Legislation could have vastly different effects in different sectors, say Wisconsin Alumni Research Foundation managing director Carl Gulbrandsen (top), Stanford University law professor Mark Lemley (left) and executive director of the Intellectual Property Owners Association Herbert Wamsley (bottom).
Legislation described as "the most comprehensive change to US patent law" in more than 50 years is pitting research universities and the life sciences industry against the computer and financial services industries. The Patent Reform Act of 2005 (HR 2795), which was the subject of House hearings this month, "will eliminate legal gamesmanship from the current system that rewards lawsuit abuses over creativity," said Rep. Lamar Smith (R-Texas) in introducing the bill in June.
The bill's most fundamental change would be to award patents to those who are first to file, rather than first to invent. This would bring US patent law in line with the rest of the world, a recommendation...
Despite general agreement on the patent bill's objectives, there is little consensus on how to achieve them. "Different industries experience the patent system very differently," said Mark A. Lemley, a Stanford University law professor, in Congressional testimony. While biotech and pharmaceutical products are often based on a single or, at most, handful of patents, computer hardware, software, and financial networks often rely on thousands of previously issued patents. A successful challenge to any of these patents can make the new product tumble like a house of cards.
Because of these differences, the patent bill has been a work in progress for three years. "It's a question of how to make reforms without goring the other guy's ox," says Jeffrey P. Kushan, a partner at Sidley Austin Brown & Wood in Washington, DC, who has also testified on the bill for biotech and pharma interests.
In the latest legislative skirmish, the biotech and pharmaceutical industries appear to be prevailing. They have argued that earlier elements of the bill would damage their ability to obtain and defend patents, potentially hindering medical innovation. In July, several major provisions of the bill were deleted, the most significant of which would have made it harder for challengers to win permanent injunctions to get allegedly infringing products off the market.
The computer and financial services industries desperately wanted this injunctive relief to help them repel "patent trolls" – inventors who essentially extort license fees by alleging patent infringement knowing that most companies will pay up rather than risk having their new products pulled from the market. But the biopharmaceutical industry and universities won that battle by arguing that obtaining injunctions was essential to enforcing their patents, especially given the frequent lag time between discovery and product launch.
WINDOWS OF OPPORTUNITY
Still in the bill is a new post-grant opposition system that would allow patents to be challenged at the US Patent and Trademark Office (USPTO) for nine months after being awarded. Most groups support this "first window of opportunity," believing that stronger patents will emerge if members of the public are permitted to present information that examiners might have missed.
But stricken from the bill in July was a "second window" that would have allowed patents to be challenged at the USPTO any time during the patent's lifetime. The goal was to reduce court costs by creating a less-expensive venue for patent challenges. "This would have led to more expensive litigation costs because you could have multiple proceedings at the PTO and in the courts," says Herbert Wamsley, executive director of the Intellectual Property Owners Association, whose membership includes a variety of industries.
The House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property, which Smith chairs, had planned to hold another hearing on the bill this month. "No final decisions have been made and changes are still possible," said Blair Jones, Rep. Smith's spokesperson. Although several hearings have also been held in the Senate, companion legislation has not yet been introduced there.
Despite all these efforts, some still question whether patent reform is truly needed. "We should think long and hard before we reject 55 years of success in innovation and suggest the patent system isn't working," Gulbrandsen said. "There are some bad players out there and we should think about tailoring legislation specifically for them, and not punish the rest of the patent applicants."