Commerce Dept. Slams Patent Reform Effort

The Bush administration strongly opposes a key provision involving damages in the patent reform legislation currently stalled in the U.S. Senate.

In a Feb. 4 letter to Senate Judiciary Committee Patrick Leahy, the Department of Commerce said the White House would continue to oppose the bill in its entirety unless changes are made.

The legislation is strongly supported by the technology industry. The bill narrows the definition of willful infringement and limits infringement damage awards to the actual value of the technology involved instead of the overall value of a completed product containing the technology.

“While well intentioned, we do not believe a convincing basis has been established to justify the significant changes to current law in the bill’s damages section,” Nathaniel Wienecke, assistant secretary for legislative and intergovernmental affairs at the Department of Commerce, wrote in the letter to Leahy and other committee members. “The administration believes that it is important to provide greater certainty in patent litigation and remains interested in exploring options that do so.”

According to Wienecke, the bill as currently written would undercut compensation for patent holders and would promote infringement.

“At a time when we are actively encouraging our foreign trading partners to strengthen their IP protection and enforcement systems, this legislation may send the opposite signal — that we intend to weaken aspects of our current law that deter infringement,” Wienecke wrote.

A coalition of party leaders from both sides of the aisle introduced The Patent Reform Act of 2007 to great fanfare in April. In July, the Senate Judiciary Committee approved the legislation and sent the bill to the full Senate, where it has gathered little more than dust.

After clearing the House Judiciary Committee, the full House approved the measure on a 220-175 vote.

In addition to the controversial damages clause, the legislation would also create a “second window” to challenge patents issued by the Patent and Trademark Office, and create a first-inventor-to-file system to replace the current first-to-invent standard, moving the United States closer to international standards.

“The administration believes that encouraging innovation within particular business models or technology sectors must not come at the expense of innovation in others,” Wienecke wrote. “Promoting an inflexible approach discourages more innovations and business models than it encourages.”

The biotech, manufacturing and pharmaceutical industries have joined the Bush administration in opposing the damages portion of the legislation.

“[The bill] prohibits excessive damage awards,” Rep. Bob Goodlatte, R-VA, said during the House floor debate. “Believe it or not, there is no current requirement that damage awards in patent cases be limited to the value the patent added to the overall product. The courts have created a virtual free-for-all in this area.”

Nevertheless, Goodlatte and other lawmakers admit the bill needs more work before it will win Senate approval.

“We admit this bill isn’t perfect,” Rep. Howard Berman, D-Calif., a co-author of the House legislation and chairman of the House Courts, Internet and Intellectual Property Subcommittee, said in September. “This is really complicated stuff. We will continue to work for compromise.”

Rep. John Conyers, D-Mich., chairman of the House Judiciary Committee, also called the bill a work in progress. “We made changes to accommodate the minority side and it won’t be final until we come out of conference [with the Senate].”