US Patent Reform Stalls as Senate Negotiations Break Down

By Dugie Standeford for Intellectual Property Watch
United States Senate negotiations on sweeping reform of the patent system foundered late last week as ongoing disputes over key provisions – and possible squabbling over confirmation of federal judges – resulted in S 1145 being pulled from the floor schedule for the time being.

“We are not going to do a patent bill now,” said Senate Majority Leader Harry Reid, Democrat- Arizona, because the chairman and ranking member of the Senate Judiciary Committee cannot agree on the text, he said on 10 April.

But while prospects for the bill’s immediate passage have dimmed, it is not yet dead, observers said.

Judiciary Committee Chairman Patrick Leahy, Democrat-Vermont, intended to announce that a revised version of the measure would be brought to the Senate floor this week, the Intellectual Property Owners Association reported last Friday. The plan derailed when Leahy failed to agree on several provisions with the panel’s ranking member (lead of the opposing party), Senator Arlen Specter, Republican-Pennsylvania.

“The principal sticking point is the issue of how to assess damages in patent infringement lawsuits,” Specter said on 9 April. The lawmakers thought they had reached agreement, but “the language continued to shift, so we do not yet have a deal on the package,” he added.

The current draft allows damages of “no less than a reasonable royalty” calculated on either the entire market value of the invention, an established royalty based on marketplace licensing, or the proportional contribution of a patented component. Judges and juries must establish an invention’s “specific contribution over prior art” to gauge the actual harm of an infringement. The provision is unpopular with some patent organisations, labour unions and others (IPW, US Policy, 18 March 2008).

Specter said later, as reflected by the Congressional Record, that some in the Republican Party want to hold up S 1145 to pressure Democrats to confirm several judicial nominations. A Democratic Judiciary Committee aide told Intellectual Property Watch that five were approved last week.

Specter’s earlier comments drew criticism from Leahy, who complained that “just a handful of words” had stalled work on a key piece of legislation. The time for patent reform is now, Leahy said. “Unfortunately, some have yet to fully grasp this fact.”

Industry Reaction Muted

Efforts to revamp the US patent system have split the biotechnology and high-tech industry sectors, with the former strongly opposed to many of the changes sought by the latter. Reaction to the stalemate was predictable but muted, with most groups saying they will continue to work toward comprehensive reform.

Leahy is “right to stand firm for meaningful reform” on damages, said Mark Isakowitz, coordinator for The Coalition on Patent Fairness, which represents telecommunications, energy, banking, retail, computer, software and other high-tech sectors. The bill’s sponsors and supporters have made many compromises to address the concerns of critics “who refuse to budge an inch” on the issue, he said.

The Coalition for 21st Century Patent Reform, whose members include companies from the chemical, pharmaceutical and other industry sectors, praised Leahy’s and Specter’s efforts so far and said it hoped a consensus would be reached.

The Biotechnology Industry Organisation said Specter was “right to reject” revisions which jeopardise many economic sectors that rely on strong patent protection.

“Serious issues remain to be resolved,” but “solving damages is the real key to whether this bill moves,” said a spokesman for the Innovation Alliance, whose members are technology companies and patent holders in various sectors.

There are other major problems as well, said Hayden Gregory, IP law consultant in the American Bar Association’s governmental affairs office. Senator Orrin Hatch, Republican-Utah, “is very insistent upon reform of inequitable conduct [improprieties in applying for a patent], and Leahy is very resistant to that,” he told Intellectual Property Watch.

The US Patent and Trademark Office is pushing hard for “Applicant Quality Submissions,” which is “code-speak for a requirement that applicants do a patent search for every application and explain the significant results as part of the application,” Gregory said. Inventors and IP lawyers strongly reject the proposal, not least because “users of the patent systems are paying $2 billion a year so that the USPTO can provide such services,” he said. Offloading the cost to patent-seekers will hike each application fee by $10,000 to $15,000 according to the Congressional Budget, he said.

“Too Early” to Predict Outcome

S 1145 “certainly is not dead” but whether there will be a patent reform law this year is “too close to call,” said Foley & Lardner patent attorney Harold Wegner.

Suspensions of negotiations on legislation are common, so it is “far too early to pronounce” S 1145 dead for the year, the IPO said.

The continuing controversy could keep the bill off the Senate floor for the next few weeks, said the Innovation Alliance spokesman. That will “hopefully allow for a serious negotiation among all stakeholders,” he said.

Separately, the American Civil Liberties Union (ACLU) earlier this month urged a federal court to uphold the denial of a patent for an abstract idea. The applicant sought to patent the concept that the “weather risk” involved in buying and selling commodities could be reduced if sellers had conversations with two buyers instead of one, the ACLU said. Patenting speech or thought risks violating the First Amendment guaranteeing freedom of speech, the organisation said.

Dugie Standeford may be reached at info@ip-watch.ch.