Patent Baristas

Well, by a 220-175 vote the U.S. House of Representatives passed its version (H.R. 1908, the Patent Reform Act of 2007) of an overhaul of patent laws designed to trim excessive litigation and improve patent quality, giving high-tech firms what they’ve been clamoring for: a weaker patent system.

If made into law, the legislation will make patents harder to obtain and easier to challenge. It would also try to cut down on the amount of litigation by limiting where patent owners can file suit and how much they can collect in damages if they win.

The changes are in response to a growing “gut feeling” that has been propagated that our patent system is somehow broken and in need of fixing, despite decades of established jurisprudence.

Approval came after last-minute changes to appease critics, including the Bush administration, labor groups, universities, and the pharmaceutical company Pfizer, which said the original proposal had gone too far in weakening patent rights.

The White House said it would oppose the bill unless it was revised to change limits on the discretion of a court to determine damages adequate for an infringement. The administration said it supported other aspects of the bill, including steps to bring the U.S. system in line with patent systems in Europe and Japan.

The U.S. is the only major industrialized country with a first-to-invent system that awards patents to the first inventor. The proposed bill would change the rules at the U.S. Patent and Trademark Office so patents would go to the first person to file an application. It would allow third parties to introduce evidence against applications, and create a system for post-grant opposition for challenging issued patents.

It would also limit where patent suits could be filed to keep lawyers from shopping for court districts deemed friendly to patent owners. The legislation also would create a new way to calculate damages and allow immediate appeals of court rulings on the interpretation of patent terms while the case is proceeding.

Republican leader, John Boehner of Ohio, and the party whip, Roy Blunt of Missouri pointed out that “While our patent system is in need of reform, we are very concerned that the bill in its present form picks winners and losers among industries with different business models in a way that has never before been attempted in patent law or practice.” In the current bill, Congress seems to side with high tech companies over pharma and biotech.

One contentious item is that the Act changes the apportionment of damages clause by reducing damage awards substantially. The effect can be disparate since the high tech industry is often based on products built on many patents covering incremental changes and improvements while the pharmaceutical industry typically would have one or two patents covering the compound at issue. High tech companies are out to quash so-called nuisance suits while pharmaceutical companies can live and die on a single patent.

There is a lot at stake and, as a result, a lot of organized lobbying from interested parties. U.S. intellectual property, dominated by patents, is valued at as much as $5.5 trillion, according to a 2005 study by USA for Innovation. That’s more than 40 percent of U.S. gross domestic product. While many experts credit a strong patent system with the rapid rise in develo[pment in the U.S., the proposed changes would now make patents weaker by making it easier to challenge patents.

Amendments For H.R.1908

1. H.AMDT.789. An amendment to incorporate a number of revisions including revisions to the sections on damages, willful infringement, prior user rights, post-grant review, venue, inequitable conduct, applicant disclosure information and inventor’s oath requirements, among others.

2. H.AMDT.790. An amendment to eliminate provisions in the law permitting certain applicants to delay or prevent publication of their applications. The amendment would strike that provision and permit applicants to delay publication until the later of (1) three months after a second PTO decision or (2) 18 months after the filing date.

3. H.AMDT.791. An amendment to change the section relating to United States Patent and Trademark Office regulatory authority by adding the requirement that Congress be provided 60 days to review regulations before they take effect. Congress may bar implementation of the regulation by enactment of a joint resolution of disapproval.

4. H.AMDT.792. An amendment to require the Director of the United States Patent and Trademark Office to conduct a study of patent damage awards in cases from at least 1990 to the present where such awards have been based on a reasonable royalty under Section 284 of Title 35 of the United States Code. The Director of the PTO would be required to submit the findings to Congress no later than one year after the Act’s enactment.

5. H.AMDT.793. An amendment to prohibit a post-grant review from being instituted based upon the best mode requirement of patent law.

See the Administration’s Concerns here: sap hr1908.pdf