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June 20, 2007

Drowning

Smelling blood in the water, sharks circle the wounded whale known as the Patent Reform Act of 2007, S. 1145 and H.R. 1908. Over 200 organizations write Judiciary committee chairmen and leading committee members of both houses to exclaim the need to erase major proposed changes to current patent law.

From the letter:

First, the section on apportionment of damages should be deleted from the legislation. The language is unclear, will increase litigation, and will force judges and juries to make complex calculations for which they are ill equipped. Chief Judge Paul Michel of the U.S. Court of Appeals for the Federal Circuit has said that the provision on apportionment of damages is unworkable and could throw the system into chaos. The U.S. Department of Commerce, parent agency for the Patent and Trademark Office (PTO) itself, has said that there is no reason to change current law in this area. Under current law, courts have discretion to evaluate the relevant facts of each case and flexibility to award appropriate damages on a case-by-case basis.

Second, we are united in our opposition to a new, open-ended, administrative post-grant review mechanism, which we believe is unreasonable and should be deleted. The postgrant review system as written in the bill could be used by virtually any third party that seeks to harass the patent holder. Patent owners need more certainty – not less -- that they can enforce their patents, invest and hire to expand their businesses, and market their innovations free from unending harassment. An open-ended post-grant opposition procedure would discourage investment and have a chilling effect on America’s innovation engine.

Third, the PTO should not be granted overbroad and unprecedented substantive rulemaking authority. The U.S. Constitution expressly grants Congress the power to protect intellectual property. Delegating that authority to an administrative agency would be an unwise abdication of Congressional authority. Granting the PTO unfettered rulemaking authority would also create instability in the patent system because, over the 20-year term of a patent, the PTO could effect multiple changes to substantive patent law through rulemaking. This could significantly alter the value of existing patents. Congress and the courts are better suited for developing substantive standards through the legislative process.

Finally, the legislation must provide adequate grace periods to allow patent holders to adjust to changes to aspects in patent laws and rules, such as filing requirements. Academic institutions, small companies, and independent inventors need adequate flexibility to adapt to the mandates of a first-to-file system, and we believe the legislation as currently drafted lacks such flexibility.

Patent Hawk concurs on scotching apportionment of damages, open-ended post-grant review, and free-reign rulemaking power to the USPTO (especially in light of the continuation limits fiasco), but thinks patents ought to be for inventions of absolute novelty, and that the U.S. should join the rest of the world with a first-to-file system.

Posted by Patent Hawk at June 20, 2007 5:44 AM | The Patent System

Comments

Patent reform is NOT dead in the water. The Democrats are pushing so hard on this that it will take a minor miracle to stop it (such as the immigration bill finally passing). I predict that it will sail through with perhaps an amendment or two, aimed at apportionment or PTO rulemaking authority.

Posted by: Opampman at June 20, 2007 12:13 PM

Does Patent Hawk think that claims issued should be presumed valid, and require clear and convincing evidence before they are found invalid. The striking difference between USA and ROW is that, in ROW, PTO examn is a dress rehearsal for a harder-to-survive inter Partes examination of validity after issue, whereas in USA it is not. The consequence is that US prosecutors bully the USPTO till they get something allowed, and that something is intimidatory after issue, even when it's of highly dubious validity. Lemley Moore, no? Is that the optimal system to perpetuate? What does industry say on that?

Posted by: MaxDrei at June 20, 2007 10:46 PM

In reply to MaxDrei, I think the patent office ought to do a quality job of examining patents, and issue patent grants with presumed validity, as has been U.S. practice. The quality of examination by the USPTO has varied over the years, depending upon patent agency management; examination is now fairly rigorous, because of political pressure, and with the SCOTUS KSR ruling, even fewer patents will be granted in areas of incremental improvement.

I do not agree with the statement that "US prosecutors bully the USPTO till they get something allowed;" at least it has not been my experience, nor is that what I have heard through the years in conversation with other prosecutors.

The most significant issue regarding patent quality now is allowing examiners enough time to do a quality job, as well as compensating examiners sufficiently to retain a quality examiner corp. Being a patent examiner ought to be a decent career, and right now it is not; the fault lies with poor agency management.

Posted by: Patent Hawk at June 20, 2007 11:15 PM

I agree with you in part, Patent Hawk. We need to improve the lives of examiners. Stopping the sucking of funds out of the USPTO would be a good start.

But that won't fix everything, because gaming the system is a natural part of U.S. patent prosecution. Prosecutors have great incentive to submit only the bare minimum prior art to fulfill ethical obligations. The presumption of validity of issued patents is what fuels the patent troll trade, and the situation is exacerbated greatly by the vast number of poorly examined patents issued in the late 90s and early 2000s. I welcome the KSR decision as necessary, but we need to move the dial even further. The flood of garbage patents has resulted in enormous economic inefficiency as companies waste resources battling trolls.

If you are not the inventor, and you don't make or have made anything with the patent, you should not be permitted to extract royalties. Permitting the inventor to reap the benefit of the inventive contribution to the world is a good idea. Permitting a productive patent owner to defend a product or service is also a good idea. Permitting a troll to extort downstream is different and unacceptable.

Posted by: Patentator at June 21, 2007 6:27 AM

There is not a flood of garbage patents out of the patent office now. The allowance rate has dropped. Many bad patents enforced now are from the mid-1990s, the outcome of a nadir in examination rigor.

Regardless of whether one thinks KSR set the "dial" of obviousness correctly, it will help prune the junk, and, with SCOTUS support of district court summary judgment, do so more quickly.

Patents are a commodity, hence the term "intellectual property." Suggesting that only the inventor should be able to profit from his IP is equivalent to requiring authors or musicians to directly sell their output in order to receive monies or royalties.

Fixation on patent trolls as evil has been repeatedly analyzed in The Patent Prospector as creating a bogeyman where none exists.

Posted by: Patent Hawk at June 21, 2007 12:52 PM

Of --I predict that it will sail through with perhaps an amendment or two, aimed at apportionment or PTO rulemaking authority,-- it will take a miracle for the "second window" of post-grant opposition to get into patent law in 2007. But, as Ted Kennedy said, (if IT and Pharma (and aligned entities) can't make a deal) it will depend on who has more lobbyists.

Posted by: Lawrence B. Ebert at June 26, 2007 2:31 PM