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Big tech companies accused of overstating patent problems

Coalition including Intel and Microsoft is arguably winning over Congress on revamping U.S. patent law, but other industries and small-time inventors will suffer, attorneys say.

Editor's note: This story was updated at 3:25 p.m. PDT to add a response from the Coalition for Patent Fairness, which represents large software, hardware, and Internet companies. ARLINGTON, Va.--A handful of patent lawyers on Friday beat up on large technology companies lobbying for a U.S. patent system revamp, arguing that their efforts could discourage start-ups, prompt foreign competitors to rip off inventions, and tear apart the economy more generally.

There weren't any Silicon Valley interests directly represented during this panel discussion at a conference here hosted by the American Bar Association's intellectual-property law section. Perhaps unsurprisingly, the views expressed by the four attorneys largely mirrored the negative outlook on proposed congressional patent bills adopted by the industries they tend to represent--namely biotechnology, universities, small inventors, and patent-licensing firms.

"I think there are some valid concerns out there, but the response is swinging the pendulum way too far in favor of big industry and potential infringers," said Richard Meyer, who represents mainly biotechnology and life sciences companies as head of East Coast patent litigation for the law firm Townsend and Townsend and Crew in Washington. "It seems Congress has bought into the characterization of the problem by a few very big IT industry players."

The debate over patent system changes that has been raging for several years now largely pits a coalition of major Internet and technology companies--including Microsoft, Google, Hewlett-Packard, Intel,, eBay, Oracle, Dell, and Comcast--against seemingly every other industry that relies on patents.

The technology companies argue that the current patent system is "broken," resulting in issuance of questionable patents and equally questionable settlements, and that legal changes are needed to fix those problems. Their opponents acknowledge that some aspects of the system could be refined but contend that less drastic changes are necessary.

There was some disagreement among the lawyers present Friday, however, over whether there is a problem with "overaggressive" patent holders who decide not to commercialize their technology, instead asserting their patents against large companies--a practice that has earned the disparaging moniker of "patent troll."

"It's the Intels, the Microsofts, that are frustrated that people are asserting patents against them--as long as you're Intel, and somebody sues you, that's overassertion," said Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation, which handles the University of Wisconsin's patent portfolio, consisting of about 700 license agreements that bring in $50 million in revenue annually.

"There really is no empirical data to prove the Patent Office is letting through a lot of weak patents these days," said Brady Fulton, a patent attorney with the Chicago law firm Niro, Scavone, Haller, and Niro. "We can't rely on anecdotal evidence to make these sort of broad, sweeping's unfair to the inventors, and it's unfair to the examiners who worked on these things and put hours of their lives into them."

Fulton's firm, among other clients, has represented a company called Advanced Audio Devices that in 2005 reached a settlement with Apple over claims related to its iPod music player.

Meyer, however, said he has witnessed firsthand some merit to arguments that patents are being overasserted. He suggested that the system could be improved by "ratcheting down" the presumption in such court cases that a patent is valid in the first place.

The discussion arrived as the Senate is preparing to take up its own version of patent law changes as soon as this month. Last September, the House of Representatives passed a sweeping bill that was hailed by large high-tech companies as a victory for inventors and consumers alike.

Arguably the biggest remaining sticking point in both bills is, not surprisingly, closely related to money. High-tech companies want to change the system so that judges are encouraged to base patent damage awards on the value that the allegedly infringed patent has contributed to a product. That's a reaction to the fact that their products often contain thousands of patented items, which they argue has led to inflated settlements brought on by so-called "patent trolls" and damage payouts. But opponents of that plan say such a route would dilute the value of their inventions and deprive them of the revenue they deserve.

There was much talk among the lawyers on Friday about the perceived imbalance between deep-pocketed corporations and smaller inventors. According to figures from Nathan Myrvold, who runs a patent-licensing firm called Intellectual Ventures, small companies, individual inventors, universities, and other research institutions hold 60 percent of patents, while large companies charging for patent reform own 40 percent of them. But large companies derive 99 percent of the licensing revenues.

Moses Mares, an in-house attorney for the controversial patent-licensing firm Acacia Technologies, said the current patent fight in Congress is nothing more than a campaign to raise the big corporations' share to 100 percent, which he argued could have serious consequences for small innovators. (For the record, some have accused Acacia of "troll" behavior for amassing and filing infringement lawsuits against major corporations over a giant portfolio of technology-related patents in recent years.)

"We might end up turning ourselves into where China is today, which is just a bunch of manufacturing companies without a lot of innovation, because there's no reward to innovate," said Mares, who previously worked as an engineer for Intel and IBM. "Venture capitalists will not invest in companies that can't get patents and exclude competition."

Regardless of whether patent law changes take place, some lawyers on the panel argued that recent Supreme Court decisions, such as those in cases involving eBay and an automobile parts patent holder named KSR, are already making it harder for patent holders with smaller bank accounts to enforce their patents.

"If you're a pro-patent person, we're in the middle of a perfect storm," said Wisconsin's Gulbrandsen. "Courts are listening to complaints of pro-reform forces."

Update at 3:25 p.m. PDT: The Coalition for Patent Reform, which represents the interests of high-tech companies, sent a statement to CNET saying its members applaud Sen. Patrick Leahy (D-Vt.), one of the sponsors of the Senate bill, for remaining firm on the issue of patent infringement damages. They also praised Leahy and bill co-sponsor Orrin Hatch (R-Utah) for recognizing the need for a proposal that "modernizes the law to accommodate those changes, while protecting intellectual property rights and correcting inequities in current law."

In a statement, Mark Isakowitz, the group's coordinator, said, "We are disappointed that critics of the bill refuse to budge an inch when the bill's sponsors and supporters have made a tremendous number of compromises to address their concerns."