Patent Reform

Congress is attempting to complete the first major overhaul of the nation's patent law in more than half a century. . . . Pharmaceuticals and biotech companies need exclusive rights to single patents, protecting, for example, a drug resulting from millions of dollars of research. Big technology, whose products often contain hundreds and even thousands of patented parts, is bedeviled by too many bad patents, infringement lawsuits and skyrocketing damages.

Earlier this month, a House and a Senate bill, identical when introduced last April, emerged from their respective judiciary committees -- a major step in this long-running effort. Following committee amendments, the bills are no longer identical, but there is some agreement among all parties that the House bill has made greater progress. . . .

[T]he greatest single obstacle to a patent reform compromise is how to calculate infringement damages, particularly, as in the high-tech world, when the infringing component is only part of a larger and more complex device.

U.S. district courts currently use a flexible 15-factor test . . . big technology . . . . has argued that the standard for calculating damages should be based on the fair share of the patent's contribution to the value of a product, and not on the value of a whole product that has many other components. . . . the House committee amended the damages provision to give judges discretion to decide, based on the facts of the case, whether damages should be apportioned, as technology companies would like, whether they should be based on the value of the entire invention, or by other means. . . .

The second major issue dividing the stakeholders concerns how to challenge the validity of patents. . . . Big technology and the financial services industry . . . are finding themselves in lawsuits in areas in which they never dreamt they would face lawsuits and on patents that seem laughable on their face[.]

This country, unlike others, does not have a post-grant opposition procedure . . . Both congressional bills provide for a post-grant review administrative proceeding for would-be patent challengers. The battle has been over how much time after a patent has issued it should be open to challenge. The bills originally allowed challenges within a set amount of time after the patent issued, but a second "window" for challenges would open when an infringer had reason to believe it had infringed the patent. . . .

The House committee eliminated the "second window" and decided to expand an existing but limited procedure known as the inter-partes re-examination procedure, which allows third parties to challenge a patent on novelty grounds in the PTO. The Senate bill still has the second window and, according to some, a very low threshold for challenges. . . .

All parties seem to have accepted provisions in the reform bills that would bring the United States into harmony with the rest of the world by shifting this country away from awarding patents to those "first to invent" to those who are "first to file." . . .

Under current law, an action can be brought in any district in which the defendant is subject to personal jurisdiction -- in reality, wherever an infringing product is sold. The bills would limit venue to districts where either a party resides or where the defendant has committed the infringement and has a regular place of business.

The venue change is clearly directed at the allegedly plaintiff-patent-popular Eastern District of Texas. . . .

[T]echnology companies want the bills to scale back the availability of treble damages when courts find "willful" or knowing infringement. The current standard is too easily met, those companies contend.

And biotech and pharmaceuticals want the use of a patent holder's "inequitable conduct" curtailed as a ground for holding a patent invalid. Alleged infringers can now argue that the patent is invalid because the holder did not disclose sufficient information about the invention during the patenting process.

From here.

In this fight, the computer guys wear the white hats, and the guys that smell funny are the bad guys. The House Bill looks like it has a real chance, and it would be an improvement.