US Senate Moves Toward Vote On Reform To Patent Regime 18/03/2008 by Dugie Standeford for Intellectual Property Watch 5 Comments Share this Story:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Google+ (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) IP-Watch is a non-profit independent news service and depends on subscriptions. To access all of our content, please subscribe here. You may also offer additional support with your subscription, or donate. By Dugie Standeford for Intellectual Property Watch Legislation for sweeping patent reform in the United States could see Senate floor action as soon as early April. Majority Leader Harry Reid, Democrat-Nevada, said the congressional body could consider S 1145 next month but the Senate Judiciary Committee has not been given a firm date, a committee aide said. With a vote looming – and several hot issues unresolved – lobbying efforts are ratcheting up. S 1145 is the companion to HR 1908, the Patent Reform Act of 2007, which passed the House of Representatives last September (IPW, US Policy, 9 September 2007). The Senate version cleared the Senate Judiciary Committee last July but has stalled for months over several controversial provisions, one of which, relating to damages in infringement cases, drew opposition from the Bush administration as well as from powerful industry sectors (IPW, US Policy, 6 February 2008). Recent weeks have seen a flurry of letters from various groups for and against the measure, as well as a request from 15 House members for a hearing on its international implications if it wins Senate approval. On 12 March, committee members circulated over a dozen amendments likely to be offered during the debate, the aide said. However, she said, amendments on the “big four” issues – damages, venue, post-grant review and inequitable conduct – are expected later. Damage Calculation Squabbles Continue The issue of how to assess damages for patent infringement continues to spur disagreement. The current language allows damages of “no less than a reasonable royalty” calculated on either the entire market value of an invention, an established royalty based on marketplace licensing, or on the proportional contribution of a patented component. Judges and juries must establish an invention’s “specific contribution over prior art” in gauging the actual harm of an infringement. In a 5 March letter to Senate Judiciary Committee leaders, the Patent for Coalition Fairness and the Financial Services Roundtable, representing the telecommunications, energy, banking, retail, financial services, computer, software, and cable sectors, said the current language on damage calculation is correct but needs clarification. The organisations proposed basing damages on the economic value of an infringing product attributable to the infringer’s use of the elements that were novel and non-obvious when the patent application was submitted, rather than on the committee’s proposal to set damages based on an invention’s specific contribution over prior art. The groups also criticised the lack of guidance juries are given to set damages, and the inadequate information judges have on how to gauge reasonable royalties. The next day, the Innovation Alliance, whose members are technology companies and patent holders in various sectors, called the proposal “anything but a compromise.” The coalition language is unpalatable to the “entire rest of the patent stakeholder community,” the alliance said, because it seeks to minimise the value of new technology by forcing judges and juries to ignore the context and contribution new inventions make to existing products, fundamentally altering the nature of damages law. Last month, 14 major trade unions said they oppose the damages provision, among others. The Coalition for 21st Century Patent Reform, whose members include pharmaceutical and chemical corporations, called the use of the phrases “novel” and “non-obvious”, and value properly attributable to the patent’s specific contribution over the period art, “toxic language that should not be used in any compromise.” The Professional Inventors Association, which consists of independent inventors, small-to-mid-sized companies and colleges and universities, is on record opposing the use of the economic contribution over prior art test, saying royalties should be determined on a case-by-case basis. International Impact? Complaints by some developing nations and trading partners about US patent reform efforts prompted several lawmakers to ask the House leadership for a hearing on the measure’s global implications. In their 5 March letter, lawmakers noted criticism by Chinese IP scholar Yongshun Cheng, who said the House bill was bad news for Chinese products, though not for developing countries with less technological development and relatively fewer patents. Chinese inventions often “encounter trouble in the US market” due to their weak foundation, Cheng wrote. By making patent challenges easier and cutting the cost of infringement, the legislation will make infringement more attractive, he said. The measure “apparently contradicts the long term stance the US has been holding to press China for strengthening IP protection,” Cheng wrote. He also “ominously” suggested, lawmakers said, that when China enacts new changes to its patent law, it consider combining Chinese practical experience with the patent infringement damages calculation method proposed in the US legislation. In January, German patent expert Professor Gernot Pehnelt, research associate at the European Centre for International Political Economy, said US patent reform efforts threaten to “undermine German innovation,” legislators wrote. Pehnelt recommended that Congress “think twice” before “fixing” a patent system that is already the envy of the world, lawmakers said. If S 1145 passes the Senate, they said, the House should hold at least one hearing to consider its global implications before taking any further action. Patent reform will also have a “profound effect” in Israel, which is second only to Silicon Valley (in California) in driving innovation, technology consultant Bernard Frieder wrote in the 20 February Jerusalem Post. Proposals to allow patent challenges during the course of a patent’s life would mean “no closure,” Frieder said. New methods of setting damages would reduce compensation for those whose patents are violated and allow “deep-pocket” challengers to wear down smaller entrepreneurial companies. Israelis “ignore the bill’s implications at our peril,” he said. Bill’s Fate Still Unknown With Congress in recess until after Easter, work on S 1145 continues. Many senators still have concerns, said an industry source working closely on the legislation. The amendments in circulation are not the core issues, but are an attempt to move the measure closer to the House version, the source said. With damages, post-grant relief, venue and other hot issues still in play, it is “a bit of an unknown,” the source said. But claims that patent reform is dead this year are overblown, the industry source said. Many people have put a great deal of effort into the bill, and there is likely to be a “real hard push” to get something done, the source said. Even the question of whether the legislation will be subject to cloture – a process to limit debate that requires 60 affirmative votes – is up in the air, the Judiciary Committee aide said. “Once we see what all the amendments will be, how they address various concerns across the spectrum, and when the bill actually comes up for consideration, we can better gauge whether cloture will be filed and where the votes will fall if it is,” she said. Dugie Standeford may be reached at firstname.lastname@example.org. 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