Prospects for Patent Reform in 2008 and Beyond
February 2008
As the 2008 election year progresses, Presidential
and Congressional candidates present their platforms, addressing major issues
such as education, budget deficits, defense spending, and Social Security. Candidates
rarely, if ever, talk about reforming intellectual property law, since it likely
falls at the bottom of the list for most voters.
by Sanford
E. Warren Jr. and Brandon Lee
Akin Gump Strauss
Hauer & Feld LLP
However, as the 2008 campaign charges forward, the current Congress will
consider making radical changes to U.S. patent law. These changes, if implemented,
would have significant repercussions for both current patent holders and those
seeking patent protection in the near future.
Over the past decade or two, a handful of Congressional bills have created
substantial new rights in the areas of trademark protection1
and copyright.2 However, controversy has followed
with respect to at least some of the changes introduced by the legislation.3
On the other hand, there have been relatively few changes to the patent laws
over the past half century, making minor changes over the years to comply with
international treaties. However, a bill currently pending before the Senate
could result in substantial changes to U.S. patent law.4
Patent Reform Act of 2007
In recent years, Congress considered several different efforts to reform
the patent system.5 Until now, none of the major
reform bills had passed either the U.S. House or the Senate. However, in September
of 2007, the House passed an amended version of the Patent Reform Act of 2007.
This represents the first serious possibility of implementing substantive patent
reform in many years. In January 2008, the Senate scheduled debate on its version
of the bill with indications that the full Senate will likely consider this
legislation for a full vote sometime in 2008.
The pending legislation includes a variety of provisions touching on numerous
areas of patent law. The 2007 Act specifically precludes patents on tax planning
methods6 and also allows third parties to submit
relevant prior art.7 It would also authorize the
Director of the Patent Office to require patent applicants to submit search
reports, which could drive up the cost for filing patent applications.8
Furthermore, the Act would authorize studies on other possible changes including
using special masters in patent litigation and reexamination proceedings.9
However, the most significant changes include the possibility of switching to
a first-to-file system, overhauling the calculation of damages, and restricting
the venue for patent suits.
One of the more radical changes would be the possibility of switching the
United States to a "first-to-file" system. Currently, the United States implements
a "first-to-invent" policy where a patent should issue to an inventor who first
conceives of the patented invention, even if another inventor files an earlier
patent application based on independent work. However, in many other countries,
including the European Union and Japan, patent rights are given to the first
party that files the application, as long as the patentable invention has never
been publicly disclosed. However, this change in U.S. law is expressly dependent
on both the European Union and Japan adopting 1-year "grace periods" for any
public disclosure by the inventor. Therefore, the likelihood that this change
will ever be implemented is uncertain.
The 2007 Act would also change how patent damages are calculated including
limitations on the availability of treble damages for willful patent infringement.10
Of concern to many accused patent infringers is the current potential for significant
damage awards based on the calculation of a "reasonable royalty." Proponents
of changing the damage provisions argue that large patent awards are excessive
compared to the actual value of the patent. They argue that awarding only the
"economic value properly attributable to the patent's specific contribution
over the prior art" is a more fair and realistic method of valuing a patent.
However, opponents of these changes argue that calculating a "reasonable royalty"
in view of the prior art is simply too difficult, introducing too many variables
and placing an unreasonable burden on both judges and juries.11
Another significant change that the 2007 Act would implement if passed, is
restricting the availability of many venues for patent litigation. Currently,
a surprising number of cases are filed in otherwise benign venues, such as the
Eastern District of Texas and the Western District of Wisconsin. These venues
are chosen by patent holders because they offer streamlined rules that specifically
govern patent litigation and move cases to trial relatively quickly. However,
many alleged infringers argue that the process is unfairly biased against infringers,
forcing alleged infringers to try cases in venues that have only a tenuous relationship
to the accused infringer's business.
In response, the 2007 Act would restrict the available venues for patent
suits to only those locales where the accused infringer has a substantial presence.
Proponents of this change argue this is only fair for infringers, while patent
holders worry that moving patent cases away from "patent venues" will result
in cases that move slowly and are tried before courts with less experience handling
such disputes.
Conclusion
Even opponents of the particular legislation pending before the Senate agree
with some of the changes proposed. However, because of the large number of different
changes proposed, it does not appear that any particular group seems ecstatic
with every aspect of the current legislation.12
Therefore, it would not be surprising to see additional changes introduced as
a result of various lobbying efforts. Only time will tell whether the Senate
passes patent reform in any form this session, and whether such reform follows
the House version or some other embodiment. Regardless, it is not likely that
this will be the last time we see patent reform efforts in the near future.
Indeed, it is likely that future changes are in store as the rapid development
of new pioneering technology keeps driving companies to the patent office, and
court, to protect their innovations.
Brandon Lee
is an associate with Akin, Gump, Strauss, Hauer & Feld LLP, where he specializes
in the procurement and enforcement of intellectual property rights, and in particular
patent and trademark rights. Mr. Lee received his B.S. in electrical engineering
from the University of Oklahoma in 2002 and his J.D. degree from the University
of Houston Law Center in 2005.
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