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."

Commerce Department Renews Support for AQS's in S. 1145

Carlos Gutierrez from the Department of Commerce sent a letter today to Arlen Specter, expressing "strong support" for a "key element" of S. 1145: Applicant Quality Submissions (AQS).

The Administration strongly supports the AQS provision in the bill in its current form and believes that enactment will prove to be the strongest step toward improved patent quality. By reducing the number ofpoor quality and imprecise applications, applicant quality standards will result in dramatic reductions in patent pendency and backlog, as well as reduce the likelihood of excessive litigation. The current misalignment of information incentives slows and degrades the patenting process.

Interestingly, the PTO appears to charge rejected applicants with draining PTO resources that would be better spent on examining "important innovations." Of course, the context of "important innovations" is unclear. However, it is clear that the PTO is expecting applicants to demonstrate their knowledge of the art before considering a patent application:

There is no one who has greater opportunity, information, or incentive to explain why an application deserves a patent grant than the applicant. There has been a sharp decline in the percentage of patents allowed, due in part to comprehensive internal quality improvements. However, the USPTO is now applying more than 55 percent of its examination resources to examining applications that do not warrant a patent. In order for additional quality and efficiency gains to accrue, the system must focus on the quality of applications. Stated simply, our innovation system can no longer afford the time and the cost of heavily subsidizing poor quality patent applications, which crowd out our most important innovations. Applicant quality standards are essential to improving and expediting the process by which new and innovative ideas become reality.

Also, the PTO made clear that changes to inequitable conduct must be accompanied by "strong provisions" requiring AQS - anything short of that would "invite fraud on the patent system":

[T]he Administration strongly opposes any statutory changes to the doctrine of inequitable conduct in the absence of a strong provision requiring Applicant Quality Submissions. Applicant quality standards and inequitable conduct reform are inextricably linked. Diminishing the penalties for misrepresenting facts before the United States Patent and Trademark Office (USPTO) without also increasing the robustness of the process for eliciting quality information from applicants may lead to poorer quality applications, in tum increasing the difficulty of conducting accurate examinations. Inequitable conduct reform alone, without Applicant Quality Submissions, would merely invite fraud on the patent system.

Read/download the letter here (link)

Draft Report of S. 1145 is (Unofficially) Available

The IPO recently reported that a draft of the Senate Judiciary Committee's report on S. 1145 has been circulated in the Washington lobbying community and on the internet. The draft report provides some interesting insight on the bill approved by the Senate on July 19, 2007, but does not contain any new or compromise provisions. It is anticipated that the report will undergo additional changes, and be finalized and issued as the official committee report on the July 19 bill.

The contents of the circulated draft bill provides

• Background and Purpose of S. 1145, the Patent Reform Act of 2007;
• History of the Bill and Committee Consideration;
• Section-by-Section Summary of the Bill;
• Cost Estimate;
• Regulatory Impact Evaluation; and
• Changes to Existing Law Made by the Bill, as Reported

According to the draft report, the numbered sections of the Act do the following:

(1) title the Act the Patent Reform Act of 2007;

(2) change the system to a “first-inventor-to-file” system;

(3) make it simpler for patent applicants to file and prosecute their applications;

(4) codify and clarify the standard for calculating reasonable royalty damage awards, as well as awards for willful infringement;

(5) create a relatively efficient and inexpensive administrative system for resolution of patent validity issues before the USPTO;

(6) establish the Patent Trial and Appeal Board;

(7) provide for eventual publication of all applications and enhance the utility of third
parties’ submissions of relevant information regarding filed applications;

(8) improve venue in patent cases and provides for appeals of claim construction orders whenwarranted;

(9) give the USPTO the ability to set its fees;

(10) remove the residency restriction for judges on the United States Court of Appeals for the Federal Circuit;

(11) authorize USPTO to require patent searches with explanations when a patent application is filed;

(12) codify and improve the doctrine of inequitable conduct;

(13) give the Director of the USPTO discretion to accept late filings in certain instances;

(14) limit patent liability for institutions implementing the “Check 21” program;

(15) end USPTO “fee diversion”;

(16) make necessary technical amendments; and

(17) set the effective date of the Act.

Download/view a copy of the draft report here, courtesy of the IPO (link)