House OKs revamp of patent system

Congress takes major step toward changes long sought by big tech companies. But there's no guarantee that proposal will become law.

WASHINGTON--In a move long sought by large technology companies like Microsoft, Oracle and Cisco Systems, the U.S. House of Representatives on Friday approved the most significant changes to the U.S. patent system in more than 50 years.

By a 220-to-175 vote, the House endorsed an amended version of the Patent Reform Act, which has been in the works in various forms for several years but previously was stalled amid lingering disagreements among disparate companies.

The vote and the tenor of the preceding debate were not strictly partisan, reflecting the issue's complexity: 60 Republicans joined the 160 Democrats who approved the bill, while 58 Democrats joined the 117 Republicans rejecting it.

The House action, however, is no surefire indicator that the bill will become law this year. The Senate still has to act on its own related but not-identical version, and it wasn't immediately clear when that vote would happen. (The Senate has been known to pass by bills that the House has already approved, as with last year's that stalled, in part over Net neutrality divisions.) And with lingering Bush administration objections to the bill, protracted negotiations may have to occur before any changes become the law of the land.

Supporters of the bill--including a number of large high-tech companies, the financial-services industry and leading consumer public-interest groups--view it as a critical step in fixing what they believe is a "broken" U.S. patent system. They claim that the current system invites rampant litigation and abuse, encourages excessive damage awards in infringement cases, produces questionable patents and is not in line, procedurally, with foreign systems.

"(The bill) is not intended to favor the interests of one group over another. It does correct glaring inequities that encourage individuals to be less innovative and more litigious."
--Rep. Lamar Smith, R-Texas

"The legislation does what is best for America, and our spirit of inventiveness and innovation," said Rep. Howard Berman (D-Calif.), chairman of a House intellectual-property panel and the bill's chief sponsor.

The vote prompted an avalanche of laudatory statements from major Washington-based technology trade associations--including the Software & Information Industry Association, the Business Software Alliance, the Computer & Communications Industry Association and the Computing Technology Industry Association--which said the move would make their member companies more competitive.

The measure's passage was not without controversy. It followed about three hours of debate, in which a handful of politicians from both parties railed against both the bill itself and the procedure for its consideration.

Opponents criticized the bill's sponsors for allowing too little time for discussion and too few amendments to the bill on the House floor. They alternately referred to process as a "nightmare," a "horror story" and a "power play" by wealthy technology companies. Rep. Dana Rohrabacher (R-Calif.), who led much of the floor rhetoric opposing the bill, dubbed it the "Steal American Technologies Act."

Rep. Marcy Kaptur (D-Ohio) said: "I'm opposed to this bill because it gives too much power to the big technology transnational companies." She claimed that the major pro-patent bill lobbying coalition--backed by the likes of Adobe Systems, Microsoft, Cisco Systems, Intel, eBay, Lenovo, Dell and Oracle--seeks an easy fix to the billions of patent damage awards they've been ordered to pay in recent years without changing "their obviously unfair and illegal business practices."

Reservations also linger from the Bush administration and from groups like the Innovation Alliance, which represents Qualcomm and a number of smaller companies that depend on licensing technology, as well as from The Coalition for 21st Century Patent Reform, composed of about 40 large companies, including 3M, Bristol-Myers Squibb, Caterpillar, Eli Lilly, Johnson & Johnson, Motorola, Procter & Gamble, PepsiCo, Pfizer and Texas Instruments.

Rep. Lamar Smith (R-Texas), one of the bill's primary sponsors, said the effort "is not intended to favor the interests of one group over another. It does correct glaring inequities that encourage individuals to be less innovative and more litigious."

Arguably the biggest remaining sticking point concerns how damages are awarded to patent holders who win infringement cases. Right now, the bill says courts must generally consider only the value the patent in question brought to the product when calculating damages--unless the patent holder can show that the particular patent was the "predominant" reason for the product's market demand.

Opponents, which tend to offer products that depend on one major patent, contend that those changes take away the flexibility that courts currently enjoy in awarding damages in a way that unduly favors patent infringers. Allowing such a legal change to take hold would water down the fundamental rights of patent holders and harm their business models, they argue.

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