United States: One Step Forward, Two Steps Back—Patent Reform Delayed But Sponsors Remain Committed, Commentary Surges

On February 13, 2008, Senate Judiciary Chairman Patrick J. Leahy (D-Vermont), co-sponsor of the Patent Reform Act of 2007 (S. 1145), indicated that the Senate will delay consideration of the bill until at least April because it is unlikely that the bill will be scheduled for floor action before the two-week congressional recess running through March 28. Nonetheless, Senator Leahy and the bill's co-sponsor, Senator Orrin Hatch (R-Utah), announced their enduring commitment to patent reform in a February 15 editorial in the Washington Times. In the editorial, entitled "Meaningful Patent Reform," the senators emphasized the need to modernize the patent system. "The last time the patent system was significantly changed, the structure of DNA had not been discovered; gasoline was around 27 cents a gallon; and we had not yet sent a man to the moon. [...] We are living in the Information Age, and the products and processes that are being patented are changing as quickly as the times themselves." The senators acknowledged existing disagreements about the bill but pledged to work through them to its enactment, "As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way. [...] But at the end of the day, we are confident that we will resolve the remaining issues in ways that should make everyone comfortable and will ensure final passage."

In the wake of the deferral of Senate action, external commentary about the bill has only increased in the first months of 2008. Summaries of significant comments follow:

Former USPTO Commissioners

On January 30, 2008, former U.S. Patent and Trademark Office (USPTO) commissioners Gerald Mossinghoff and Stephen Kunin issued a 35-page position paper entitled "The Need for Consensus on Patent Reform." Generally, Mossinghoff and Kunin support many provisions of the Act but call for significant revisions before adoption. The paper, funded by the Coalition for 21st Century Patent Reform, cited proposals for mandatory apportionment of patent damages, changes to venue rules, immediate interlocutory appeal of claim construction rulings to the Federal Circuit, revised standards for willful infringement and delayed patent application publication as problematic. Nevertheless, Mossinghoff and Kunin commented that "the time for fair compromises that provide these fixes is now. Too much is at stake to delay."

Biotechnology Industry Organization (BIO)

On January 30, 2008, BIO released a report entitled "Proposed Patent Reform Legislation: Limitations of Empirical Data Used to Inform the Public Policy Debate." BIO's report alleges that the three papers most frequently cited as demonstrating a need for patent reform (by the Federal Trade Commission, the National Academy of Sciences and the National Research Council) are not actually based on empirical data, but instead rely largely on "conjecture, anecdotes and individual publicized cases." Prepared by two professors from the Center for Biomedical Ethics at the University of Virginia, the report claims that existing empirical data actually shows that the patent system is working to promote innovation and that the alleged problems with the patent system are being solved with market-based solutions and through the courts. The allegedly flawed studies are "To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy," by the FTC; "A Patent System for the 21st Century," by the NAS; and "Reaping the Benefits of Genomic and Proteomic Research: Intellectual Property Rights, Innovation, and Public Health," by the NRC.

The Bush Administration

On February 4, 2008 the U.S. Department of Commerce Assistant Secretary for Legislative and Intergovernmental Affairs sent a letter to Senator Leahy. Among other proposed reforms, the administration opposes the patent damages section of the bill, stating that it does not believe it is necessary to impose a statutory directive to be "rigidly" applied by courts in calculating damages. Rather, the judiciary needs "the flexibility to determine a reasonable royalty based on the circumstances of a particular case." The administration will continue to oppose the bill in its entirety unless the damages section is significantly revised, as the administration believes that "the resulting harm to a reasonably well-functioning U.S. intellectual property system would outweigh all the bill's useful reforms." Significantly, the statement was issued by the Commerce Department, not the White House, perhaps signaling the intent of the Administration to accept whatever congressional compromise emerges.

The Electronic Frontier Foundation (EFF)

On February 4, 2008, the EFF sent a letter to Senators Leahy and Specter. EFF opposes the bill's proposed elimination of re-examination proceedings in light of its efforts challenging overbroad patents through its "Patent Busting Project." The bill's proposed post-grant review procedures are an inadequate substitute for re-examination proceedings, according to the EFF, because third parties (like itself) would only be allowed to challenge the validity of issued patents within 12 months of issuance. Also, most non-profit entities would be precluded from challenging invalid patents in the second window of post-grant review because they could not demonstrate that they are economically harmed by a patent, as the bill currently requires. "The public has a right to defend itself against patents that should never have been granted," EFF stated, continuing, "Reexamination proceedings are essential for us to continue this work."

The Patent Office Professional Association ("POPA") and 13 Other Labor Unions

On February 6, 2008, POPA and 13 associated unions sent a facsimile letter to all senators. POPA, representing thousands of patent examiners, and 13 other labor unions have urged the Senate to oppose the act in its current form, arguing that the act will undermine U.S. competitiveness. The letter cited the act's proposals towards damages calculation, post-grant procedures and publication of pending applications as major areas of concern, cautioning, "All of these changes increase the likelihood of American innovations being stolen and provide incentives for American manufacturers to simply license their technology for production overseas."

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