Patent ‘reform’: Deja vu all over again

Patent reform legislation, introduced in both the Senate (S. 515) and House (HR 1260) calls for major reforms, many of which were proposed but not passed in 2008. Hence, with apologies to Yogi Berra, “It’s deja vu all over again.”

The main reforms proposed in the Senate bill, which is slightly different than the House Bill, include:

• Compensatory damages are limited to a royalty based on the value of the invention’s “specific contribution over the prior art” rather than one based on the value of the whole invention, often containing many other features as well. It also greatly limits treble damages for willful infringement.

• A patent is granted to the applicant who is the first to file a patent rather than the first to invent the actual invention, as in the current system. It also eliminates the one-year grace period to file after public disclosure in most instances.

• The circumstances in which re-examination may be requested is expanded. Also created is a new post-grant review procedure for third parties to seek cancellation of a patent based on any ground of invalidity.

• Rights holders will be more easily able to file patent applications on behalf of the inventors.

• The federal Circuit Court of Appeals will hear appeals of the results of claim construction hearings when approved by the lower court.

• The Patent and Trademark Office will be granted the power to set its own fees, including the power to reduce fees, to reasonably compensate the PTO for the services performed.

The Senate and House bills do not include a number of reforms proposed in 2008. These are:

• A requirement that all patent applications be published after 18 months, eliminating the opt-out provision currently available to applicants who do not intend to file international applications.

• A clearer definition of what constitutes inequitable conduct or an elimination of this defense altogether

• A requirement that an applicant for a patent submit a search report and analysis and any other information relevant to patentability.

Opposition to these proposed reforms was so strong in 2008 that they were eliminated from the Senate and House Bills.

Full-scale war

Some of the proposed reforms are more or less neutral and will be beneficial to the patent system as a whole. Others will be the subject of charges and counterchanges between information technology, pharmaceutical and financial sector companies supporting the reforms, on the one hand, and manufacturing companies, opposing the reforms, on the other hand.

Google has already weighed in supporting the Senate and House bills. Google argues that the limitations on damages is a necessary response to runaway jury awards. It also argues that these reforms are intended to address the increasing number of cases filed by “patent trolls” — entities merely holding patents but not producing anything. This argument may be based primarily on the fact that “patent trolls” sound like good enemies to fight.

On the other hand, 130 manufacturing companies, including Dow Corning, Exxon Mobil and Monsanto, at the encouragement of the Manufacturing Alliance on Patent Policy, recently signed a letter to President Obama stating that proposals in recent patent reform legislation would, if enacted, pose a risk to manufacturers by weakening the patent system.

These are clearly just the first shots of what will be the resumption of a full-scale war over patent reform legislation. Nevertheless, we in New Hampshire should make every effort not to let our interests get lost in the war. We need to make sure that the interests of the sole inventors, small companies and educational institutions that are the basis of New Hampshire’s high technology economy are protected.

For example, the proposed damages provisions clearly benefit large companies that are frequent targets of infringement suits. They do so by reducing awards for infringement, both by reducing the amount of compensatory damages and reducing the circumstances in which treble damages can be awarded.

Conversely, they reduce the size of the “stick” available to New Hampshire’s sole inventors, small companies and educational institutions to protect their technology against infringement.

As another example, the first to file provisions are clearly advantageous to large institutions that are well-financed and that have departments filing numerous patent applications. Moreover, the first to file provisions not only tend to favor large well-financed entities that regularly file patent applications but also tend to weaken the rights of patent holders. When priority is based on the filing date — a date obviously later than the invention date — more material will be considered prior art, which prior art can be used to invalidate the patent.

Again, these provisions reduce the size of the “stick” available to New Hampshire entities.

New Hampshire’s sole inventors, small companies and educational institutions do not, unfortunately, have the “Chicago option” open to them — to vote early and often against these provisions of the current Senate and House bills. However, these entities, and the rest of us who benefit from a vibrant New Hampshire economy, should contact our senators and representatives and make known our opposition to these provisions.

Paul C. Remus, a shareholder in the law firm of Devine Millimet, focuses his practice on intellectual property and emerging companies. He can be reached at 603-695-8506 or