Congress takes new stab at patent system overhaul

Key politicians vow to pass bill that's drawing rave reviews from high-tech firms but resistance from other quarters.

Anne Broache Staff Writer, CNET News.com
Anne Broache
covers Capitol Hill goings-on and technology policy from Washington, D.C.
Anne Broache
5 min read
WASHINGTON--Politicians from both parties of the U.S. Congress on Wednesday unveiled a new proposal designed to make the most sweeping changes to the nation's patent system in decades.

The latest attempt at a so-called Patent Reform Act borrows many ideas from earlier versions that died before votes, thanks in part to disagreements among various sectors--including high-tech companies, the pharmaceutical industry, venture capitalists and independent inventors--about the extent to which the system needs fixing.

The lead sponsors of the bill, all chairmen of key committees dealing with intellectual property issues, vowed at an afternoon press conference that this year would be different. For starters, they said, this year's proposal is more likely to succeed because politicians attempted to approach the issue in a more unified way: A handful of co-sponsors from both parties have already signed on, and identical bills were scheduled to be introduced simultaneously in both the House of Representatives and the Senate.

The bill's backers said they would push for the measure, subject to minor adjustments, to pass both chambers and be signed into law within the next few months. One hearing has already been scheduled for next Thursday in the House's intellectual property panel, said Rep. Howard Berman (D-Calif.), the panel's chairman.

It's high time to enact new legislation because existing patent laws were "crafted for an earlier time, when smokestacks rather than microchips were the emblems of industry," Sen. Patrick Leahy (D-Vt.), one of the Senate bill's chief sponsors along with Sen. Orrin Hatch (R-Utah), told reporters.

Supporters said the bill would improve the patent system by putting in place mechanisms aimed at weeding out bad or obvious patents, imposing new limits on monetary damages awarded in infringement lawsuits, and setting up an alternative to litigation.

Like earlier efforts, the bill also attempts to bring the U.S. patent system in line with those of foreign countries by shifting to a system that grants patents to the first person to file for them, as opposed to the current "first to invent" standard, which critics argue is hard to prove. The bill lays out a process for contesting a patent applicant's entitlement to that protection.

The new bill "is going to help individuals and businesses across the spectrum," from garage inventors to large high-tech companies and everyone in between, said Rep. Lamar Smith (R-Texas), who co-sponsored the House version along with Reps. Howard Berman (D-Calif.), Rick Boucher (D-Va.) and others.

A long list of large hardware and software makers and Internet companies--including Amazon.com, Microsoft, Cisco Systems, Intel, Oracle and Symantec--were quick to rave about the bill's approach.

IBM Senior Vice President John Kelly said the effort "will help maintain our country's innovation leadership, reduce excessive litigation and damages awards, and improve patent quality." Big Blue has amassed the largest quantity of patents of any U.S. patent filer each year for 14 years running.

The joint bill appears to address several complaints about the patent system lodged by the high-tech industry in recent years.

One chief gripe is that the current system allows for winners of patent infringement suits to obtain disproportionately high sums of court damages. Microsoft, for instance, was ordered by a federal jury earlier this year to pay more than $1.5 billion to Lucent Technologies in a dispute over MP3 audio technology patents used in Windows. That amount was derived from the number of Windows PCs sold since May 2003.

The new bill attempts to answer that complaint by rewriting the law to dictate that courts may generally only award damages based on the patent's "specific contribution over the prior art"--that is, the extent to which the patent at issue improves on previous inventions. The bill would also raise the bar for when patent infringement is considered "willful"--a determination that results in tripling the damage award.

Much like several of its predecessors, the bill would allow patents to be challenged within a year of their issuance through a special "post-grant review" process, consisting of a special board within the Patent Office, in an effort to substitute for expensive and time-consuming court litigation. It would also restrict the scope of the court districts in which patent infringement cases could be filed--arguably a direct response to widespread reports that certain federal district courts, particularly one in eastern Texas, provide more favorable treatment to patent holders.

In an attempt to aid patent examiners trying to determine whether applications for new patents are obvious, the bill would also direct the Patent Office to set up a system by which third parties can submit prior art, although that's not a new idea. The Community Patent Review--partnered with the Patent Office and organized by the New York Law School and companies like Red Hat, IBM and Microsoft--plans to launch a yearlong pilot project with a similar aim in June.

Support for the bill from some of Silicon Valley's biggest players may not be a guarantee of the bill's success. A pronounced rift over how far patent system changes should go persists among high-tech companies, independent inventors and venture capital firms, and the powerful pharmaceutical lobby.

The new bill received a more lukewarm response from a group called the Coalition for 21st Century Patent Reform, whose members include corporate giants 3M, Caterpillar, General Electric, Johnson & Johnson, Eli Lilly and Procter & Gamble. The coalition said it was pleased to see the first-to-invent provision, but Procter & Gamble Vice President Steven Miller said he was concerned that the bill omitted "several critical reforms."

A coalition spokesman said he was concerned, among other things, that the new way of calculating damages suggested by the bill would not adequately compensate owners of infringed patents.

And venture capital firms have already voiced resistance to several ideas supported by high-tech companies, such as the post-grant review process, which they claim would inject uncertainty into the validity of their patents and make it tougher to attract investors.

Politicians behind the new effort admitted they expected to receive some opposition to the current draft, but they promised to press on, making slight changes to the language if necessary. "Now, more than ever, it is important to ensure efficiency and increased quality in the issuance of patents," Hatch told reporters, "and this bill does that."