Patent Baristas

After the Department of Commerce sent a letter to the Committee on the Judiciary, on the views of the current Administration on S. 1145, the Patent Reform Act of 2007 — specifically, its beef with Section 4 on Damages, the Under Secretary of Commerce for Intellectual Property held a conference to explain the Bush Administration’s views regarding the Patent Reform Act.

In a conference with reporters today, Under Secretary of Commerce for Intellectual Property Jon Dudas said the Administration supports modernizing the patent system but is against the Senate bill in its current form.   The Administration feels that the current Senate bill doesn’t give judges or juries enough discretion in deciding how much to award for patent infringement.

The remedies for infringement include an injunction and damages. The measure for damages for infringement can be either (i) profits lost by the patent holder because of the infringement (lost profits), or (ii) not less than a reasonable royalty.

In an attempt to reign in just what a reasonable royalty rate should be in cases of an invention comprised of many components, the proposed law would change the system to require that:

[T]he court shall conduct an analysis to ensure that a reasonable royalty is applied only to the portion of the economic value of the infringing product or process properly attributable to the claimed invention’s specific contribution over the prior art.

Now, the Administration has stepped in with its opinion saying:

The requirements in Section 4 of the bill, as currently drafted, would likely lead to less than adequate compensation for many patent holders and could promote infringement. While many in the high-tech industries complain that the current system allows patent holders to receive damage awards that are disproportionately large in relation to the value, the administration is concerned that the proposed changes will harm certain industries.

Specifically, Dudas mentioned that mainstream manufacturers, universities and research institutions, small businesses, the bio and pharmaceutical companies, venture capitalists, and others will be disproportionately harmed.   The Administration wants to see patent reform that is technology neutral in its impact.

Dudas said the Administration does fully support the change to first-to-file as long as it is what he called a “pure first-to-file” system. That is, if it is a “first-inventor-to-file” system where an applicant must still have independently invented the subject matter claimed in the application.  Furthermore, the Administration supports changes to provide for a post-grant review process to allow challenges to patents outside of federal court.  The Administration also appears to support the much-maligned, Applicant Quality Submissions.

The Bush Administration’s total $3.1 trillion budget package does include full funding of the Patent Ofice. The fiscal year 2009 budget request for the Department of Commerce’s United States Patent and Trademark Office (USPTO) is $2.075 billion.

The 2009 request represents a $159 million (8 percent) increase over the FY 2008 budget of $1.916 billion, and assumes continuation of the current fee structure. The alloweds the Office full access to anticipated fee revenues for the fifth consecutive year. In 2009, the USPTO plans to hire an additional 1,200 patent examiners.

Expect to see some change in the patent laws in ’08.

See more:

• Judge Michel Writes Letter on Damages in Patent Infringement Cases
• Patent Reform: What Does First-To-File Mean To Me?