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February 15, 2008

Good Old Bozos

Senators Leahy and Hatch, in a Washington Times editorial, cry wolf about the need for patent reform, dishing out fallacious logic and rummy rumor posing as fact. "Meaningful patent reform is crucial to America's ability to maintain its competitive edge in the world," they toot, without evidentiary basis or rational reasoning matching perceived problem to proposed solution.

The senators, money sots and shills in reality, pose as academics.

The Patent Reform Act of 2007 (S.1145) is the product of years of deliberation and study within Congress and by many esteemed agencies and institutions, including dozens of hearings with the testimony of scores of witnesses, extensive and substantive mark-up sessions, and hundreds of meetings and discussions with countless stakeholders representing a sweeping array of interests in the patent system.

If their legislation is, as they proclaim, the product of study, it is, as we shall see, a profile in sheer incompetence: an utter inability to critically analyze the current situation, or even develop a rational solution to what is perceived to be a problem, leaving aside that much of the legislation comprises screwy solutions without corresponding problems.

Think about this: The last time the patent system was significantly changed, the structure of DNA had not been discovered; gasoline was around 27 cents a gallon; and we had not yet sent a man to the moon. Our economy is no longer defined by assembly lines and brick-and-mortar production; we are living in the Information Age, and the products and processes that are being patented are changing as quickly as the times themselves. Unfortunately, Congress has neglected to modernize our patent system to keep pace with the boom in American innovation.

The above argument equates technology change with a need for legal change. Think about this: the processes of patent grant and enforcement are technology independent. Their analogy is prima facie spurious.

In 2003, the Federal Trade Commission reported that patents of questionable validity were inhibiting innovation and competition, harming consumers and businesses and our overall economy. The FTC further found that relying on court battles to challenge questionable patents was unduly costly and cumbersome. To address this problem, our bill would set up an administrative, post-grant review procedure. This would not only cut down on legal costs for the patent holder and the patent challenger, but it would also leave the issue to those best equipped to review patents -- the experts at the U.S. Patent and Trademark Office.

The FTC report failed to show consensus, and had no factual basis for its recommendations, other than anecdotal accusation. The FTC report offered zero statistical analysis. An objective analysis of the FTC report found: "Despite no evidence, the FTC report concludes that poor quality patents are being issued and urges a number of reforms to address the potential problems."

And then there's the proposed solution: the same clowns that supposedly created the mess, the USPTO, are going to clean it up, by instituting a largely redundant procedure to the current reexamination regime. No reason has been cited, no justification found, that a freshly minted patent should immediately be subjected to open-season pot shots, at patent holder expense, and by the same body that just gave the green light. The senators are living in the past if they are not aware of the heightened examination regime in force now at the PTO, with KSR as a magic damnation wand. An objective observer would inexorably be led to a singular conclusion: they are smoking the good stuff up on the Hill.

There are reasons why litigation is chosen over negotiation. The courts encourage litigation, having made declaratory judgment motions easy, and the proposed legislation does nothing about that.

If the cost of litigation is such a concern, a lower-cost alternative to infringement analysis, not just validity analysis, is required.

We must also restore fairness to the rules that govern how courts determine damages when a patent is infringed. The threat of excessive damages is ruthlessly curtailing progress, and the loss of jobs and innovation is directly linked to litigation costs.

No basis in fact to return to an apportionment of damages that has been demonstrated historically to be a great morass, and is strongly opposed by those most affected and informed: the CAFC. What the senators propose for damages apportionment would greatly increase litigation costs, according to CAFC Chief Judge Michel.

Under today's rules, patent cases can be brought virtually anywhere in the country... Our bill would prevent this gaming of the system by bringing the standards for selecting venues in line with mainstream jurisprudence.

Limiting venue selection is a naked placation of serial patent infringers, and utterly illogical. Certain districts in the country are favored for multiple reasons, but particularly competence and efficiency. Patent litigation is inherently complex. If you've been reading the Patent Prospector, you know that district courts often get it wrong, that the appeals court often corrects and remands. You also know that 3-2 split CAFC rulings are common, with vigorous dissent. Even the patent appeals court struggles with interpretation. Rep. Darrell Issa (R-Ca), understanding the problem, has proposed funding for training courts to better handle patent cases, and mulled patent trial courts as a means to avert ill-equipped district courts frustrating patent enforcement. Yet frustrating patent enforcement is exactly what the proponents of venue limits have in mind, and that these senators support.

Another provision to clarify and limit use of the so-called inequitable conduct defense would also bring balance to the patent system. This defense is used to assert that the patent in question was obtained improperly and is, therefore, invalid. It is frequently pled, and when it is misused, it needlessly drives up the cost of litigation.

No statistics have ever been collated to demonstrate that inequitable conduct accusations are excessive, or needlessly drive up the cost of litigation. Anecdotal evidence in the Patent Prospector archives as often as not show that when there's the smoke of inequitable conduct, there's fire, although it's sometimes hard to prove. Inequitable conduct charges are readily pitched by courts now when there's no basis in fact for them. The only reasonable basis for arguing that inequitable conduct accusations should not be entertained is evidence that judges are generally rubes, easily fooled; and there is Mt. Everest of evidence to counter such a notion.

As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way.

The above statement is preposterous. Legislation crafted to strengthen the patent system and streamline attendant processes would encounter opposition from vested interests, but would not engender complaints from "everyone," particularly the courts and patent bar. This legislation was drafted by an anti-patent lobby and rubber stamped by craven senators happy to have their pockets lined with lucre.

Gentlemen, allow me to introduce you to someone you don't know: Jack Shit.

Posted by Patent Hawk at February 15, 2008 2:02 AM | The Patent System

Comments

Dear Pat and Orin
If you want to make seismic changes to the system, why not make changes that will improve it. Try these:

1. Set up a non-Article III IP trial court system, as is done with the tax system. Put IP lawyers on the bench. Get rid of the juries, unless you're willing to hire technical juries. Place one trial court in each federal circuit. Make claim construction a matter of fact, not reviewable de novo.

2. Set up an IP wing of the CAFC that hears all appeal from the IP trial courts. The only judges that go on that bench are those promoted from the trial bench.

3. Bring the TM system approach over to the patent side: allow a 90 day period for opposition of applications after publication, and then a 2 year period of contestibility after issue. After 2 years the patent is deemed virtually bullet proof.

4. Do like most of the world does and make the file wrapper off limits for litigation.

5. Pass a constitutional amendment keeping id1ots out of the PTO at all levels, but especially the very top and the very bottom.

These changes will fix 90% of the problems.

Bab

Posted by: BabelBoy at February 15, 2008 9:28 AM