Congress resumed its long-running patent reform debate March 10 with the
usual intractable foes lining up for and against the primary sticking point in legislation introduced March 3:
damages. High-tech companies want the damages formula in patent infringement
lawsuits gutted; traditional manufacturing and pharmaceutical firms like it
just the way it is.
Bills introduced in both the House and Senate would more narrowly define
willful infringement, determining infringement damages in relation to the
economic value of the patent's contribution to an overall product. Currently,
infringement damages are based on the entire value of the product.
Reducing damages rank as a top priority for many of the country's tech firms.
As David J. Kappos, IBM's vice president and
assistant general counsel, explained to the Senate Judiciary Committee, "Innovation
today is characterized by diverse forms of collaboration, multidisciplinary
problem solving, interconnected technologies and complex products involving
multiple inventions. The patent system must adapt to these changes."
Kappos told lawmakers patent litigation has significantly increased over the
last decade and that if it continues, "This excessive litigation threatens
to sap America's
innovative capacity and its ability to compete in the world if left
unaddressed."
Kappos' claim of increasing litigation was challenged by Philip S. Johnson,
chief intellectual property counsel at Johnson & Johnson. According to
Johnson, of the approximately 2,700 patent lawsuits filed annually in the United
States, fewer than five result in verdicts
of more than $100 million, and most of those do not survive post-judgment
review and appeal.
"A prime example is the Alcatel-Lucent vs. Microsoft verdict of $1.5
billion that was touted in the last Congress as the reason for patent damages
reform, even though it was later promptly and finally vacated," Johnson
said. "Critics from some large technology companies nonetheless contend
that damages reform is needed because their fears that erratic or spurious
awards will be granted cause them to settle their cases at higher amounts than
are fair."
Johnson added that tech's excessive damages claims are "hard to vet, as
settlement terms are normally private, and entered at a fraction of the damages
that would be assessed were the case to proceed to judgment."
Congress has heard all of this before. In the 110th Congress, the House approved patent reform,
but the legislation never gained traction in the Senate. The House vote came
after six years of debate and more than 20 hearings, most of them covering the
same material as the March 10 testimony before the Senate Judiciary Committee.
"Our bill is intended to establish a more efficient and streamlined patent
system that will improve patent quality and limit unnecessary and
counterproductive litigation costs, while making sure no party's access to
court is denied," bill sponsor Sen. Patrick Leahy, the Vermont Democrat who
heads the Judiciary panel, said in his opening remarks. "There is much work
to do, but I am optimistic that by continuing to work together, we will find
the right language. We may be closer to reaching consensus on language
regarding damages and venue than ever before."
In addition to limiting damages, the bill would also create a post-grant review
to challenge issued patents, call for a first-to-file system and grant broader
rulemaking authority to the USPTO (U.S. Patent and Trademark Office).
Sen. Orrin Hatch, R-Utah, co-sponsored the bill with
Leahy. Hatch said he hoped the third time would be the charm for patent reform.
"Today's introduction signals the third and what I
hope will be the final round. If we are to continue to lead the globe in
innovation and production, we must have an efficient and streamlined patent system,"
Hatch said. "For those who might say nothing has changed, I can attest
that it has. Just look at the bill. We have listened to many of the concerns
raised by stakeholders and have changed the legislative text accordingly."
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