Patent reform is bubbling toward a boil in Washington DC, with lawmakers from both parties pushing for legislation and dealing with well-financed lobbyists on both sides.
"This is a big fight about winners and losers," said Senator Tom Coburn, a Republican from Oklahoma, adding that he is not entirely satisfied with the pending Patent Reform Act of 2007, which was introduced in the Senate in April. "The question is how do we strike the balance."
The Patent Reform Act would make the obtaining a new patent more difficult, make it easier for rivals to challenge patents, and reduce the penalties for patent violations.
Committee chairman Patrick Leahy of Vermont said that he, Utah Republican Orrin Hatch, and a number of other colleagues have been working on the non-partisan bill for several years and that the existing patent system was designed for a bygone era.
A recent decision by the Supreme Court in the case of KSR International vs. Teleflex set a higher bar for what qualifies as an original invention.
The ruling has already prompted legal wrangling between VoIP vendor Vonage and Verizon in their lawsuit over Internet telephony patents. Legal experts say that the ruling was a direct rebuke to lower courts that have tended to favour patent owners over challengers.
Despite strong support from Democratic and Republican leaders in both chambers for change in the patent system, however, passage of the bill into law is not assured.
IT behemoths, including Cisco, Apple, Dell, HP, Microsoft, and Oracle, have aligned as the Coalition for Patent Fairness to press for the sweeping changes envisioned in the bill. They maintain that the reforms are necessary to reduce costly, sometimes frivolous litigation.
However, other technology companies, including InterDigital Communications and Qualcomm, have banded together as the Innovation Alliance and joined the biotechnology and manufacturing sectors to limit changes to the system. They argue that the bill would give patent infringers an advantage.
The high stakes involved in the patent issue were illustrated yesterday at a hearing of the Senate Committee on the Judiciary, which was briefly delayed as committee aides tried to locate an extra room for the overflowing crowd.
"What we're trying to do here is move the process forward," Senator Hatch said in an appeal to lobbyists for compromise. "There are a number of organisations who could stop this bill."
The bill's two main sticking points are a provision that would give the public a new opportunity to review patents after they've been granted, and a provision granting the right for an immediate appeal to the Court of Appeals for the Federal Circuit after a district court has made a pre-trial ruling on the framework that will be used to determine infringement (known as a "claim construction").
Large IT companies and the financial industry support the "post-grant review" of patents, which would allow for a re-evaluation of suspect patent claims before companies are forced to go through lengthy, costly litigation, John Squires, chief intellectual property counsel at Goldman Sachs told the committee.
Opponents countered that the proposed post-grant review process would create an essentially limitless opportunity for rivals to challenge patents.
"If a patent can be easily challenged at any time under a low standard of proof, (then) patents will have much less value, and investment predicated upon them will inevitably be diminished," Kathryn Biberstein, senior vice president of Alkermes, a biotech company, told the committee. "This, in turn, will likely result in fewer cures for diseases and other breakthrough biotechnology products."
The biotech industry and the Innovation Alliance also oppose the right for an immediate appeal after a claim construction ruling, arguing that it would encourage appeals, further prolonging cases. But advocates, including Palm senior vice president Mary Doyle, said it would reduce the chance of conducting unnecessary trials and cut down litigation costs.
The witnesses were eager to raise two other controversial provisions in the legislation, regarding how damages in patent cases are determined and the expansion of the Patent and Trademark Office's authority to make rules.
Doyle and Squires, supporting the bill's "mandatory apportionment" of damages provision, told the committee that damages today can be unreasonably high because the calculation is based on the value of an entire product, not just the patented feature at issue. Countering that argument, Biberstein and Bruce Bernstein, chief intellectual property and licensing officer at InterDigital, said that the provision would replace today's market-oriented valuation of inventions with subjective jury findings.
Debate on expanding the PTO's rule-making authority mirrored the rest of the patent debate with representatives from the financial sector and the Coalition for Patent Reform joining forces in support, while witnesses from the biotechnology sector and the Innovation Alliance cautioned against the change.
An identical House version of the Patent Reform Act is pending, having recently won approval by the House Judiciary Subcommittee on Intellectual Property. Leahy said he is eager to prepare the legislation for a vote by the Senate Judiciary Committee, but he did not indicate when that vote might occur.
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