Familiar Start to New Year in IP Community's Reaction to Patent Reform, Anti-Piracy Attack

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One week after Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) introduced a new patent reform bill, S. 23, in the 112th Congress, reaction to the bill generally mirrors the reaction to the prior “Manager's Amendment” that spurred last year's debate (81 PTCJ 369, 1/28/11)--cautious support by proponents and skeptical rejection by opponents.

The bill's proponents acknowledge that changes will be needed before the bill can be enacted, while opponents appear to have concentrated their efforts on supporting lawmakers' behind-the-scenes blocking attempts. Conservatives mounted a new initiative, sending a letter Feb. 1 urging congressional leaders to stop the “ill-considered patent legislation.”

Practitioners contacted by BNA largely shared those concerns that the lawmakers were invading territory that can be handled most efficiently by the courts and should instead concentrate on provisions that would help the Patent and Trademark Office.

The government's interest in patent protections was marginally evident in another Washington, D.C., event Jan. 28. Meeting with administration officials and industry executives, as well as consumer and labor representatives, Vice President Joseph Biden renewed his attack on copyright piracy, but also addressed concerns about counterfeiting of patented products.

Patent Reform Restarted.

S. 23 marks the fourth attempt at a comprehensive patent reform bill in the last six years. The Senate has yet to bring a bill to the floor for a full vote.

The bill mostly tracks the Senate Judiciary Committee's compromise draft from 2010, but adds an effective ban on patents for tax avoidance strategies; modifies the “derivation” proceedings for challenging patents on the basis of first-inventor-to-file status; slightly postpones the implementation of the first-inventor-to-file provision; and effectively eliminates qui tam complaints of false patent marking under 35 U.S.C. §292(a).

“A strong patent system will encourage innovation and protect inventors,” Leahy said in a Jan. 27 press release. “This will result in new businesses and more jobs. Comprehensive patent reform has the support of the administration and many business organizations. We can help support innovators and help companies create jobs. Importantly, the Patent Reform Act does so without adding a penny to the deficit.”

The committee was scheduled to mark up the patent reform bill at its weekly business meeting Jan. 27, but consideration of the bill was postponed until Feb. 3.

Proponents Express Cautious Support.

Two organizations formed specifically as patent reform lobby groups praised the introduction of the bill but were not effusive in support.

Gary Griswold of the Coalition for 21st Century Patent Reform issued a statement Jan. 25 noting the “real momentum to move forward with patent reform,” but only going so far as to say that S. 23 is “a strong starting point for proponents of patent reform.”

The same day, Innovation Alliance's Executive Director Brian Pomper said his group would “hope to be a constructive force” in Congress's consideration of the bill. But he asked lawmakers “to focus on consensus-backed proposals …. The Innovation Alliance therefore believes that policymakers should first address the serious and complex funding and administrative issues at the USPTO that gave rise to the backlog before creating any new programs at that already overburdened and understaffed agency. We are concerned that any new programs would divert some of USPTO's already overstretched resources to administering this new system, taking away from Director [David J.] Kappos's laudatory efforts to reduce the crushing backlog.”

Unequivocal support did emanate from one association, though, the Biotechnology Industry Organization. President and CEO Jim Greenwood said in a Jan. 28 press release, “We believe the Patent Reform Act of 2011 will help strengthen and improve our nation's patent system for all users while preserving the incentives necessary to spur the creation of high-wage, high-value jobs and sustain America's global leadership in innovation.”

Prior Opponents Reaction Terse.

In contrast, a group largely consisting of companies in the high technology industry, said Feb. 1, “The Coalition for Patent Fairness opposes the Leahy bill because we believe it is worse than current law for innovative technology companies. This is supposed to be a consensus issue for the stakeholders in the patent system. Right now, there is no consensus, or there is one that leaves out high tech.”

CPF spokesman Amos Snead of Story Partners LLC added, “The current approach weakens the protections against abuse under current law, expands the opportunities for new forms of abusive litigation, and does not include new provisions that would curtail abuse. This proposal would hurt our nation's most innovative companies, damage our nation's competitiveness, and reduce economic growth and job creation.”

The group organized a letter to President Barack Obama from 28 CEOs from leading technology companies in March 2009, urging the administration to support the bills as they were first introduced in the 111th Congress (77 PTCJ 596, 4/3/09). After the Senate Judiciary Committee passed a compromise bill without key provisions that would limit damages awards, though, the CPF turned against the bill (78 PTCJ 28, 5/8/09). When the Manager's Amendment further reduced opportunities for post-grant opposition to patents, a statement from the group said that the new proposal “would produce a patent system that is significantly worse than the status quo” (79 PTCJ 560, 3/12/10).

But key coalition member Microsoft Corp. abandoned the group when the company came out in favor of the Manager's Amendment in April (79 PTCJ 787, 4/23/10). Indeed in 2007, 21 companies were identified as members, but the CPF website now lists only 12 current members--Apple, Autodesk, Cisco Systems, Dell, Google, HP, Intel, Micron Technology Inc., Oracle, RIM, SAP, and Symantec.

The Business Software Alliance was also vocal in its opposition to the Manager's Amendment, but has not responded publicly or to BNA's requests for comment.

Joseph D. Matal, Republican general counsel for the Senate Judiciary Committee, said in a June conference that S. 515 was subject to “holds” by senators from California and Utah (80 PTCJ 225, 6/18/10). Of course, most of the CPF members and a significant portion of the software industry hail from those two states, so one can assume the companies will continue to work behind the scenes in Congress to thwart attempts to bring the bill up for a vote.

Conservative Group Not Terse at All.

A Feb. 1 letter signed by 22 conservative leaders was relentless in its attack on the bill and the lawmakers who support it, “following the lead of several large multinational companies.”

The letter specifically criticized the post-grant opposition and first-inventor-to-file proposals. As to the former, the conservatives said, “By creating a new, expensive procedure to challenge the validity of a patent throughout its life, the benefits to patent-holders become far less certain. Incentives to seek patents are severely weakened, and venture capitalists face much higher risks when backing new ideas.”

The first-inventor-to-file proposal being pursued in the name of “harmonization” with other patent regimes around the world is also “misguided,” the letter argued. “Our competitors should have to 'harmonize up' to our superior intellectual property regime, rather than our having to weaken our patent system and 'harmonize down' to their levels.” The conservatives called the European system “calcified” and the Japanese system “impossibly unfair,” and labeled China a country “where intellectual property theft is a way of life.”

On the other hand, the conservatives criticized the PTO as well. “Sadly, the Federal Government has fallen down in its patent responsibilities and has become a bottleneck to genuine innovation,” the letter said, citing pendency and backlog problems at the agency. “This is the situation that must be reformed immediately,” they said. “The logical remedy to this problem is to fully fund the USPTO, allowing it to set user fees and keep them to run USPTO efficiently and effectively, rather than letting them be diverted to other parts of the government.”

The conservatives' call for PTO fee-setting authority and an end to diversion was reflected in a narrower House measure (80 PTCJ 79, 5/21/10) that was introduced last year but never taken up for a vote.

Practitioners Would Limit Provisions.

Patent practitioners making comments to BNA generally agreed with the position that patent reform should be more targeted to the PTO's needs.

“It's unclear why Congress keeps trying to push through 'comprehensive' patent reform bills, when this approach hasn't worked in the previous three sessions of Congress,” according to Peter Zura of Barnes & Thornburg, Chicago. “The issue of patent damages and, to a lesser extent, post-grant review, are very controversial and were instrumental in derailing patent reform legislation in the past. It would seem practical then, to break up the legislation into two or three bills and move them forward, starting from the least contentious bill.”

Stephen B. Maebius of Foley & Lardner, Washington, D.C., was slightly more interested in the more comprehensive approach. “A lot of people have invested a lot of effort to get patent reform where it is,” he said, but acknowledging that “there appears to be room for improvement,” he added, “ I hope opposing stakeholders will be brought together through the legislative process.”

Rebecca M. McNeil of Finnegan, Henderson, Farabow, Garrett & Dunner, Cambridge, Mass., said that people who previously opposed the bill will undoubtedly continue their attacks, “But there is a lot of good improvement in the bill. A number of features are focused on patent quality and certainty, and that always results in a better system for entrepreneurs.”

McNeil's greatest concern was in the implementation details of many of S. 23's provisions. For example, the S. 23 provision allowing submission of prior art to the PTO before patent issuance is “a great idea in principle,” she said, but “right now, examiners are already flooded with too much prior art.” She suggested that there would have to be limits on the number of references that one third party could submit, as well as mechanisms to detect duplicate submissions by multiple third parties.

She also expressed concern about how the bill's post-grant opposition procedures would work. The provision is notable in that it is the result of a building consensus since 2005, she said. But the provision requires more work from the PTO's Board of Patent Appeals and Interferences that is already “really struggling with the volume” in its current workload.

“The BPAI would have to do some restructuring, but still the same individuals are in these position,” McNeil said, adding that the requirement to add administrative patent judges is clear but nowhere authorized in the bill. “I am excited about the opportunity for post-grant review as an avenue for challenging a patent at a lower cost, and it could increase certainty in the validity of challenged patents, but I have concerns of how it will be implemented and woven into the agency's current procedures.”

Maebius agreed that the PTO's workload should be monitored, but noted that proposals to ease the agency's workload might pass that problem on to the U.S. Court of Appeals for the Federal Circuit, rather than solving it. He was referring to provisions in S. 23 that would preclude losers in patent reexamination proceedings from appealing those rulings to a district court and to the PTO's Board of Patent Appeals and Interferences.

Maebius saw both as attempts to streamline such appeals by sending them directly to Federal Circuit, but he questioned whether the appeals court can handle the additional workload. “We absolutely want final decisions,” Maebius said, “but there needs to be some additional planning with respect to how the Federal Circuit will be able to deal with the case load.”

Tax Strategy Patent Ban, False Marking.

Maebius commented particularly on a provision in S. 23 that would effectively ban patents on tax avoidance strategies. Under that provision, such patents would fail for anticipation or obviousness under Sections 102 or 103 of the Patent Act. Maebius acknowledged that lawmakers are generally averse to precluding certain inventions from patentability as nonstatutory subject matter, but, he said, “This is really just a different way of exempting a certain group of inventions from being patent eligible” under Section 101.

He hoped lawmakers would focus instead on the enforcement side, pointing to the example in current patent law of limiting remedies in 35 U.S.C. §287(c) “With respect to a medical practitioner's performance of a medical activity that constitutes an infringement.”

“I wonder if lawmakers could take that approach as to tax patents--defining the conditions under which the patent could be enforced,” Maebius said. “It's something I'd like to see at least examined.”

Maebius was pleased to see the provision in S. 23 to eliminate qui tam false patent marking actions, though. “The false marking situation cries out for some kind of legislative solution,” he said. “It's almost sad that companies are spending money on these lawsuits and it's not contributing to innovation or helping consumers that much.”

He estimated that most people in the patent community feel that false marking should be dealt with legislatively, but that it should be done in a relatively quick time period. Unfortunately, though, he said, the provision is “bundled together with things that do not have a clear consensus” in S. 23, which will likely draw out a solution to the problem.

Prospects for Comprehensive Bill?

Maebius acknowledged that lawmakers “bundle for a reason,” resulting in a comprehensive bill such as S. 23. “If they unbundle, they lose the give and take of compromise,” he said.

But given the lawmakers' failure to reconcile the different patent reform “bundles” considered in the last Congress, he said, “It is definitely a challenge for both sides of Congress to figure out how to move patent reform forward. I don't see a path for reconciliation that has emerged yet.” In fact, Maebius characterized the House approach as one of wanting to take a fresh look, while the Senate is saying, “Let's fish or cut bait and see what kind of votes are there.”

Zura was perhaps even more skeptical about the chances for patent reform given that it “is also competing with multiple technology-related bills this year, including net neutrality legislation, FCC incentive auctions for broadband, Universal Service Fund reform, and reforms to the Electronic Communications Privacy Act. These bills arguably carry more 'political capital' in Congress and will likely take precedence over patent reform legislation heading into the 2012 elections.”

Biden Holds Another Meeting.

Vice President Biden's Jan. 28 meeting with IP stakeholders was not his first occasion to address their concerns.

At what he called a “first of its kind” discussion, Biden in December 2009 convened a roundtable to convey the Obama administration's commitment to enforcing laws against copyright piracy, saying that such piracy is “flat, unadulterated theft and it should be dealt with” (79 PTCJ 183, 12/18/09). Intellectual Property Enforcement Coordinator Victoria A. Espinel, cabinet and administration officials, and corporate executives representing copyright owner interests attended that meeting, but consumer advocates notably absent.

In another appearance with government representatives in June 2010, Biden announced the administration's Joint Strategic Plan to combat intellectual property theft (80 PTCJ 258, 6/25/10). Biden said intellectual piracy and infringement can be deadly. “Whether we're talking about fake drugs that hurt, or knock-off car tires that fall apart at 65 miles per hour causing injury and death, counterfeits kill,” he said.

Many of the same administration officials attended the Jan. 28 meeting. However, along with corporate executives representing copyright holders' interests, Biden also invited Gigi Sohn, president of consumer advocacy group Public Knowledge. And in a nod to those likely to be concerned about “fake drugs” and “knock-off car tires,” Thomas Rothman, CEO of Eli Lilly & Co., and Paul A. Almeida, president of the AFL-CIO's Department of Professional Employees, attended as well.

Referring to President Obama's State of the Union address Jan. 25, Biden said that the president “laid out what I think is the single most important objective of this administration,” to unleash the ingenuity and entrepreneurial spirit of the American people. To that end, Biden said, “Not only do we have to encourage and unleash those talents of the United States … but we also have to protect them.”

He then acknowledged that the protection was not only about “artistic integrity” covered by actions aimed at copyright piracy, but also about public safety and national security. Biden pointed to U.S. Food and Drug Administration estimates that, in some parts of the world, 30-50 percent of prescribed--and thus likely patented--drugs are either counterfeit or compromised.

“To state the obvious, the primary role of government is to ensure that we're providing basic protections to our citizens,” he said. Such an obligation is “embedded in our Constitution,” according to Biden. “The founding fathers, they got it right a long, long time ago. They saw the immense potential of American creativity to provide economic opportunity. They decided at our nation's birth to protect it.”

By Tony Dutra