Patent law changes power ahead in Congress

Sweeping changes to U.S. patent system have been approved by Senate and House committees. The high-tech industry is pleased, but others aren't.

The U.S. patent system transformation long sought by high-tech industry players like Microsoft, and Cisco Systems may finally be gaining momentum in Congress.

On Thursday evening, the Senate Judiciary Committee approved by a 13-5 vote an amended version of the Patent Reform Act of 2007. Supporters say the proposal would go a long way toward staving off expensive court litigation, limiting what are perceived as excessive damage awards, and keeping questionable patents off the books in the first place.

"We have reaffirmed our commitment to ensuring that our nation's patent laws promote and protect the inventiveness of all of our industries," Chairman Patrick Leahy (D-Vt.), who co-sponsored the bill with Sen. Orrin Hatch (R-Utah), said in a statement after the vote.

The Senate action followed incremental changes at earlier committee meetings and arrived just one day after a similar bill cleared the House Judiciary Committee by a unanimous voice vote.

The bills were identical when they were unveiled with some fanfare at a press conference back in April but are now slightly different, thanks to various amendments. Those inconsistencies will have to be reconciled if the full slate of House and Senate politicians ultimately approve the bills in floor votes.

The relatively swift action by both committees comes in sharp contrast to the direction of patent law debates in previous sessions of Congress. The last attempt at such massive overhauls sputtered and ultimately died over intense disagreements mostly arising from differences in how various industries incorporate patents in their business models.

Arguments for and against
Whether a single, unified patent bill will actually make it to the president's desk this time around still remains to be seen. Both proposals continue to face considerable resistance from a broad swath of companies, from major manufacturers (think General Electric, 3M and Procter & Gamble), pharmaceutical makers, biotechnology and nanotechnology companies, venture capitalists, some universities and research institutions, and companies like Qualcomm that rely heavily on licensing their patents.

"The bill will still erode, not strengthen, patent protections thereby dampening innovation and stifling entrepreneurship," a group called the Innovation Alliance said of the Senate bill's approval. The group, whose members include Qualcomm, Tessera and AmberWave Systems, voiced similar reservations about the House version.

Meanwhile, high-tech companies have applauded the bills' passage. They counter that the system has become skewed in favor of patent holders, spurring the rise of so-called "patent trolls" that exist solely to extort disproportionate damage awards or royalty payments out of deep-pocketed companies like theirs.

Enactment of the bills "is essential to future innovation and prosperity in America," Robert Holleyman, president of the Business Software Alliance, said in a statement Friday. BSA's members include Adobe Systems, Apple, Dell, Intel, Microsoft and IBM.

Both measures that passed this week share a number of core components, some of which have been the source of considerable controversy among the warring industries.

Addressing litigation tactics
Each bill would establish a "first to file" patent system, which all other foreign patent systems currently possess. Critics argue that the existing "first to invent" standard has posed problems because the identity of an inventor can be hard to prove. The bills lay out a process for contesting a patent applicant's entitlement to that protection under the new system.

They also call for creation of a "post-grant opposition" board within the U.S. Patent and Trademark Office that would serve as a replacement for what can be costly, time-consuming court challenges of newly issued patents. Conflicts remain, however, over the bills' approaches to how long outsiders should be able to use that process. High-tech companies have been advocating for few limits, while their opponents in the patent debate say unlimited windows for challenging patents could jeopardize their value.

Both bills also pay considerable attention to recurring gripes from the tech industry about the state of patent litigation. For instance, they would restrict acceptable venues for filing such suits in an attempt to prevent companies from shopping around for the most favorable courts.

Some of the thorniest debates over the bills have centered on how much money infringers should be forced to pay to patent holders. The high-tech industry has argued that because its products can rely on thousands of components, it's often inappropriate to be forced to pay damages based on the entire value of a product if only one piece is infringed. But opponents in other sectors, whose offerings often rely on fewer patents, argue such a policy could diminish the value of their inventions and deprive them of damages they are rightfully owed.

In an attempt to respond to those concerns, each bill would allow courts to award damages based solely on the "contribution" that the patent in question made to a product, unless the patent holder could show the patent was the "predominant" reason for the product's market demand. The bills also attempt to limit findings of "willful" infringement, which require violators to pay triple damages, by placing new obligations on patent holders to show the alleged infringers were aware they were copying the inventions.

Even if the measures do not ultimately move forward in Congress this year, some of the tech industry's concerns have already been addressed by U.S. Supreme Court decisions in the past two years. Most recently, the high court issued a ruling designed to loosen the requirements for determining that a patent is too "obvious"--and thus doesn't warrant protection.

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