Patent reform moved closer to reality April 2 as the Senate Judiciary Committee voted 15-4 for a compromise bill that seeks to bridge the longstanding dispute between technology companies and the pharmaceutical industry over patent infringement damages.
Through six years of debate in the Senate and the House of Representatives, high-tech firms have fought to more narrowly define willful infringement damage rewards while big pharma and traditional manufacturing companies urged Congress to keep the infringement formula intact, fearing diluted damages would hurt the value of their patent portfolios.
Judiciary Chairman Patrick Leahy (D-Vt.) and ranking member Orrin Hatch (R-Utah) knitted together a compromise: empowering judges to serve as gateways for damage determinations in their instructions to juries.
"The agreement this committee has reached to move forward with patent reform is the culmination of months of arduous negotiations and compromise ... working together, we can make the necessary, long-overdue improvements our patent reform system requires," Leahy said. "I thank everybody. The bill will go to the floor."
In the 110th Congress, the House approved patent reform favored by tech that would limit damages in relation to the economic value of the patent's contribution to an overall product, but the legislation never gained traction in the Senate. Currently, infringement damages are based on the entire value of the product. Legislation similar to Leahy and Hatch's bill is pending in the House.
"As the legislation moves forward, we urge the chairman and members of the Senate to resist efforts to weaken the bill," Robert Holleyman, president and CEO of the Business Software Alliance, said in a statement. "The committee vote today is an important step. Patent reform is indispensable to U.S. job creation, innovation and leadership in the global economy; and America's economy needs an effective and meaningful update of the patent law."
The Software & Information Industry Association also praised the Judiciary Committee's action.
"SIIA is especially pleased that the bill makes changes that begin to clarify the vague and uncertain rules for calculating damages, and to establish procedures for enhancing the quality of patents issued by the U.S. Patent and Trademark Office," the trade group said in a statement.
As a measure of the compromise nature of the bill, the Biotechnology Industry Organization even had warm words for the legislation.
"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," BIO President and CEO Jim Greenwood said in a statement.
When it was all said and done, though, Hatch was unhappy with the bill he co-sponsored and walked out of the hearing room in a huff. Hatch had sought to have a provision added to the bill to make it more difficult for the Patent Office to revoke patents based on application errors. He didn't get it.
"My primary purpose for doing this bill was to improve patent quality and limit unnecessary and counterproductive litigation costs. I do not believe the bill, in its current form, accomplishes these goals," Hatch said.
Horacio Gutierrez, Microsoft's corporate vice president and deputy general counsel, said the legislation may not have made everyone happy, including Microsoft, but nevertheless he praised the bill.
"As is necessary in any successful legislative initiative, the amended version of the bill reported by the Judiciary Committee reflects a compromise among the varying views of the members of the committee and among the very different perspectives expressed by stakeholders during the legislative process," Gutierrez said. "Together with administrative and judicial reform efforts, this legislation-if enacted-will help modernize the patent system in important respects and represents a significant step forward in efforts to bring balance and predictability to the outcomes in patent litigation cases."