[Ip-health] US Senators offer sweeping patent system changes

Mon Aug 7 17:10:02 2006

Senators offer sweeping patent system changes

By Anne Broache
http://news.com.com/Senators+offer+sweeping+patent+system+changes/2100-1028=
_3-6102493.html

Story last modified Mon Aug 07 04:45:55 PDT 2006

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The U.S. patent system could be inching closer to an overhaul long
desired by the technology industry.

Just before departing for their summer recess on Thursday, Utah
Republican Orrin Hatch and Vermont Democrat Patrick Leahy, who serve as
chairmen of the U.S. Senate's intellectual-property panel, introduced a
45-page bill that proposes a number of changes to the way American
patents are awarded and challenged.

"This legislation is not an option, but a necessity," Leahy said.

Called the Patent Reform Act of 2006, the measure followed two years of
hearings, meetings and debate, the senators said. It bears a number of
similarities to a bill offered last summer by Texas Republican Lamar
Smith in the House of Representatives.

Specifically, it would shift to a "first to file" method of awarding
patents, which is already used in most foreign countries, instead of the
existing "first to invent" standard, which has been criticized as
complicated to prove. Such a change has already earned backing from Jon
Dudas, chief of the U.S. Patent and Trademark Office.

The bill would also establish a "postgrant opposition" system that would
allow outsiders to dispute the validity of a patent before a board of
administrative judges within the Patent Office, rather than in the
traditional court system. The idea behind such a proceeding, also
endorsed by the Patent Office, is to stave off excessive litigation.

The Senate version appears to give broader leeway for such challenges,
offering up to 12 months--as opposed to the House's nine-month
window--after the patent is awarded for challengers to file a "petition
for cancellation." That time period could then be widened even further,
with a second window available if the petitioner "establishes a
substantial reason to believe that the continued existence of the
challenged claim causes or is likely to cause the petitioner significant
economic harm." Challengers would be limited, however, in the issues
they could raise after that first year expires.

In addition, the Hatch-Leahy bill would place new restrictions on the
courts where patent cases could be filed--an attempt at rooting out
"forum shopping" for districts known for favorable judges. It would also
curb the amount of damages for winners of infringement suits. Perhaps
most notably, and in a departure from the House version, courts would
have to calculate the royalties owed by infringers based solely on the
economic value of the "novel and nonobvious features" covered by the
disputed patent, not on the value of the product as a whole.

Technology companies have been lobbying hard for putting such a
requirement into law, complaining that it's unfair to require massive
payouts based on lost profits for an entire product that can contain
hundreds of thousands of patented components if only one or two are
infringed. Such a system, some argue, has contributed to the rise of
"patent trolls"--that is, companies that exist primarily to make money
from patent litigation and are using the system to force lucrative
settlements.

The Senate's approach won immediate praise from a recently formed group
of mostly technology-oriented companies and trade associations, the
Coalition for Patent Fairness. Its members include the Business Software
Alliance, the Information Technology Industry Council, Apple Computer,
Comcast, Dell, Intel, Time Warner, Visa and Microsoft.

The Leahy-Hatch bill "will fix a major problem that is draining our
economy," coalition representative Mark Isakowitz said in a statement
sent to CNET News.com. Microsoft Vice President Marshall Phelps said the
proposal would be critical in "promoting improvements in patent quality,
discouraging litigation abuse and bringing U.S. law into accord with
established international norms."

The Professional Inventors Alliance, a group representing independent
American inventors, blasted the proposal, saying it amounts to a "wish
list" for "antipatent, washed-up tech companies" and would water down
protections for individual inventors.

Ron Riley, the alliance's president, said in an e-mail interview that
"the bill would reward those who can afford to file quickly and
often...will tilt the balance of power in favor of well-heeled patent
pirates and would greatly lower the ability of inventors to get fair
compensation when they are forced to sue disreputable companies."

If the responses to its House counterpart are any indicator, the Senate
bill could ruffle feathers because of competing priorities among the
technology, drug, biotechnology and other patent-heavy industries. Both
Hatch and Leahy emphasized that the bill represents just a first effort.

"I am sure that further refinements will be made to this bill during the
legislative process," Hatch said, "so I would encourage those who are
either pleased or displeased by any of the aspects of the bill to
continue working with us to resolve any outstanding issues."