Today, "Low Cost Drugs." Tomorrow, "Low Cost Car Parts?"

A report has surfaced today that the Quality Parts Coalition (QPC) is lobbying Congress to include a “repair” clause or exemption in U.S. design patent law to protect competition and allow lower consumer costs for collision repairs.

The QPC claims that car companies control more than 73 percent of the repair parts market, resulting in limited choices and increased costs to consumers. The QPC also claims that "shutting out" competition in the auto parts market would further increase costs to consumers as well as insurance companies by roughly $1 billion each year.

Last July, the QPC, along with numerous other trade organizations (Advocates for Highway and Auto Safety, Center for Auto Safety, Consumer Federation of America and Public Citizen) sent an open letter to lawmakers, stating that

"If the auto industry is allowed to continue their efforts to patent the design of these parts, crash-repair bills will significantly increase, quality will suffer in the absence of real competition, and safety will be compromised as families are forced to forego necessary repairs because of the high cost of replacement parts."

The letter added that an amendment to patent law should allow using an alternative repair part to restore a product to its "original appearance," without violating patents that protect manufacturers from rivals who would copy their designs.

Read press release from QPC here (link)

Read related economic study "Estimation of Benefits to Consumers from Competition in the Market for Automotive Parts" (link)

Read article from Market Watch "Protect drivers from high-cost car parts, Congress urged" (link)

CAFC Weighs in on Patent Reform

Chief Judge Michel issued a letter on May 4 to Senators Leahy and Hatch, decrying two specific provisions in the Patent Reform Act of 2007: (1) immediate appellate review of claim construction, and (2) apportionment of damages:

First, the provision making claim construction rulings immediately appealable will likely increase filings in this court, as I previously advised. One empirical study suggests that the annual filings, now at about 500, would double. If so, substantial additional delays in deciding patent and all other appeals would ensue, The appeals in patent cases presently take almost a year to resolve; because of the impact of additional filings, the delay could easily approach two years, Meanwhile, the bill commands that all further proceedings in the trial court are frozen. Trial court delays in patent cases are already typically two-to-three years. The new provision could double that delay.

Furthermore, initial claim construction rulings are subject to change during summary judgment proceedings or trials as more information is provided to the court and dispositive issues are clarified. Such rulings, because they come so early in the litigation, construe large numbers of claim terms that ultimately turn out not to control the outcome. Therefore, providing immediate appellate review is very inefficient. Presently, when a construction does control the outcome, summary judgment is granted and is immediately appealable under current law as a matter of right. Indeed, the majority of our patent appeals from district courts are not from final judgments after trial, but from grants of summary judgment based on claim construction. It is difficult to see serious deficiencies in current law and practice, particularly when both sides file summary judgment motions, as is the norm, because even if one summary judgment motion is denied (not immediately appealable), the other is granted and is immediately appealable.

Second, the provision on apportioning damages would require courts to adjudicate the economic value of the entire prior art, the asserted patent claims, and also all other features of the accused product or process whether or not patented. This is a massive undertaking for which courts are ill-equipped. For one thing, generalist judges lack experience and expertise in making such extensive, complex economic valuations, as do lay jurors. For another, courts would be inundated with massive amounts of data, requiring extra weeks of trial in nearly every case. Resolving the meaning of this novel language could take years, as could the mandating of proper methods. The provision also invites an unseemly battle of "hired-gun" experts opining on the basis of indigestible quantities of economic data. Such an exercise might be successfully executed by an economic institution with massive resources and unlimited time, but hardly seems within the capability of already overburdened district courts. Appellate issue would also proliferate increasing complexity and delays on appeal, not to mention the risk of unsound decisions.

I am unaware of any convincing demonstration of the need for either provision, but even if the Committee ultimately concludes that they would represent an improvement over current patent policies embedded in Title 35 of the United States Code, their practicality seems to me very dubious. That is, the costs in delay and added attorneys fees for the parties and overburden for the courts would seem to outweigh any potential gains. Finally, even if the policy gains were viewed as significant, the courts as presently constituted simply cannot implement the provisions in a careful and timely manner, in my judgment.

View the letter (link)

Patent Reform Legislation Scheduled to be Released Today

Sponsors in both the House and Senate plan to unveil patent reform bills today (2:15 p.m. EST), according to congressional officials. The Coalition for Patent Fairness, will host a media teleconference today, at 3:30 p.m. EDT to discuss the bipartisan, bicameral patent reform legislation scheduled to be introduced this afternoon by Senators Patrick Leahy (D-Vt.) and Orrin Hatch (R-Utah) and Congressman Howard Berman (D-Calif.) and Congressman Lamar Smith (R-Texas). After brief remarks, reporters will have an opportunity to ask questions.

Participants in the teleconference include

• Jon Yarowsky, chief counsel, Coalition for Patent Fairness
• Steve Elmendorf, coordinator, Coalition for Patent Fairness
• Charles Fish, vice president and chief patent counsel, Time Warner Inc.
• Joel Poppen, deputy general counsel, Micron Technology, Inc.

CALL-IN INFO:

1-800-311-9407

1-334-323-7224

Passcode: Patent

Of course, the 271 Blog will provide updates on the legislation as it becomes available

See Washington Post, Patently At Odds

2007 Patent Reform - It's Off To An Ugly Start . . .

The U.S. House of Representatives Committee on the Judiciary is organizing the Subcommittee on Courts, the Internet, and Intellectual Property for oversight hearings this Thursday (2:00 PM) on patent reform.

The title of the hearings pretty much says it all: "American Innovation at Risk: 'The Case for Patent Reform.'” The current list of witnesses, and their linked testimony, includes:

• Adam B. Jaffe, Professor of Economics and Dean of Arts and Sciences, Brandeis University Whaltham, Massachusetts (view prepared testimony here)
• Suzanne Michel, Chief Intellectual Property Counsel and the Deputy Assistant Director for Policy Coordination Federal Trade Commission Washington, D.C. (view prepared testimony here)
• Mark Myers, Co-Chair of the National Academy of Sciences Report Patent System for 21st Century Unionville, Pennsylvania (view prepared testimony here)
• Daniel B. Ravicher, Executive Director Public Patent Foundation New York, NY (view prepared testimony here)

The testimony of Myers and Michel lay out the conventional case for patent reform: quality issues at the PTO create uncertainty, trolling litigation exploits the uncertainty, and the lack of challenge mechanisms on validity propagate the uncertainty. Thus, the following reform measures were highlighted

1. increase scrutiny (i.e., "second pair of eyes") and funding for PTO examination;
2. provide post-grant opposition to challenge questionable patents;
3. tighten standards on obviousness and willfulness; and
4. provide safe havens for prior user rights and research exemptions.

One interesting note on Suzanne's testimony is that she resurrected the "preponderance of the evidence" standard for invalidity which was recently recommended in the FTC's 2002 report on patent policy. Other than noting this recommendation, Suzanne didn't pursue this further in the testimony.

The testimony of Jaffe and Ravicher, however, is another matter. With all due respect, it's just over the top. Some of the testimony is inaccurate and misleading (the USPTO has an 85% allowance rate? Really?) some of it is simply untrue ("through a quota system, patent examiners are given more credit, and evaluated more favorably, if they issue, rather than reject patents"), and some of it is just bizarre. Take this, for example, when Ravicher compares bad patents to condemned prisoners on death row:

[l]itigated patents tend to have a much greater significance to the public, on average, than non litigated patents. To draw an analogy, if 35% of the people on death row who challenged their convictions were actually proven innocent, that wouldn't necessarily mean that 35% of all people on death row, much less 35% of all convicted criminals, were actually innocent (that ratio could be higher or lower), but the severity of each mistake regarding someone on death row is extreme nonetheless. Similarly, the technology involved with litigated patents is almost without exception extremely valuable, so any mistakes regarding the validity of those patents can cause severe harm in and of itself, regardless of the validity rate of issued patents in general.

Of course, the call for banning software and business method patents is urgently argued, as well as reducing wilfull infringement strictly to cases where direct copying is proven. In short, the patent world, according to Jaffe and Ravicher, is populated with good guys and bad guys - and the bad guys are people who dare to exclude others, who purport to have good intentions, from technological advancements.

This is not to say that their testimony is wholly without merit, because they do make a few valid points. However, the rhetoric is simply too much, and frankly, is getting a little old.