Obama Administration Puts Weight Behind Patent Reform Bill in Senate

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As the U.S. Senate began debate Feb. 28 on a patent reform bill, S. 23, six years in the making, the Obama administration threw its support behind the legislation in a “Statement of Administration Policy,” reinforced by a Commerce Department press conference the next day.

“The Administration supports Senate passage of S. 23,” the SAP began. “As a whole, this bill represents a fair, balanced, and necessary effort to improve patent quality, enable greater work sharing between the United States Patent and Trademark Office (USPTO) and other countries, improve service to patent applicants and the public at the USPTO, and offer productive alternatives to costly and complex litigation.”

During the March 1 press conference, Commerce Secretary Gary F. Locke said, “The stars are aligned better than ever before,” predicting that Congress will pass a bill this year.

However, it is clear that the current S. 23 will be modified before patent reform can be finalized, as the administration acknowledged that key provisions are still being negotiated by key stakeholders.

'The America Invents Act.'

Originally titled “The Patent Reform Act of 2011,” S. 23 was renamed “The America Invents Act” as its primary sponsor, Sen. Patrick J. Leahy (D-Vt.) began debate on the legislation in the Senate Feb. 28.

When the floor action continued March 1, Leahy added the SAP into the Senate record and said, “I thank all those from the administration who worked on this matter and, in particular, Secretary Locke, Director [David J.] Kappos of the Patent and Trademark Office and former [Commerce] Secretary [William M.] Daley.”

The bill was reported unanimously out of the Senate Judiciary Committee Feb. 3 (81 PTCJ 451, 2/11/11). Most of its provisions are now geared to modifying or adding procedures at the PTO, though a few provisions directed to litigation remain.

One probable floor amendment would put an end to Congress's right to take fees collected by the PTO and use the funds for other governmental purposes. That process, known as fee diversion, has been a point of contention between the judiciary committees of both houses, responsible for substantive law, and their respective appropriations committees, who perceive the funds to be little different from other government taxes.

The amendment is highly likely to be submitted on the Senate floor by Sen. Thomas A. Coburn (R-Okla.).

First Inventor to File, PTO Fee-Setting Highlighted.

The administration appears to be gearing up for a debate over S. 23's provision that would require a switch from the current first-to-invent system for determining inventorship to a first-inventor-to-file system. However, the proposed adoption of such a system is one of only two provisions in the bill specifically endorsed in the SAP.

“By moving the United States to a first-to-file system, the bill simplifies the process of acquiring rights,” according to the SAP. “This essential provision will reduce legal costs, improve fairness, and support U.S. innovators seeking to market their products and services in a global marketplace.”

During the Commerce Department press conference, Kappos made a point to assure independent inventors and small businesses--the most vocal critics of the first-inventor-to-file provision--that the change will advance their claims to ownership of inventions rather than favor large corporations.

The second provision cited favorably by the SAP--granting fee-setting authority to the PTO--has also been welcomed enthusiastically by most stakeholders. That provision, the administration said, would allow the PTO “to establish and adjust its fees to reflect changes in costs, demand, and workload, the bill would enhance productivity--reducing delay in the patent application process--and ensure full cost recovery at no taxpayer expense.”

The American Intellectual Property Law Association and the Intellectual Property Owners Association, however, have argued that the fee-setting provision must be tied to a provision banning fee diversion.

Both Kappos and Locke addressed the fee-diversion controversy in the press conference. Kappos noted that a ban on such reallocation of PTO resources is embedded in the president's fiscal year 2012 budget (81 PTCJ 483, 2/18/11). He was referring to the statement in the budget, “That the receipts collected as a result of these surcharges shall be available within the amounts provided herein to the United States Patent and Trademark Office without fiscal year limitation, for all authorized activities and operations of the Office.”

Locke predicted operational problems unless the agency can keep its fees. “Having fees diverted does not help us reform the patent process and get us down to what the industry wants” in terms of the pendency between patent application and a decision on its allowance, he said. “If we set our fees but the money is taken away, we could be going backwards, in fact,” he said, and the backlog of unexamined applications at the PTO may even increase.

But Administration Ready to Shed Litigation Pieces.

Patent reform efforts over the past six year were initially focused largely on substantive changes affecting patent infringement litigation, but recent decisions by the U.S. Court of Appeals for the Federal Circuit and the U.S. Supreme Court attempted to resolve some of those issues--such as the standards for granting injunctive relief in patent infringement actions, and for awarding damages for willful infringement. However, proposals for litigation reform continued to spark debate as the patent lingered.

Indeed, the most contentious issue in the last Congress was on the calculation of damages--despite the Federal Circuit attempts to clarify its jurisprudence on that issue over the past two years. Damages reform is proposed again in S. 23, and so is venue language limiting transfers of patent cases out of patentee-friendly courts--a topic that has also received considerable recent attention by the Federal Circuit.

Apparently recognizing the judicial advances, the SAP suggested that damages and venue reform might no longer be needed. “The Administration would not object to removal of these provisions from the final version of the legislation,” according to the SAP.

More Compromises to Come.

However, the SAP provided a hint that simply deleting those two provisions and adding a ban on fee diversion will not address all the anticipated concerns of stakeholders. “The Administration looks forward to continuing to work with the Congress to craft patent reform legislation that reflects sound policy and meets the needs of the Nation's innovators,” the SAP concluded.

In the press conference, Locke acknowledged that he has been meeting with industry leaders and “trying to work through compromises to get [a patent reform bill] enacted.”

He praised the communication between and mutual commitment by Leahy and Rep. Lamar S. Smith (R-Texas) as a sign that whatever controversies remain can be resolved.

Smith, who chairs the House Judiciary Committee, said at a Feb. 11 committee hearing that he intended to introduce a different bill in that chamber (81 PTCJ 484, 2/18/11). But he also said of his relationship with Leahy, “I'm absolutely convinced we're going to be able to find common ground.”

By Tony Dutra  


SAP at http://pub.bna.com/ptcj/S23AdminSAPFeb28.pdf

Obama's 2012 budget available at http://www.gpo.gov/fdsys/