Patent Reform Hits Congress

Technology companies and trade groups rushed to praise patent reform legislation introduced in both the U.S. House and Senate March 3. One of the top items on the tech industry's agenda, patent reform has failed in the last two Congresses and opponents to reform from biotech companies to big pharmaceutical companies to small inventors are expected to again strongly challenge the legislation.

The bills would more narrowly define willful infringement, determine infringement damages in relation to the economic value of the patent's contribution to an overall product and create a post-grant review to challenge issued patents. The legislation also calls for a first-to-file system and grants broader rulemaking authority to the USPTO (U.S. Patent and Trademark Office).

"This bill will 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," Vermont Democrat Sen. Patrick Leahy, bill sponsor and chairman of the Senate Judiciary Committee, said in a statement. "Patent reform is ultimately about economic development. It is about jobs, it is about innovation and it is about consumers."

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."

In the House, Judiciary Committee Chairman John Conyers, D-Mich., and ranking member Lamar Smith, R-Texas, are the sponsors of the patent reform legislation. Conyers said the bill would be "among the most important things that we will work on, as our economic future is dependent on our ability to innovate."

Smith added, "We cannot expect individuals or companies to drive innovation without protecting the creative ideas that generate profit."

Leahy said the legislation differs from former failed attempts at patent reform by removing the requirement that all patent applications be published 18 months after they are filed and removing the requirement for applicant quality submissions. The most controversial element of previous patent reform bills-damages-remains unchanged. The Patent Reform Act of 2009 limits damages to the actual value of the infringed technology, not the entire product containing the contested patent.

"As one of the nation's largest patent holders-HP is on average granted four U.S. patents every day-HP is a constant target of frivolous patent lawsuits," Michael J. Holston, Hewlett-Packard general counsel and executive vice president, said in a statement. "These lawsuits force HP to divert resources away from innovation and product development, leading to reduced economic benefits from invention. Reforming the patent system will reduce costly litigation and free up valuable resources for research and development."

CCIA (Computer & Communications Industry Association) President and CEO Ed Black added, "Balanced patent reform is needed so there are incentives for inventors to innovate, yet there is also the ability for others to come along and build on previous inventions to create even newer innovations. This give and take is critical for a balanced, growing economy. We look forward to improved patent quality and provisions that would provide a cost-effective alternative to litigation."

The Coalition for 21st Century Patent Reform, though, predicted that several provisions of the legislation-specifically, provisions designed to reduce damages-will not have enough support in Congress to allow the bill to pass.

"The damages methodology in this bill heavily favors infringers over inventors. At a time when we need to stimulate our innovation and aid U.S. manufacturers, this bill sends an international signal that patented American technology can be copied with little or no consequence," Gary Griswold, chairman of the coalition, said in a statement. "We will erode our global leadership in research and invention if we eviscerate this cornerstone of our patent system."

Hatch admitted that "more work needs to be done on the damages and inequitable-conduct provisions."

In the 110th Congress, the House approved patent reform but the legislation never gained traction in the Senate. Leahy said his Judiciary Committee has scheduled a hearing March 10 on the new legislation.