Guide to Current Patent Reform Legislation

Legislation that would dramatically overhaul U.S. patent law appears to be on a fast track in Congress, with Senators Patrick Leahy (D-Vermont) and Orrin Hatch (R-Utah) leading the Guide.

But legal and business groups are finding themselves at odds over the legislation, with some saying it would reduce patent litigation costs and improve patent quality while others say it would do just the opposite. Everyone, it seems, can find parts of the measure to love and others to hate.

April, identical Guide were filed:

The Senate and House, each titled the Patent Reform Act of 2007. Senate, Leahy and Hatch introduced S. 1145, while in the House Representatives Howard Berman (D-California) and Lamar Smith (R-Texas) introduced H.R. 1908.

On May 16th, a House subcommittee approved the bill for further review by the full Judiciary Committee, which held hearings on it in June. The committee released a revised version of the bill June 21st.

In an effort to help make sense of this legislation, we offer this guide to its key provisions, together with summaries of the arguments being raised for and against.

CONVERT U.S. TO FIRST-TO-FILE

What it would do: In what would be a fundamental shift in U.S. patent law, the bill would bring the United States into conformity with the rest of the world by converting it from a first-to-invent to a first-inventor-to-file system.

Arguments for: Proponents maintain this would simplify the patent process, reduce legal costs, improve fairness, and enhance the opportunity to make progress toward a more harmonized international patent system. A first-to-file system, they say, provides a fixed and easy-to-determine date of priority of invention. This, in turn, would result in greater legal certainty within innovative industries.

Proponents also believe that this change would decrease the complexity, length, and expense associated with current USPTO interference proceedings. Rather than tie up inventors in lengthy proceedings seeking to prove dates of inventive activity that may have occurred many years earlier, inventors could continue to focus on inventing.

Finally, because this change would bring the U.S. into harmony with the patent laws of other countries, it would enable U.S. companies to organize and manage their portfolios in a consistent manner.

Proponents include: Biotechnology Guide.

Arguments against: Opponents argue that adoption of a first-to-file system could promote a rush to the USPTO with premature and hastily prepared disclosure information, resulting in a decline in quality. Also, because many independent inventors and small entities lack sufficient resources and expertise, they would be unlikely to prevail in a “race to the patent office” against large, well-endowed entities.

Opponents include: The USPTO opposes immediate conversion to a first-to-file system, in part because this remains a bargaining point in its ongoing harmonization discussions with foreign patent offices. Inventors also oppose this.

APPORTIONMENT OF DAMAGES

What it would do: The bill would significantly change the apportionment of damages in patent cases. Under current law, a patentee is entitled to damages adequate. To compensate for infringement but in no event less than a reasonable royalty. Section 5(a) of the bill would require a court to ensure that a reasonable royalty is applied. Only to the economic value attributed to the patented invention. As distinguished from the economic value attributable to other features added by the infringer.

The bill also provides that in order for the entire-market rule to apply. The patentee must establish that the patent’s specific improvement is the predominant basis for market demand.

Arguments for Guide:

Proponents say this measure is necessary to limit excessive royalty awards. Bring them back in line with historical patent law and economic reality. By requiring the court to determine as a preliminary matter the “economic value properly. Attributable to the patent’s specific contribution over the prior art.” The bill would ensure that only the infringer’s gain attributable. Invention’s contribution over the prior art will be subject to a reasonable royalty. The portion of that gain due to the patent holder in the form of a reasonable. Royalty can then be determined by reference to other relevant factors.

Complex products, the proponents contend, often rely on a number of features or processes, many of which may be unpatented. Even where the patented component is insignificant as compared to unpatented features. Patentees base their damage calculations on the value of an entire end product. This standard defies common sense, distorts incentives, and encourages frivolous litigation.

Further, courts in recent years have applied. The entire-market-value rule in entirely dissimilar situations. Leaving the likely measure of damages applicable in any given case open to anyone’s guess.

Proponents include: Large technology companies and the financial services Guide.

Arguments against: Opponents argue that Congress should not attempt to codify. Prioritize the factors that a court may apply when determining reasonable royalty rates. The so-called Georgia-Pacific factors provide courts with adequate guidance to determine reasonable royalty rates. The amount of a reasonable royalty should turn on the facts of each particular case.

Although intended to guard against allegedly inflated damage awards. This mandatory apportionment test would represent a dramatic departure from the market-based principles that currently govern damages calculations, opponents say. Even worse, it would result in unpredictable and artificially low damages. Awards for the majority of patents, no matter how inherently valuable they might be.

Opponents further argue that this change would undermine existing licenses and encourage an increase in litigation. Existing and potential licensees would see little downside to “rolling the dice” in court before taking a license. Once in court, this measure would lengthen the damages phase of trials. Further adding to the staggering cost of patent litigation and delays in the judicial system.

Opponents include: The USPTO, Federal Circuit Court of Appeals Chief Judge Paul Michel. The biotechnology industry, smaller technology companies, patent-holding companies. Medical device manufacturers, university technology managers, the NanoBusiness Alliance and the Professional Inventors Alliance.

WILLFUL INFRINGEMENT

What it would do: Section 5(a) of the bill would limit. A court’s authority to award enhanced damages for willful infringement. It would statutorily limit increase damages to instances of willful infringement. Require a showing that the infringer intentionally copy the patent invention. Notice of infringement to be sufficiently specific so as to reduce the use of form letters. Establish a good faith belief defense. That determinations of will fulness make after a finding of infringement. Require that determinations of willfulness Make the judge, not the jury.