White House opposes tech-backed patent bill

As the U.S. House of Representatives prepares to vote as soon as Friday on sweeping changes to the U.S. patent system, the Bush administration is registering its opposition to the high-tech industry-backed bill.

A policy statement by the Office of Management and Budget (PDF) sent to the House Rules Committee on Thursday argues that the Patent Reform Act of 2007 proposes a number of "unneccessary" changes to patent law.

The office's biggest beef seems to be a section that prescribes how courts should award damages to patent holders who prevail in infringement cases--a provision that has already become one of the bill's thorniest components.

Under the latest approved version of the bill, courts would generally be instructed to consider only the value the patent brought to the product when calculating damages--unless the patent holder can prove that the patent was the "predominant" reason for the product's market demand.

Large high-tech companies like Microsoft and Google support the damages provision. That's because they believe that the current system enables winners of patent infringement suits to obtain disproportionate damage awards--in turn, fueling inflated settlements and royalty agreements. Or as Google public-policy wonks put it in a blog entry earlier this week: "A windshield wiper found to an infringe a patent should not spur a damage award based on the value of the entire car."

The Bush administration argues that such an approach "would introduce new complications and risks reducing incentives to innovate."

It's not alone. Some pharmaceutical companies, biotechnology companies, universities, small inventors, venture capitalists and other patent-dependent manufacturers (think companies like 3M, General Electric and Procter & Gamble) also strongly oppose the bill's proposed changes, arguing that they would water down the fundamental rights of patent holders and harm their business models.

A group called the Innovation Alliance, which opposes the bill, argued in a statement (PDF) that a federal judge's recent reversal of a $1.52 billion jury verdict against Microsoft in a high-profile patent dispute with Alcatel-Lucent is evidence that existing law "provides courts with the right amount of flexibility in determining proper damage awards."

The bill isn't all bad, though, the Bush administration said. It supports the general idea behind a number of the provisions, such as allowing third parties to submit "prior art" that could help patent examiners decide whether an invention is truly novel and setting up an out-of-court process for challenging recently issued patents, though it called for some "technical" tweaks.

Meanwhile, preliminary debate over the ground rules for the patent bill's consideration began heating up on the House floor on Friday morning. A number of Republicans railed against a party line vote by the House Rules Committee on Thursday that calls for one hour of debate and a limited number of amendments. Several Republicans--even a few who said they planned to support final passage of the bill--said that's too restrictive and called for a more "open" set of rules for how the debate will proceed.

Rep. Howard Berman (D-Calif.), the bill's chief architect, attempted to assuage their concerns by saying he realizes that the bill still isn't perfect. "My commitment to everyone in this chamber is to recognize that there are still issues that need to be worked on, and we will be working to achieve the best possible balance," he said.

Update at 2:03 p.m. PDT: After a few hours of back-and-forth, the House went on to approve the Patent Reform Act by a 220-175 vote on Friday afternoon. Click here for the full CNET News.com story.