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February 5, 2008

Lack of Consensus

Senate Judiciary Committee Chairman Patrick Leahy recently released a Senate status summation on S. 1145, the Patent Reform Act of 2007. It shows a diversity of comprehension, misunderstanding, and uncertainty by various senators. Meanwhile, the White House chips in.

Sen. Leahy kicks off with a skewed matchbox history and how-to-fix-it guide. But the real chewy grist is tucked in the "additional and minority views" section.

Sen. Arlen Specter has a hard-on about venue selection:

While some of these districts may facilitate swifter resolution of patent cases with their ‘‘rocket dockets,’’ most cases are filed there because of the view that they are ‘‘plaintiff-friendly’’ locales. This has led to the perception that justice in patent cases can he ‘‘gamed.’’ This does not serve the interests of justice, or the patent system as a whole.

At least Sen. Specter recognized that a docket like a rocket has something to do with efficiency. Naturally, the thought of providing additional funds to district courts to bring their patent docket handling up to snuff stays hidden under a rock.

Senators Specter and Orrin Hatch then sing an off-key duet about inequitable conduct.

The inequitable conduct defense today has become a convenient and frequently raised litigation tactic that is overpled and a quick route to taking down otherwise valid and commercially valuable patents.

Today, virtually any information can be characterized as ‘‘material’’ to the examination of a patent application.

Courts often ignore the requirement of proving that the person accused of inequitable conduct specifically intended to deceive the USPTO so that it would grant the patent. Courts have done this by inferring the intent to deceive from the ‘‘materiality’’ of the information at issue. In order to have a viable fraud standard, we believe intent must be proven with independent evidence separate from and unrelated to the materiality of the information at issue.

Certainly, the bad folks who commit fraud on the patent office leave hard liquor proof lying around to be snatched up and poured into the shot glass of justice.

Sen. Jon Kyl gets down and dirty about the economics of just thinking up inventions versus having to spend a bunch of money in a laboratory. Never mind that the Supreme Court ruled "obvious to try" meant practically anything that might be tried.

Kyl recounts the slippery slope to going to hell in a bucket:

The PTO began to slip somewhat from this longtime recognition of a ‘‘business-methods exception’’ to patentability in the 1980s, and the Federal Circuit radically accelerated this shift when it eliminated the business-methods exception in its 1998 State Street decision.

Business methods are not expensive to invent, and since, by definition, business is already engaged in business, there is little or no inherent barrier to commercialization of these methods. Business methods should not be patentable.

Someone tell this economist why cost has anything to do with invention. While genius may be 1% inspiration and 99% perspiration, that 1% is the beating heart of a patent. Gaining the expertise that affords an insight creating a leap of technology defines the process, but it's the insight that defines what's patent-worthy, not how much you had to shell out to get there.

Senators Specter, Kyl, Chuck Grassley, Tom Coburn, and Sam Brownback then worry about the scratchy language in the changes to damages awards, post-grant opposition as a delaying tactic, and the current bad language in the bill about interlocutory appeals.

Senators Russ Feingold and Coburn howl full-throated at the whole shebang:

This legislation fails to strike a fair balance between patent holders and patent infringement defendants. In our view, it remains far too lenient on infringement. In its current form, it could potentially undermine one of the most important engines of American innovation.

Unfortunately, the bill put far less energy into crafting proposals for more rigorous pre-grant examination of prior art and novelty. That is a way to deal with the problem of so-called ‘‘junk patents’’ without threatening the value of legitimate patents.

Two other provisions in S. 1145 are very troubling: the mandatory apportionment of damages and the restriction of plaintiffs’ ability to sue infringers in their home venue.

The truth is that, with the exception of a few possibly excessive awards, current law on damages is working. The fifteen Georgia- Pacific factors, which the courts have adopted, preserve flexibility for jury calculations by covering a wide range of real business circumstances.

Similarly, as reported, the bill’s venue provision is skewed heavily in favor of infringer-defendants. It may be true that forum-shopping is a problem in patent litigation, but this provision sweeps too broadly.

Senators Coburn, Grassley, Kyl, Coburn, and Brownback dance a sunshine song about post-grant review: namely, don't let it rain on patents their whole life.

Whatever post grant system is ultimately devised, at some point the patent should be final and the inventor should enjoy the benefit of their invention without a cloud of uncertainty lingering over it during the full life of the patent.

In the finale, senators Coburn, Grassley, Kyl, and Brownback hum a hymn about railroading patents through the muck that comprises much of S. 1145:

Without significant changes, S. 1145 will considerably tilt the intellectual property landscape to favor a few high-tech mega-corporations and some large financial service interests against a myriad of players including academia, agriculture, alternative energy, biotechnology, chemical, electronics, environmental technology, financial services, information technology, life sciences, manufacturing, nanotechnology, and telecommunications industries. Congress will send to the President a bill that picks winners and losers based on business models and not on protecting the Constitutional rights of patent holders. The interests of infringers will be elevated over the interests of inventors; the interests of those with deep pockets over the interests of start-ups; litigation over licensing; and the interests of foreign competitors over the interests of domestic innovators.

Congress should be cautious to accept changes to the patent system advanced by one industry sector at the expense of many others. The over-arching goal of patent quality is ill served by measures that would destabilize our current system of patent rights and remedies and, in turn, jeopardize the global leadership of this country’s most innovative industries. Moreover, by creating uncertainty as to the validity and enforceability of patent rights, Congress stands to encourage, not discourage, costly litigation and infringement. Added costs, delayed enforcement, and increased risk combined with reduced damages for infringement is a sure recipe for the withdrawal of private capital from early stage development or innovative research.

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Nathaniel Wienecke at the Department of Commerce spewed the administration view in a letter to Sen. Leahy and the Senate Judiciary Committee.

The real hard word was continued opposition to changes in damages.

While well-intentioned, we do not believe a convincing basis has been established to justify the significant changes to current law in the bill's damages section.

The letter outlined agreement areas: making applicants search prior art, excepting the little guy; letting the USPTO set fees; terminating inter partes reexaminations; and post-grant opposition, but only with "improvements.. to make the bill's post-grant procedures more effective, efficient, and manageable."

Other areas of disagreement include funky USPTO funding, "through a mandatory revolving fund account;" first-to-file, and inventor's oath, though it's more tweaking than anything; allowing the patent office to accept late filings; messing with willfulness, in light of in re Seagate.

Then there's this nice passage, with reference to outlawing "patented check collection systems:"

As a general matter, the Administration does not support exceptions to patent protection based on a particular technology.

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Hat tip of thanks to Dennis Crouch at Patently-O for the material.

Posted by Patent Hawk at February 5, 2008 2:19 AM | The Patent System

Comments

The damage apportionment provision which the Bush Administration opposes in S. 1145, while bothersome, won't cause disaster to the U.S. patent system like the other provisions in S. 1145. These include the applicant quality submissions (the new Documents of Doom), granting the Director of the USPTO unbridled authority on fees (a nauseating thought given what we're going through with the current PTO Rules mess), open-ended post-grant oppositions (an invitation for the Goliaths of industry to grind the Davids of innovation into the sod), and the improved (but not far enough) effort to reign in the "inequitable conduct" doctrine that is rightly called a "plague" on the patent system. If one or more of these loathsome provisions remain in S. 1145, it won't matter that the damage apportionment provision is jettisoned. Again, better that this whole legislative mess sink with no survivors.

Posted by: EG at February 5, 2008 6:13 AM