken pains since his appointment to listen to the concerns of independent inventors.
"If I wanted to do the right thing for a specific company, I could have stayed there," he said. IBM declined to comment.
Kappos also said he told lawmakers in private meetings they should establish a high threshold for reviews and include safeguards against serial challenges.
But even one post-grant review can cause an inventor to lose market advantage and venture capital funding.
"Patent certainty is critical to the ability of a venture capitalist to be able to invest," said Kelly Slone, director of the National Venture Capital Association's medical industry group. More than a dozen research universities have also sent letters opposing the post-grant review provision.
Microsoft, too, has connections in the Commerce Department. Marc Berejka, a senior official handling intellectual property matters, worked for Microsoft for the 12 years leading up to his July 2009 hiring, including eight years as a lobbyist for the company.
Commerce Secretary Gary Locke, who endorsed most of the bill in an Oct. 5 letter, received campaign donations from Microsoft employees as Washington state governor. Locke accepted $96,900 in cash donations from company employees while running for re-election in 2000, according to state public records. In total, Locke raised $3.8 million in that election cycle. He also owned between $100,000 and $250,000 of Microsoft stock until divesting it on June 22 as a condition of his appointment.
A Commerce spokesman said the agency is deferring to Congress on how to alter patent laws.
Pat Choate, an economist and board member of American Innovators for Patent Reform, said he was troubled by the process. "Patent policy is suddenly being run by advocates for Microsoft and IBM," Choate said.
But some representatives of small companies say they think the government is trying to work in good faith.
"It is certainly the case that big companies have a lot of very well-qualified people who work with them and then go and do other things," said Brian Pomper, executive director of Innovation Alliance.
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