House Could Take Up Patent Reform Measure This Week

The Rules Committee of the US House of Representatives is scheduled to meet on Thursday to discuss how the latest sweeping patent reform legislation, H.R. 1908, is to be introduced to the floor of Congress. Pending the registration of proposed amendments, it could be introduced as soon as Friday.

The two most critical reforms the new legislation would make drastically reduce the often windfall amounts that victors in patent infringement suits may be awarded; and replace the post-patent review process to encourage individuals to file objections within a year of a patent's approval, rather than wait for that period to expire and file infringement suits in federal court.

But high-level opposition to the bill has been mounted in recent weeks, most notably from the nation's largest labor union, the AFL-CIO. Last July, the union's legislative director, William Samuel, wrote the chairman and ranking member of the House Judiciary Committee (PDF available here) to express his union's opposition to the proposed awards caps.

Samuel also warned the proposed amendment to the post-patent review process could open the courts "to serial patent challenges, which for some, can become a business strategy designed to elicit a settlement.

"At a time when the Chinese government is constantly being challenged to live up to its intellectual property obligations," Samuel continued, "we do not want to take actions that may weaken ours."

The union's position on patent reform is important, especially for Democrats whose leadership status in both houses of Congress is tenuous at best.

Last week, while some publications were touting the coming showdown between technology industry leaders who support patent reform and pharmaceutical industry leaders who oppose it, New York Times blogger Brad Stone learned that H.R. 1908 has picked up an unlikely opponent: the IEEE.

In a letter Stone obtained sent by the IEEE to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, the Institute took a stand against the bill for the same reasons the AFL-CIO cited. "IEEE-USA believes that, left as is, the patent reform legislation will create an environment that is harmful to individual inventors and small businesses," the letter reads.

This while, at the same time, the IEEE's own Web site takes a stand in favor of patent reform, at least in principle.

"The U.S. economy and job growth depends upon strong protections for intellectual property," reads the Institute's Web site. "IEEE-USA will promote patent reforms that are equitable and serve the entire cross-section of IEEE-USA membership, including fledgling companies (and solo inventors), university faculty, as well as Fortune 50 companies."

One of critics' key complaints about the bill concerns how it opens up new options for both individuals and companies to challenge freshly approved patents, during a new one-year review period. But as the bill currently reads, language that would have enabled this period to be extended for another year, and another year, and so on mostly at the discretion of the challengers, has already been altered.

"If a final decision has been entered against a party in a civil action...establishing that the party has not sustained its burden of proving the invalidity of any patent claim," the bill currently reads, "...that party to the civil action and the privies of that party may not thereafter request a post-grant review proceeding on that patent claim on the basis of any grounds...which that party or the privies of that party raised or had actual knowledge of; and the Director [of the Patent and Trademark Office] may not thereafter maintain a post-grant review proceeding previously requested by that party or the privies of that party on the basis of such grounds." [emphasis added]

However, the aggrieved challenger may file an appeal. In which case, as the bill currently reads, the USPTO Director must assemble a team of three judges to hear that appeal, and it does not look as though that appeals tribunal would have the option -- as the Supreme Court does, for instance -- not to hear the appeal.

One of the bill's key authors, Rep. Howard Berman (D - Calif.) is expected to be among those offering amendments to the bill tomorrow, which is the Rules Committee's deadline. An amendment may further address the issue of when the appeals process is allowed to stop.

In a recent article for IEEE Spectrum, Institute member and attorney Steven J. Frank posed an interesting dilemma that may very well be weighing on fellow members' minds. Taking a neutral stand on the patent reform issue personally, and taking no stand on the actual bill, Frank suggested that in recent years, the monetary value speculators and investors have placed in a company's intellectual property has been based on its likelihood to acquire damages awards in court.

Conceivably, if patent disputes are shifted away from civil courts and into patent office tribunals -- where the debate centers not around how much was a petitioner hurt in terms of dollars, but whether a patent is valid or not -- the investment value of IP could plummet as a result.

"It only makes sense: Recent studies confirm that the more valuable the patent, the more likely it will face opposition," Frank writes. "Because investors assume they are investing in the winners - that is, in research likely to be profitable and therefore to invite patent oppositions - values placed on technology companies will probably fall as perceived risk, expense, and delay increase. Inventors, for their part, may fear that the visibility of professional investment can turn otherwise unobtrusive patents into targets."

In other words, increased uncertainty over the monetary viability of IP would inevitably level the playing field for corporate patents versus individuals' patents. That could place a new burden on inventors who are already struggling to hold on to some portion of ownership over what they create, in order to make a living for themselves.

Perhaps this is what the IEEE was referring to in its letter to Congress, particularly in this otherwise cryptic remark that cites the Senate's near-identical version of the House bill: "We are concerned that S. 1145 favors the companies with the financial resources that enable them to tread on others' patent rights by commercializing works and inventions they did not create."