Video: Intel, Startups Debate Patent Reform Efforts

Recently, Intel Corp.'s chief patent counsel David Simon and entrepreneur Steve Perlman faced off in a debate on patent reform yesterday, where their views showed a wide gap between the opinions of big corporations and startups over pending patent legislation, and especially apportionment of damages and first-to-file.

It's an interesting presentation - Simon makes a number of points regarding the practical effect of patent litigation on the business models and budgets of high tech companies. Perlman, who was more animated than Simon, began to pick apart, in detail, some of the contentions of the CPF, and others in the pro-reform movement. At one point, it even sounds like he calls one of the authors that contributed to matters cited in the Congressional Report a "f***ing liar" (this is not crystal clear, but you can judge for yourself at about the 7:35 point of the video)

View the 20-minute video here (link)

Also see part 2 of the video (16 min.), where Ronald Yin from DLA Piper addressed a more middle-of-the-road position, stating that "The system needs to be fixed, but I don't think it's in as dire straits." (link)

See, EETimes, "Intel, startup face off in patent debate" (link)

EDN, "Patents: fixable, or the next weapons of financial destruction?", discussing the debate and noting that the burgeoning "patent derivative market" could "further increase the risk of innovation for real technology companies" (link)

See also, Tech Daily Dose, "Lofgren 'Very Nervous' About IP Pact" (link). From the article:

Silicon Valley executives told [Lofgren] in recent meetings that a compromise bill, which last month passed the Senate Judiciary Committee, could be worse than no bill at all due to what they believe is watered down damages language. "Last year we had a strong bill," Lofgren said of the version that passed the House. The Senate measure stalled last spring after Judiciary Chairman Patrick Leahy and then-ranking member Arlen Specter could not see eye to eye on damages text. "Now we have a bill that opponents of patent reform are rallying around," she said of Leahy's legislation as amended.

House Rule Change May Cloud Transparency on Patent Reform

Back in 1994, reforms to the House rules were made to tackle the issue of "secretive" legislative processes. The reforms included opening committee meetings to the public and media, term limits for committee chairmen, "truth in budgeting", elimination of the committee proxy vote, authorization of a House audit, specific requirements for blanket rules waivers, and guarantees to the minority party to offer amendments to pieces of legislation.

It is now being reported that Speaker Pelosi is looking to reverse the "House Fairness Rules" to allegedly consolidate power in the (recently expanded) Democratic majority. Needless to say, the Republicans are not happy, and the leadership has shot off a letter to voice their objections:

The American people[] stand to pay a price if the Majority [] shuts down free and open debate on the House floor by refusing to allow all members the opportunity to offer substantive alternatives to important legislation -- the same opportunities that Republicans guaranteed to Democrats as motions to recommit during their 12 years in the Minority. The Majority’s record in the last Congress was the worst in history when it came to having a free and open debate on the issues.

See a copy of the full letter here.

Connie Hair, writing for Human Events, decribes the situation this way:

Pelosi’s proposed repeal of decades-long House accountability reforms exposes a tyrannical Democrat leadership poised to assemble legislation in secret, then goose-step it through Congress by the elimination of debate and amendment procedures as part of America’s governing legislative process.

New Patent Reform Bill Introduced In Senate (Seriously!)

"And I beheld when he had opened the sixth seal, and, lo, there was a great earthquake; and the sun became black as sackcloth of hair, and the moon became as blood"

-- Revelation 6:12

As the Horsemen of the Apocalypse plod through the financial markets, Congress, suffices to say, has has a rough patch heading into the final days of the current Session of Congress. So it came as quite a surprise (at least to yours truly) that Senate Minority Whip Jon Kyl (R-AZ) introduced the latest Patent Reform Act last night.

Early reports indicate that the bill "departs substantially from the one sponsored by Judiciary Chairman Patrick Leahy and Sen. Orrin Hatch, R-Utah. The Kyl bill resulted from months of meetings with critics of the Leahy language."

Interestingly, members from the Coalition for Patent Fairness were absent from the talks leading to the latest version of the bill. While there is practically zero chance that this bill will pass in the current session, members of the Senate continue to stress that patent reform will be a "top priority" for 2009.

In short, the bill:

- Increases PTO authority on a number of administrative fronts (money, etc.).

- Introduces "applicant quality controls" (i.e., prior art search w/ analysis), but does not make them mandatory. Instead, section 123 of the bill provides that "the Director may, by regulation, offer incentives to applicants who submit a search report, a patentability analysis, or other information relevant to patentability."

- Modifies inequitable conduct, so that, if inequitable conduct is found during litigation, a court order must contain "findings of fact setting out with specificity the information relating to the conduct at issue not previously considered by the Director and upon which the court based its order." The patentee then would have to file a reissue within 2 months thereafter, and take the matter up with the PTO. If there is "probable cause" that inequitable conduct has occurred, the Director will be authorized to impose civil sanctions of up to $150,000 for each act of misconduct, or up to $1M for a "pattern of misconduct."

- Provides a 9-month "first window" for opposition, where issues related to 35 USC 101-103 AND 112 may be considered. No "lawsuit threat" showing is required for oppositions.

- Provides a "second window" for opposition, where only 102 or 103 considerations based on patents or printed publications will be allowed.

- Applies post-opposition estoppel to any subsequent litigation.

- Requires economic analysis for determining damages. Subject to specific exemptions, "the amount of a reasonable royalty shall not be determined by the use of a standard or average ratio for the division of profits, an industry average rate for royalties, or other methods that
are not based on the particular benefits or advantages of the use of the invention."

- Includes a "Check 21" exception: "With respect to the use by a financial institution of a check collection system that constitutes an infringement under subsection (a) or (b) of section 271, the provisions of sections 281, 283, 284, and 285 shall not apply against the financial institution with respect to such a check collection system."

Read/download a copy of the latest draft here, courtesy of Hal Wegner.

Patent Reform on Wobbly Legs in Senate

On Friday, the Wall Street Journal ran an article claiming that S. 1145 has hit an "impasse" at the Senate, and quoted Pennsylvania's Sen. Arlen Specter as saying "I think we need more time to get it right." More telling however, was a quote from Senate Judiciary Chairman Patrick Leahy, who spoke of the bill in past tense, saying that the bill "was a missed opportunity," adding that the dispute over S. 1145 was over "just a handful of words" and further warning that "thousands of hours" spent on negotiations were at risk of being wasted.

Also, it was reported by Hal Wegner that after last Wednesday's Giles Sutherland Rich American In of Court meeting, John Whealan announced to several members that he would be leaving his temporary position with Senator Leahy on May 1, 2008. Whealan has been the Deputy General Counsel for Intellectual Property Law and Solicitor for the USPTO since 2001. Over the last year, he has been on leave to assist Leahy with S. 1145. Some are questioning if Whealan's move is indicative of a dying bill that has, so far, failed to generate the level of support hoped by its proponents . . .

Cracks Forming in the Passage of Patent Reform Act

Today the Congressional Quarterly (CQ) is reporting that Senator Arlen Specter (R-PA) is pulling his support for S.1145, stating that he "cannot join" his colleagues "on some parts of the bill, citing apportionment of damages as a "principle sticking point."

Patrick Leahy, the chairman of the Senate Judiciary Committee has reportedly been working on introducing the amendments to S.1145 for several days and even reserved the television studio two days in a row this week, only to cancel both times. Support for the bill does not appear to be strong at this time - the CQ article notes that Leahy acknowledged that he "will need every vote he can find to advance the bill through the Senate."

Cosponsor Orrin Hatch (R-UT) has also voiced reservations about S.1145, and made clear this week that his support for the bill is contingent on the inclusion of his language for amending inequitable conduct (currently Hatch is "optimistic" that his language will be included).

In a separate but related news story, the Dow Jones Newswires are reporting that Senator Jeff Sessions (R-AL) is dropping the "Check 21" provision completely from the bill, stating "I don't know how [the provision] can be modified" to pass constitutional muster. Tuesday, Sessions indicated that he likely wouldn't attempt to fix the amendment. House Speaker Nancy Pelosi (D-CA) has previously voiced her opposition to the amendment.

The quote that best summarizes the situation is from Senator Sessions himself: "I think this has more to do with lobbyists than it does with merits . . . This has been a lobbyist money machine. They're all over the place around here."

Latest Amendments to S.1145

The Senate has released the latest amendments to the Patent Reform Act in advance of Senate Floor Debate:

Interlocutory appeals: limits interlocutory appeals of claim construction orders to those which the district court determines have a reasonable basis for disagreement, and the appeal may advance the ultimate termination of the litigation;

Best Mode amendment: best mode would be considered for obtaining a patent, but not for invalidating;

Reexamination amendment: restores third-party reexamination;

The "CAFC Telework" amendment: ensures that CAFC judges that do not reside within a 50-mile radius of Washington DC use chambers of an existing courthouse in the district where they reside.

Derivation proceedings amendment: clarifying procedures relating to derivation proceedings (which will "replace" interference practice when it is gone);

Interference appeals amendment: allow CAFC to hear BPAI interference decisions commenced prior to the effective date of the act;

Marking provision amendment: deletes marking provision and maintains current law;

In re Seagate amendment: codifies the "objective recklessness" standard;

Post-grant review amendment #1: corrects inconsistency between section 337 (1) and (2) by disqualifying post-grant reviews where issues were raised (or could have been raised) in the litigation;

Post-grant review amendment #2: defines "final decision" for estoppel purposes.


More amendments are expected to follow in the coming weeks.