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November 15, 2007

Crying Time

In facilely reasoned tones, Cisco general counsel Mark Chandler pleads in the San Francisco Chronicle for indulgence to pass sorry legislation gutting patent enforcement. Simple logic, and history, defy the stance of those serial infringers who would denigrate patents and rig the system to their advantage.

Chandler:

More than 500 percent as many companies sued for patent infringement in recent years compared to 15 years ago. Up until 1990, only one patent damages award exceeded $100 million, but more than 10 judgments and settlements greater than that amount were awarded in the last five years, and at least four topped $500 million. Even if defendants are successful, they still need to forfeit millions of dollars to defend themselves.

That's an argument to streamline litigation. What the money figures point to is how valuable the innovation economy has become to this country; all the more reason to tread cautiously with patent legislation, not kill the goose that lays golden eggs.

[T]he Patent Reform Act of 2007... has three principles that are not controversial except for those who benefit from an imbalanced system that encourages lawsuits and is favorable to plaintiffs: first, make sure suits are brought in a jurisdiction that has a relationship to the important business operations of either the patent holder or the accused infringer; second, give those accused of infringement, who have relevant evidence bearing on whether the patent should have been granted in the first place, the opportunity to bring that to the Patent Office for review; and third, don't allow damages based on the entire sale price of a product, rather than the economic value of the component described in the patent, only when the judge can find that the patented invention is truly the predominant basis for demand for the product.

Chandler is disingenuously dead wrong. The three issues he points to are the most controversial.

The "venue shopping" issue has a built-in irony. Patent cases are one of the most difficult types for courts to manage. Plaintiffs choose jurisdictions for speedy, low-cost resolution. Limiting choice of venue is a means to drag out the process, allowing large companies to bury smaller entities in legal costs. Real reform would fund all courts handling patent cases to come up to snuff, not limiting cases to courts who can't handle it in an economically efficient fashion. The patent appeal overturn rate, at over one-third of district court cases put before the CAFC, is already high. PRA 2007 would clog the appeals court even more.

No sensible argument has been made to do anything more than improve the current open-ended post-grant opposition process already available. It's simple: you want to kill a patent, call Patent Hawk. No legislation will change that.

Presently, damages are awarded on lost profits or reasonable royalty; entirely judicious measures. Naturally, for successful products, the damages figures can run high. Damages apportionment, an economic chimera, has been tried and failed owing to numbing complexity; again, a way to interminably drag the process out. There is no evidence that damages apportionment would lessen infringement awards, but it certainly would make damages determination much more expensive. CAFC Chief Judge Michel has repeatedly argued strenuously against damages apportionment as unworkable.

The bottom line is that the corporations pushing PRA 2007 are aiming to make patent enforcement as expensive as possible, thus rendering patents truly "the sport of kings."

Posted by Patent Hawk at November 15, 2007 11:33 AM | The Patent System

Comments

Your post provides and excellent and concise summary of how to read the PRA. Thank-you for covering the PRA 2007 with the critical eye that it deserves!

Posted by: GD at November 15, 2007 3:32 PM

"More than 500 percent as many companies sued for patent infringement in recent years compared to 15 years ago."

An alternative explanation ... the piratical morphing of the business-model for certain large high tech corporations creates more willful or quasi-willful infringement, and has increased litigation exposure in ways the markets haven't learned to appreciate yet.

Now some of these behemoths are trying to ram through changes to reduce their business risks. Kind of like criminals taking out "conviction insurance"... or better yet, changing the criminal codes before their crimes are detected.

Posted by: FF at November 19, 2007 10:17 AM