Patent Baristas

In Ariad v. Eli Lilly & Co. (08-1248) (a top 10 case for 2009), the Court of Appeals for the Federal Circuit set out a split decision on a case addressing patent validity and enforceability issues where Lilly contends that the asserted claims of US 6,410,516 are invalid for including non-statutory subject matter, for being obtained through inequitable conduct, and are unenforceable due to prosecution laches.

Lilly argued, and of course Ariad disputed, that the claims cover unpatentable naturally-occurring phenomena, that Ariad withheld critical documents from the patent examiner not only to get the patent issued, but to avoid the risk of losing 13 years of patent term.

Earlier, Eli Lilly and Company lost a jury trial in the U.S. District Court of Massachusetts in the case of Ariad Pharmaceuticals et al. v. Eli Lilly and Company. The Jury decided that ‘516 patent was valid and infringed by Lilly’s sale of Evista® and Xigris® and awarded the plaintiffs approximately $65 million in back royalties and a 2.3 percent royalty on future U.S. sales of Evista and Xigris until the patent’s expiration in 2019.

The ‘516 patent claims methods based on the discovery of a naturally-occurring biological pathway, the NF-kappaB pathway. While Ariad contends that the patent covers all means for modulating the NF-kappaB pathway, Lilly’s contention is that it discovered the drugs in question, Evista and Xigris and disclosed their medicinal properties years before the patentees’ scientists made their discovery.

This case raises the question of if a researcher discovers a drug without ever knowing the drug acts on a patented pathway or before the pathway is understood, does that constitute infringement? If the drug was acting on the pathway before the pathway was discovered, does the existence of the drug invalidate the patent on the pathway by rendering it not “new“? This could give rise to a number of conflicting patents.

The inventors of the ’516 patent discovered that if the transcription factor NF-κB’s activity could be reduced, it could ameliorate the symptoms of diseases that trigger NF-κB activation – similar to how aspirin can reduce a fever without actually treating the underlying infection.

The asserted claims include language for methods that include a single step comprising reducing NF-κB activity in cells. The district court determined that “reducing NF-κB activity” means “decreasing the function of NF-κB to act as an intracellular messenger that regulates transcription of particular genes, in response to certain stimuli.”

To satisfy the written description requirement, an applicant does not have to utilize any particular form of disclosure to describe the subject matter claimed, but the description must clearly allow persons of ordinary skill in the art to recognize that he or she invented what is claimed.  In other words, the applicant must ‘convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention,’ and demonstrate that by disclosure in the specification of the patent.” (quoting Vas-Cath Inc. v. Mahurkar).

The same is true for both process claims and composition claims. Where the specification provides only constructive examples in lieu of working examples, it must still describe the claimed subject matter in terms that establish that the applicant was in possession of the claimed invention. Of course, what is adequate depends upon the context of the claimed invention with courts looking at “the existing knowledge in the particular field, the extent and content of the prior art, the maturity of the science or technology, [and] the predictability of the aspect at issue.”

Lilly argued that the asserted claims are not supported by written description because the specification of the ’516 patent fails to adequately disclose how the claimed reduction of NF-κB activity is achieved. The parties agree that the specification of the ’516 patent hypothesizes three classes of molecules potentially capable of reducing NF-κB activity: specific inhibitors, dominantly interfering molecules, and decoy molecules. Lilly contends that this disclosure amounts to little more than a research plan, and does not satisfy the patentee’s quid pro quo as described in Rochester.

Ariad turned around and said that Lilly’s arguments fail as a matter of law because Ariad did not actually claim the molecules.  According to Ariad, because there is no term in the asserted claims that corresponds to the molecules, it is entitled to claim the methods without describing the molecules. The Federal Circuit, however, felt that Ariad’s legal assertion was wrong-headed:

In Rochester, we held very similar method claims invalid for lack of written description. Id. (holding patent invalid because “Rochester did not present any evidence that the ordinarily skilled artisan would be able to identify any compound based on [the specification’s] vague functional description”); see also Fiers v. Revel, 984 F.2d 1164, 1170–71 (Fed. Cir. 1993) (holding a claim to a genus of DNA molecules not supported by written description of a method for obtaining the molecules); cf. Eli Lilly, 119 F.3d at 1567–68 (holding claims to a broad genus of genetic material invalid because the specification disclosed only one particular species). Ariad attempts to categorically distinguish Rochester, Fiers, and Eli Lilly, because in those cases, the claims explicitly included the non-described compositions.

Ariad’s attempt to distinguish these cases is unavailing. Regardless of whether the asserted claims recite a compound, Ariad still must describe some way of performing the claimed methods, and Ariad admits that the specification suggests only the use of the three classes of molecules to achieve NF-κB reduction. Thus, to satisfy the written description requirement for the asserted claims, the specification must demonstrate that Ariad possessed the claimed methods by sufficiently disclosing molecules capable of reducing NF-κB activity so as to “satisfy the inventor’s obligation to disclose the technologic knowledge upon which the patent is based, and to demonstrate that the patentee was in possession of the invention that is claimed.” Capon, 418 F.3d at 1357.

Circuit Judge Linn, concurring, wrote that:

I write separately to emphasize, as I have before, my belief that our engrafting of a separate written description requirement onto section 112, paragraph 1 is misguided. … As I observed in University of Rochester, section 112, paragraph 1 requires no more of the specification than a disclosure that is sufficient to enable a person having ordinary skill in the art to make and use the invention.”

I note that the written description requirement does separate mischief in this case. Because the court relies upon this requirement to reverse the district court, it does not reach the important enablement issue raised by Lilly. … We have long held that in order to survive the enablement requirement, the specification “must describe the manner and process of making and using the invention so as to enable a person of skill in the art to make and use the full scope of the invention without undue experimentation.” … To my knowledge, however, we have not specifically addressed this requirement in relation to the type of claims at issue here—that is, claims written broadly enough to cover any method for achieving a particular result. It may be, as Lilly argues, that such a claim can never be valid, since the specification cannot enable unknown methods. Cf. In re Hyatt, 708 F.2d 712, 714 (Fed. Cir. 1983) (rejecting “single means” claim, as such claims “cover[ ] every conceivable means for achieving the stated result”). This is an important issue that we have left unresolved. It is an issue that we would have been compelled to reach had the case been decided on enablement grounds, a basis found in section 112, instead of on written description grounds, a separate basis not justified under that section or any other provision of the Patent Act.

Look for more discussion from the courts on what is (or is not) required for a written description.

The Irish Minister for Finance announced two new measures designed to enhance the prospects of what it has termed Ireland’s “Smart Economy”.

First, the Government intends to introduce a new tax relief for capital expenditure incurred in the purchase of intellectual property assets. Secondly, the Government has committed to increasing R&D spend to 2½% of GNP by 2013.

Existing Intellectual Property tax reliefs

These measures are in addition to Ireland’s existing tax incentives for intellectual property creation and exploitation. In addition to the Ireland low corporation tax rate of 12.5% for IP exploitation activities which are carried on as an Irish trade, other taxation measures which already form part of Ireland’s intellectual property regime include the following:

Patent Income Exemption

In general, profits or gains arising from a patent (whether received in the form of royalties or as a capital sum) are taxed as income. However, Irish legislation provides a tax exemption (limited to €5 million per annum) for income derived from “qualifying patents” when received by an individual or company resident in Ireland.

A “qualifying patent” is defined as a patent in relation to which the research, planning, processing, experimenting, testing, devising, designing, developing or similar activity leading to the relevant invention was carried out in the European Economic Area. It is not necessary that the patent itself be registered in Ireland or indeed in another country of the EEA. However, the recipient of the royalty income must be Irish resident.

The exemption is generally available from the date on which the patent is granted. A retrospective exemption may be available for income arising in the period between the date of filing of the final patent specification and the date on which the patent is granted.

Where the patent holder is a company, Irish legislation also provides for a tax exemption in respect of dividends paid by a company which is in receipt of tax-free patent income, subject to certain restrictions where the royalty income is received from a related company.

One of the main advantages of holding patents in Irish corporate structures is this ability to provide an opportunity to persons other than the “original inventors” to share in tax free dividends. As there is no requirement that the patent royalty be payable in respect of an invention used for an activity located in Ireland, this exemption has been traditionally very attractive to large international groups, making Ireland a popular location for IP holding companies.

Stamp Duty Exemption

Irish tax law also provides an exemption from stamp duty on the sale, transfer or other disposition of intellectual property, including patents, trade marks, copyright, designs, inventions, domain names, supplementary protection certificates and plant breeder’s rights.

Goodwill is also expressly included in the exemption to the extent that it is directly attributable to IP. This represents a huge tax saving for companies engaged in the licensing of IP or other hi-tech business and therefore acts as a further incentive to locate IP rights in Ireland.

Research and Development Tax Credits

Tax credits are available on research and development on up to 25% of qualifying expenditure. The credits can be carried back one year as well as forward. Where a company has insufficient corporation tax to absorb the credits, they can instead be set off against payroll taxes over three years.

The new tax relief on capital expenditure incurred in the acquisition of intellectual property and the Government’s commitment to increased R&D spending as announced will enhance these existing provisions and should be welcomed by Ireland’s innovators and IP holders.

(via Philip Lee Solicitors, Dublin, Ireland)

The European Patent Office (EPO) has announced more important rule changes, as part of its drive to speed up prosecution without apparently requiring any more from its examiners.  The new rules will come into force on 1 April 2010.

Of particular note is that two of the new rule changes are actually beneficial to applicants!

Compulsory response to European search reports

At present, an applicant does not have to reply to any search report that the EPO issue.  However, this will change when the new rules come into force.

From that date the applicant will have to respond to objections raised in the opinion accompanying a European search report. This applies to extended search reports, raised on European patent applications filed at the EPO, and supplementary search reports, raised in the European regional phase of a PCT application where the EPO was not the International Search Authority (ISA).

The deadline for responding to an extended European search report will be 6 months from the publication date of the search report, if a request for examination has not already been filed. However, if a request for examination has been filed, the deadline will be 2 months from a communication from the EPO.

If an applicant fails to respond before the deadline, then the application will be deemed withdrawn, but can be revived using “further processing”.

The EPO will require a full response to the objections.

Compulsory response to written opinions and international preliminary examination reports

If the EPO is the ISA for a PCT application, it does not carry out a search in the European regional phase. For those applications, the applicant must file a response to any objections in the written opinion raised in the International phase of the PCT application.

The applicant will have to file the response shortly after entry into the European regional phase. The EPO will set a 1 month deadline to file the response and, in the same communication, invite the applicant to pay claims fees and/or file voluntary amendments.

Again, the EPO will require a full response to the objections.

Amending a European patent application

Under the new rules an applicant must identify, and provide basis in the original text, for all amendments to the application.

If the applicant does not, then the EPO will set a 1 month deadline to do so. If the applicant still fails to provide the information, the application will be deemed withdrawn, but can be revived using “further processing”.

Multiple independent claims

If an application contains several independent claims, the EPO, before carrying out the search, will ask an applicant which claims are to be searched.  They will give the applicant 2 months to provide this information. If the applicant does not, then the EPO will search only the first claim in each category (product, method, use).

This change will allow applicants to direct the EPO to a search report on the subject matter of most interest to them. It is a definite improvement on the current practice, where the applicant is not asked for such direction.

Incomplete search

If the EPO considers that it is impossible to carry out a meaningful search on an application, it will invite the applicant to indicate, within 2 months, which subject matter it should searched.

If the applicant does not reply in time, or does not identify matter that the EPO can search, then the EPO will issue a partial search report or a declaration that they cannot carry out any meaningful search.

This change will help applicants in fields which often face objections that their application relates to excluded subject matter or is defined unclearly.

Divisional applications

The recently announced changes in divisional practice are discussed separately here.

Please do not hesitate to contact us here if you have any questions about the new rule changes.

This information has been prepared by Forresters. It sets out the present positions, as presently understood, on the basis of the latest information available, from various sources but it must not be relied upon and does not constitute legal advice. No liability will be accepted for any errors or omissions. Detailed advice should always be requested with regard to specific circumstances of any particular case, or issue, in any jurisdiction.

As the importance of technology-based products and processes continues to increase, so too does the significance of patents.  Unsurprisingly, therefore, patent-related disputes are becoming more common and their consequences more significant than ever. Likewise, globalization means that patent disputes must increasingly be managed on an international rather than local level.

However, the lack of a harmonized patent dispute resolution system across the major jurisdictions means that this is not a simple exercise. Actions taken in one jurisdiction can have unforeseen consequences in another; the time taken in the various jurisdictions to reach a conclusion can vary considerably; and the measures and remedies available differ from country to country.

International Patent Litigation: Developing an Effective Strategy

“International Patent Litigation: Developing an Effective Strategy,” Edited by David Wilson (Globe Law & Business Publishing Ltd. 2009),  is a collection of articles covering patent litigation strategy from over 15 countries has been put together. Before enforcing any patent rights, you need to develop an effective strategy for using litigation as a means to an end. Editor David Wilson provides an overview of the issues in strategy development stating the case thusly:

“[D]ifferent countries approach patent litigation differently, both from a procedural point of view and substantively. As a result, not only are the procedures by which patent disputes are resolved different, but different remedies can be available and the length of time to obtain resolution can vary widely.”

Wilson sets out that the patentee must determine the landscape. That is, what patents, if any, have been infringed? What are the relative strengths and weaknesses of the rights? Once the landscape is set out, the patentee must consider when and where to litigate. Many of the factors to consider include the availability of pre-action discovery and disclosure, the availability of interim relief such as preliminary injunctions, the timetable for proceedings, the discovery process, each jurisdiction’s substantive and procedural patent laws and the cost of patent litigation in the jurisdiction(s) in question, of course.

The remainder of the book covers the aspects involved on a country-by-country basis — mainly Europe, Japan and the U.S. — with each jurisdiction covered by an expert in that country’s litigation practice. This book is a practical guide for those involved in the management of international patent litigation, from in-house professionals (patent managers, patent attorneys and general counsel) to those in private practice.

While not for the casual reader, “International Patent Litigation: Developing an Effective Strategy” will be invaluable for developing a strategy for protecting against infringements, preparing proper litigation strategy, estimating costs of litigation, and preparing to engage local counsel.  This is a guide for understanding not just the lawyers in certain jurisdictions but the very court system and how patent cases are heard.  By looking at the types of cases heard in the courts and the timetables involved, a patentee can make an informed decision on moving ahead with an action.

International Patent Litigation: Developing an Effective Strategy is available from Amazon and from Globe Law & Business Publishing Ltd. (gbplawbooks.com).

India’s pharmaceutical industry caters to about 30% of the world’s generic requirements. Despite its tremendous volume, it has been facing difficult times recently, with the WHO stance on counterfeit drugs, as well as seizure of Indian generic shipments in the EU.

There is some good news now on the turf with the introduction of Bipartisan Biogenerics Consensus Bill: Promoting Innovation and Access to Life-Saving Medicine Act in US which shall open up the US markets to biogenerics. It is proposed by Rep. Henry A. Waxman who is also credited with an existing legislation on pharma generics to his name. (Hatch-Waxman Act) The Bill intends to authorize FDA to approve generic biotech drugs and provide a regulatory set up for the same. This would help Indian companies to launch their biological generics in US by 2010.

The patent protection for blockbuster first-generation biotherapeutics developed in the West has begun to expire, throwing them open for generic exploitation. While continued high demand, high prices, and applicability in previously untreatable conditions are behind the success of branded biologics, the absence of generic competition has meant that the growth has gone unchallenged.

The US Approach

While recognizing patient need for affordable drugs and the constant need to foster pharmaceutical innovation, the US authorities are keen to develop framework on timely resolution of patent disputes and market exclusivity provisions consistent with the Hatch-Waxman model. The highlight of the Bill remains the reduction in the exclusivity period to 5 years, with a possibility of extension to 3 more years in certain cases, which is 7-10 years at present. Global Pharmaceutical Association (GPhA), that represents the manufacturers and distributors of generic and active pharmaceuticals, says on its website:

“As our nation acts to strengthen our health care system, our priority must be to reduce costs while increasing access to quality care.”

For firms looking to develop biosimilars, some 75 proteins and peptide therapeutics were recently identified in US as potential profitable targets for new products. And significantly, a substantial proportion of these were approved as NDAs, meaning thereby that they can be targeted by biosimilar firms.

Indian and Chinese Markets

The Indian and the Chinese drug regulatory systems have since long favoured domestic generic companies through less rigorous regulations for pharma approvals and clinical testing standards. Currently, insulin, interferon alpha, erythropoietin (EPO), monoclonal antibody (MAb) products and recombinant vaccines are the biosimilars manufactured by a number of domestic biotech companies including Biocon and Wockhardt, who are keen to sell them in US. Biocon’s Insulin is slated to be the first biogeneric to hit US markets in 2011. The Indian government has also streamlined some of its drug application and review procedures in order to cash in on the opportunities.

The biotech industry has been investing heavily in the development of facilities as a result of strong tax incentives. The Indian biogeneric manufacturers are also upbeat about the new regulations that could provide guidelines on the manufacture and approvals, which have been missing so far. The sales that biologic agents command and the costs that they impose for payers combine to generate intense interest in the development of biogenerics.

The Challenges and Opportunities in India

The challenge now is to develop biogenerics at par with chemical counterparts. The infrastructure, academic network, technical confrontations and costs of making biogenerics are higher than for traditional chemically synthesized generics. The Department of Biotechnology is reported to spend around $200 million annually to develop biotech resources in the country, including the expansion and improvement of academic programs, the development of more and better infrastructure, the nurturing of biotech companies, and the improvement of technology transfer to businesses from universities and other noncommercial laboratories.

This is expected to bear fruits with the renewed focus on biogenerics- hailed as the future of medicine. At the same time, the biotech companies in India may look towards licensing development and marketing to western partners, as has been done by Biotech for its G-CSF biogeneric, ahead of its approvals.

With EU already having forayed into this arena and established a regulatory set up, the markets seem to be lucrative. The global market for biotech drugs grew by 18% last year and now exceeds $50 billion, which is 10% of the global pharmaceutical market at nearly three times the growth rate. The US bill is expected to simplify regulatory hurdles as well as set up a pricing strategy that would ultimately be helpful for generic companies of both countries.

Today’s Guest post is by the Group on Research, Publications and Programmes at Lex Orbis Intellectual Property Practice, Solicitors & Advocates in New Delhi, India.

Responding to an article about robotic inventors (Science, April 3, 2009), which reports about a robot that actually developed and tested hypotheses regarding certain yeast and discovered new gene sequences, we ask whether robotic “inventions” will ultimately become free to the public without the possibility for patent protection.

American patent law (35 U.S.C. Section 102) says that “[a] person shall be entitled to a patent unless . . .” (emphasis added), and proceeds to set forth a number of exceptions to patentability. But that preamble to section 102 limits the ability to patent to a person, probably not to a machine. This conclusion is reinforced by section 101 that limits the invention to the discoverer: “[w]hoever invents . . . may obtain a patent . . . .” Section 101 uses “whoever” not “whatever.”  Thus, a person using a robot that might make an invention may face some serious statutory impediments to patent protection.

The situation is compounded by Section 102(f) that states that one cannot obtain a patent if “he did not himself invent the subject matter sought to be patented.” Thus Section 102(f) prevents one from obtaining valid patent protection if he gets the idea in question — even in private — from another source.

There is some existing U.S. patent practice to offer some hope. Existing DNA/amino acid sequencing machines provide inventors with information that inventors later patent, of course. There is a difference because such machines are automated and not capable of cognition, and much of the inputs into such machines are provided and selected by humans. And the resulting data and results are analyzed and verified later by humans.

Another case in point we deal with frequently involves high-throughput compound screening to identify promising compounds for pharmaceutical, agricultural and other purposes, but again, the inputs into screening machines are human, and the outputs are analyzed by humans. Still another example we see involves Monte Carlo analysis using Spice for electronic circuit design, again involving human inputs. There are numerous similar examples. However, unlike our examples, the robots discussed in your article seem to have an independent ability to generate and verify hypotheses, perhaps leading in patent parlance to independent “invention” by the robot, not the human.

There is the possibility that the programmer of the robot could be the inventor if the robot were given the hypotheses to test and parameters to evaluate, in which case the human would probably be the inventor on the theory that the robot was simply the “hands of the inventor.”

We use Europe to illustrate how things might be different in other countries. Article 58 of the European Patent Convention sets forth the “[e]ntitlement to file a European patent application thusly: “[a] European patent application may be filed by any natural or legal person, or any body equivalent to a legal person by virtue of the law governing it.” That language — never applied to the robot situation in your article to our knowledge — seems to provide some wiggle room for the possibility of the robot being an inventor in Europe. But one still has to name the inventor on European patent applications, which leads to an interesting question. Would the robot’s central processor be listed as the inventor? If so, it might need to be identified by serial number and where it resides. Interesting possibilities.

If a robot were to be or become an “inventor” under the laws of the U.S. or Europe it would seem that the owner or lessee of the robot would probably be the owner of the “invention” rather as employers are generally the owners of employees’ inventions. However, owners or lessees of such robots should do something akin to what employers do with employees: still get solid written contracts from the developers of the robots to make sure robot inventions are owned by the owner or lessee.

One final thought: we might someday ask whether a robot that gains true “cognition” or self awareness should be considered a “person.”  That day seems a long way off and perhaps a bit too much for any court to decide now. But that day may be coming sooner than we expect.

Today’s post is by Guest Baristas Robert Stevenson, Esq., Joseph Murphy, PhD, Esq., and Thomas Clare, Technical Advisor, all of Philadelphia intellectual property law firm Caesar, Rivise, Bernstein, Cohen & Pokotilow, Ltd.

After seeing the Senate Judiciary Committee vote to approve Senate bill S.515, the Patent Reform Act of 2009 (Leahy, Hatch, Schumer, Whitehouse), you have to wonder why compromise couldn’t have arrived earlier — and with fewer campaign donations.

But, preliminary reactions seem hopeful:

Innovation Alliance

The Innovation Alliance, a coalition of companies seeking to enhance America’s innovation environment by improving the quality of patents and protecting the integrity of the U.S. patent system, gave mixed reviews to the Patent Reform Act of 2009 (S.515), as approved today by a divided Senate Judiciary Committee:

“We are encouraged that the Committee has expressed a desire to continue working to achieve a true consensus,” said Brian Pomper, Innovation Alliance executive director. “This is welcome news, as we believe the post-grant review provisions approved today threaten to diminish the value and enforceability of U.S. patent rights at a time when America’s economic recovery and future job creation are dependent upon promoting U.S. innovation.”

Pomper noted that the post-grant review provisions of S.515 would create multiple avenues for challenging a patent’s validity without any meaningful protections to prevent abusive or serial attacks.  As a result, U.S. patent holders will spend precious time and resources defending their innovations against challengers, including foreign competitors, with much reduced odds of succeeding.  Small innovators will find it particularly difficult to defend their rights against larger and better-financed challengers, who could mount post-grant challenges for purely competitive reasons against perfectly valid patents.

Coalition for 21st Century Patent Reform

The Coalition for 21st Century Patent Reform sent their letter to the Senate Judiciary Committee in support of compromise patent reform legislation introduced in today’s mark up.

Our Coalition appreciates and recognizes the focus and hard work by Senators and their staff over the past several weeks that led to the reporting of the bill by the Committee. The compromise package, together with the other critical provisions of the bill, should improve the U.S. patent system.

With today’s vote, the 111th Congress has set a course that will foster American innovation and employment by ensuring the patent system is fair, balanced and promotes research and innovation.”

Biotechnology Industry Organization

The Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood issued a statement regarding a consensus agreement on patent reform legislation which was approved by the U.S Senate Judiciary Committee:

“BIO commends the Senate Judiciary Committee for its success in developing a more consensus-oriented approach to patent reform legislation – one that makes encouraging progress toward reforms that will help strengthen and improve our nation’s patent system.  Thanks to the leadership of Chairman Patrick Leahy (D-VT) and Senators Dianne Feinstein (D-CA) and Arlen Specter (R-PA), we are optimistic that we will now see meaningful patent reform that preserves the incentives necessary to sustain America’s global leadership in innovation and spurs the creation of high-wage, high-value jobs in our nation’s innovation economy.

“We greatly appreciate the tireless efforts of Senators Leahy, Feinstein and Specter to craft careful compromises on several key issues, including damages and post-grant review.  While no compromise is ever perfect, we believe the Committee’s product breaks the logjam on the major issues that have held up patent reform for the past several Congresses and will clear the path for a bill to be completed without undue delay.

The Senate Judiciary Committee voted to approve a patent reform bill, despite opposition from Sen. Orrin Hatch. This will send the bill to the Senate for a vote after including amendments. The Senate Judiciary Committee held an Executive Business Meeting to consider S.515, the Patent Reform Act of 2009 (Leahy, Hatch, Schumer, Whitehouse).  The legislation   is set to pick up where patent-reform efforts left off last year.

Hatch, a sponsor of the bill, said he could not support the amendment to the bill. Hatch and Sen. Patrick Leahy, chair of the committee and a chief sponsor of the bill, preferred the original language, which would have changed damages from total market value of the product to “a reasonable royalty.”

Hatch: I am afraid that the bill, as currently written, has the very real potential to undermine the stimulatory affects of not only our patent system but those abroad. As many of you know, I have been the strongest and longest advocate for reforming our patent system. We desperately need to streamline the process to spur growth in American innovation and keep our competitive edge. But, I cannot support a bill that I know does not improve the status quo.

Now, the way only Congress can punt on tough issues, the bill requires judges hearing patent infringement cases to play a “gatekeeper” role — sought by Senators Feinstein and Specter — to just figure out in some Kreskin-like way the appropriate damages by deciding if a patent that was infringed is crucial to the final product or bit player in the final scheme.

Other changes would tighten interlocutory appeals by requiring district courts to certify that specific standards have been met, and would create a pilot program to hire law clerks devoted to working on patent cases and provide funding for training in patent law. The agreement calls for the pilot program to run in at least six district courts from at least three different federal circuits.

Unfortunately, it may leave lots of people unsatisfied:

Feingold: Great strides toward a bill I can support have been made. Although it is difficult to tell how well drafted the new damages provision is since experts have not had much time to review and analyze it, the intent seems positive. I am pleased that the much more sweeping and untested damages provision from last year’s bill was abandoned. The modest changes in this bill are much less likely to severely undercompensate patent holders who prove their patents have been infringed, thus devaluing their intellectual property. Similarly, I am pleased that the venue provisions were modified to simply codify a recent Federal Circuit opinion that makes forum shopping more difficult while not preventing patent holders from having an infringement action heard in their own jurisdictions.

It is in the area of post-grant review that I remain deeply concerned about the impact of this bill. Simply put, even as amended, S. 515 still threatens to reduce the value and enforceability of U.S. patents. The reduction in value will most likely be felt by individual inventors, start-ups and small businesses, and research universities. These are the entities that don’t have the resources to mount a continual defense of their patents against repeated requests for inter partes reexamination that the bill allows. I hope that further work on these provisions can be done because as it stands the bill makes it too easy for would-be infringers to attack a patent, or make it too expensive to defend.

I was unable to pay attention for every minute of the Committee webcast but, if you really want a blow-by-blow account, see additional coverage at IP Watchdog.

Amendment to Damages Section:

(a) IN GENERAL.

(1) COMPENSATORY DAMAGES AUTHORIZED. Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

(2) USE OF EXPERTS PERMITTED. The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

(b) PROCEDURE FOR DETERMINING DAMAGES.

(1) IN GENERAL. The court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.

(2) DISCLOSURE OF CLAIMS. By no later than the entry of the final pretrial order, unless otherwise ordered by the court, the parties shall state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages under this section, specifying the relevant underlying legal and factual bases for their assertions.

(3) SUFFICIENCY OF EVIDENCE. Prior to the introduction of any evidence concerning the determination of damages, upon motion of either party or sua sponte, the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis. After providing a nonmovant the opportunity to be heard, and after any further proffer of evidence, briefing, or argument that the court may deem appropriate, the court shall identify on the record those methodologies and factors as to which there is a legally sufficient evidentiary basis, and the court or jury shall consider only those methodologies and factors in making the determination of damages under this section. The court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.