More Patent Reform News

• Chief Judge Michel's new letter to the Senate (link) - Judge Michel expounds on his concerns over mandatory interlocutory appeals, and apportionment of damages. In the latest letter, Judge Michel offers some alternatives:

[T]he third avenue of [interlocutory] appeal could be limited to cases in which, despite the absence of a grant of summary judgment, the trial court determines that claim construction will likely control the verdict on infringement. Under such a provision, the number of interlocutory appeals on this third avenue would, I expect, be far fewer than under the provision as currently drafted.

With regard to Section 5, on apportionment of damages when calculated as a reasonable royalty, the current language requires the court to conduct a massive macroeconomic analysis. The analysis requires determining the economic value of all prior art technology and the economic value of everything in the accused product or process not attributable to the asserted patent . . . Perhaps the Committee would consider making this analysis discretionary with the court so that it could be limited to those cases where it might be truly necessary. A second alteration would be to require the accused infringer to establish a basis by submitting sufficient evidence before the undertaking would occur.

• More than 200 organizations signed a letter similarly opposing the apportionment of damages provision, and also opposing the "second window" provision and the expanded rulemaking authority for the USPTO. The letter can be viewed/downloaded here (link)

• Senator Kennedy admitted recently that Congress is having problems grappling with the esoteric issues of patent law. "All of us are generalists, we're elected as generalists, and this is an enormously technical issue," Kennedy said. He also remarked that the biotech and high-tech sectors should work out differences by themselves -- otherwise, "it comes down to who has more lobbyists."

• In a bit of a twist, Democratic presidential candidate and former Sen. John Edwards (N.C.) on Thursday in Detroit offered details of his universal health care proposal, which included overhauling the patent process for breakthrough pharmaceuticals. His proposal will explore the possibilities of offering "prizes" for breakthrough discoveries. From Edwards' website (link):

Edwards will convene an expert panel to explore whether there are certain key disorders where prizes for breakthroughs – as an alternative to patent monopolies—would offer new incentives to researchers, guaranteed gains to companies, and lower costs to patients. Prizes would supplement, but not replace, the current patent system.

More Voices Speak Out on Patent Reform

As the Patent Reform Act of 2007 makes its way through the Senate, more and more entities are making sure their concerns are being heard by Congress. To be sure, the swell of dissent is increasing, and is expected to further increase over the coming weeks. Some recent letters to Congress include:

Chief Judge Michel: his letter includes a biting criticism over the apportionment of damages:

• "As promised, I have since reviewed some of the Federal Circuit decisions that address aspects of this subject [damages], and I have also identified and attached an article that should help you more than reading individual opinions. Significantly, it was written by a seasoned patent litigator with direct experience in how such damage theories are actually litigated in court. Lawyers employed by particular companies, like most law professors, have little or no experience from that perspective. Mr. Rooklidge, by contrast, has several decades of litigation experience in precisely these types of cases."

• In short, the current provision has the following shortcomings. First, it requires a massive damages trial in every case and does so without an assignment of burden of proof on the proper party and articulation of a clear standard of proof associated with that burden. Second, the analysis required is vastly more complicated than that done under current law. Third, the meaning of various phrases in the bills would be litigated for many years creating an intervening period of great uncertainty that would discourage settlements of disputes without litigation or at least prior to lengthy and expensive trials.

View/download Michel letter here (link).

View Rooklidge article here (link).


Advanced Medical Technology Association (AvaMed): the world's largest association of medical device manufacturers stated the following:

• "We agree with the position taken by many other industry groups, as well as Chief Judge Michel of the Federal Circuit, in opposing any apportionment of damages."

• "AdvaMed’s IP Working Group also opposes the “second window” of post-grant oppositions.Unlike many other industries, the life cycle of medical devices is relatively short—often no longer than seven to ten years. The ability to quickly capture, and then maintain, market share over this short period is critical."

• "Inequitable Conduct Should be Reformed and Substantive Rulemaking Should Not be Delegated to the PTO . . . With respect to the delegation of substantive rulemaking to the PTO, we oppose this provision. Such rulemaking likely would result in litigation challenging the PTO, which would create further uncertainty. In addition, giving the PTO power to make substantive rules, while bypassing legislation that is subject to debate and commentary, would inevitably lead to specialized lobbying groups."

View/download AvaMed letter here (link).

Massachusetts Medical Device Industry Council (MassMEDIC): Massachusetts ranks second among all states in the number of medical device patents filed each year. In a letter to Senator Kennedy, MassMEDIC states:

• "MassMEDIC opposes an open-ended post-grant opposition that allows for a second window of review after the initial post-issuance challenge period. Having a second, open-ended window prevents conveyance of patent certainty, validity, and exclusivity, which are essential to justify the millions of investment dollars needed to bring these types of inventions through to commercialization."

• "MassMEDIC opposes the bill’s limit on patent infringement damages to the economic value attributable to the patent’s “improvement over the prior art.” As Judge Michel of the Court of Appeals for the Federal Circuit (which has exclusive jurisdiction over appeals for patent cases) has recognized, a “prior art subtraction” standard would add complexity and uncertainty to patent litigation and result in more costly and lengthy court proceedings."

• MassMEDIC opposes [the] delegation of expansive rulemaking authority [to the USPTO] provided under S1145.

View/download MassMedic letter here (link).


Medical Device Manufacturer's Association (MDMA):

• The Patent Reform Act of 2007 includes provisions that, when combined with the changes that have already taken place, threaten to devastate life sciences investment, and thereby, innovation. MDMA is particularly concerned with the provisions dealing with PTO rule making authority, apportionment of damages, the open-ended nature of the post-grant review window, and the lack of redress for the growing use of the inequitable conduct defense.

View/download MDMA letter here (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)