Good and Bad in Patent Reform Act of 2007

by on April 19, 2007 · 2 comments

Fine-tuning patent law (as I have argued here and here) is a task the Supreme Court is best suited to handle, and the Leahy-Hatch / Berman-Smith Patent Reform Act of 2007, introduced yesterday in the Senate and House, thankfully is silent on some of the more contentious patent reform issues. According to Rep. Howard Berman (D-CA),

There are a number of issues which we have chosen not to include in the bill primarily because we hope they will be addressed without the need for legislation. For instance the Supreme Court recently resolved questions regarding injunctive relief. In that category we include amendments to Section 271(f) and the obviousness standard as both issues are currently before the Supreme Court. If either of those issues are not resolved, Congress may need to re-evaluate whether to include them in a patent bill.

Click here for Rep. Berman’s web page containing the text of the proposal and a section-by-section analysis. A very quick initial read indicates that a number of the ideas in the Congressional proposal sound okay in theory but could in practice lead to more uncertainty and new forms of abuse.


First of all, the proposal aims to limit obscene damage awards by requiring that when a court seeks to determine what a “reasonable royalty” would be, the analysis must be limited to the economic value “attributable to the patent’s specific contribution over the prior art.” But this is what the courts try to do already. The law doesn’t intentionally compensate someone for the harm done to another. So this is, in effect, a warning shot to judges to be more defendant-friendly and keep damage awards to a minimum. The proposal also says damages can’t be based on the “entire market value” of the infringing product or process, unless the patent’s specific contribution over the prior art is the “predominant basis for market demand” for that product or process. This is a very high threshold intended to exclude almost everything. I wonder what’s wrong with “significant,” for example, instead of “predominant”? Also, a “predominant basis for market demand” may not be the same as an essential ingredient. But right now if something is an essential ingredient the courts can take that into account.

Rep. Howard Berman (D-CA), one of the proposal’s sponsors, notes that what really grates on infringers is having to pay damage awards for “low quality” patents,

Litigation abuses, especially ones committed by those which thrive on low quality patents, impede the promotion of the progress of science and the useful arts.

On the positive side, the proposal permits third parties to submit relevant prior art references to the Patent Office. But it also creates a new post-grant opposition procedure. That’s because,

a party seeking to challenge the validity and enforceability of the patent has two avenues under current law: by reexamination proceeding at the USPTO or by litigation in federal district court. The former is used sparingly and is considered not very effective; the latter, district court litigation, is unwieldy and expensive

Why is reexamination considered not very effective? Well, for one thing, it has to be requested within three months of the issuance of a patent, unless the Director of the Patent Office decides to call for it on his or her own initiative. The Director can trigger a reexamination at any time. This serves as an important safeguard in truly unusual or egregious situations, but one that’s tempered by the fact that the Director presumably is a disinterested third party. Post-grant review can be requested by an infringer at any time, throughout the life of the patent, if the patent is likely to cause the infringer “significant economic harm.” There is, therefore, little incentive for interested third parties to participate at the front end of the process when patents are issued, which is normally the goal of public policy. The result is unnecessary risk for innocent third parties who participate in the marketing of new products and processes, such as investors, employees and suppliers. Most if not all decisions of government agencies must be appealed within limited timeframes such as 30, 60 or 90 days, because finality is what allows people to get on with their lives and plan for the future. The proposal tries to solve this problem by making post-grant review just like reexamination,

§ 325. – The Director may not institute a post-grant review proceeding unless the Director determines that the information presented provides sufficient grounds to proceed.

It sounds like we’re back where we started, except that we now have three layers of review instead of two. But there’s more. Post-grant review will be a congenial forum for an infringer:

§ 328.– The presumption of patent validity does not apply in post-grant review; burden of proof is preponderance of the evidence.

That’s not all. Berman acknowledges there’s a possibility of abuse, so new and unspecified regulations are going to be required,

Many have expressed concerns about the possibility of harassment of patent owners who want to assume quiet title over their invention. In an effort to address those concerns, the bill prohibits multiple bites at the apple by restricting the cancellation petitioner to opt for only one window one time. The bill also requires that the Director prescribe regulations for sanctions for abuse of process or harassment.

For those who have struggled to deal with the patent thickets in the newly patentable areas of software and business methods, there will appear to be some good stuff in the Leahy-Hatch / Berman-Smith Patent Reform Act of 2007. For many other holders of traditional patents, who are more or less satisfied with the current system, this isn’t a great starting point.

  • Lawrence B. Ebert

    Of “more uncertainty,” the so-called “second window” in which to oppose an ISSUED patent will create MAJOR uncertainty:

    § 322.– The petition for cancellation can only be filed (1) within 12 months of the patent’s issue or reissue (known as the “first window”), or (2) if there is substantial reason to believe that the continued existence of the challenged claim is likely to cause the petitioner significant economic harm, the petitioner has received notice from the patent holder alleging infringement by the petition, or the patent owner consents to the proceeding in writing (known as the “second window”).

    Thus, if the reform act of 2007 passed, one could never be sure if an issued patent is valid.

    The correct approach is to examine the patent application THOROUGHLY in the first place, and assess prior art/poor wording/etc. at the BEGINNING of the process. Continual “reinspection” of the product flies in the face of the teachings of Deming, and is just simply bad business.

    Leaving aside the uncertainty that WOULD be created by a POST-GRANT opposition, consider what can happen in the re-examination procedure ALREADY in place.

    See for example:
    http://ipbiz.blogspot.com/2007/04/somers-on-bongso-work-as-prior-art-to.html

    While there is much discussion on techliberation about bad patents being enforced against competitors, there is not so much discussion about the use of bad patents against patentees, as is happening in the Thomson case. Issued US patents are presumptively valid, and Thomson now gets to explain how his (real) “product” is distinct from the non-existent, prophetic “products” of earlier workers who merely guessed about things might be.

  • Lawrence B. Ebert

    Of “more uncertainty,” the so-called “second window” in which to oppose an ISSUED patent will create MAJOR uncertainty:

    § 322.– The petition for cancellation can only be filed (1) within 12 months of the patent’s issue or reissue (known as the “first window”), or (2) if there is substantial reason to believe that the continued existence of the challenged claim is likely to cause the petitioner significant economic harm, the petitioner has received notice from the patent holder alleging infringement by the petition, or the patent owner consents to the proceeding in writing (known as the “second window”).

    Thus, if the reform act of 2007 passed, one could never be sure if an issued patent is valid.

    The correct approach is to examine the patent application THOROUGHLY in the first place, and assess prior art/poor wording/etc. at the BEGINNING of the process. Continual “reinspection” of the product flies in the face of the teachings of Deming, and is just simply bad business.

    Leaving aside the uncertainty that WOULD be created by a POST-GRANT opposition, consider what can happen in the re-examination procedure ALREADY in place.

    See for example:
    http://ipbiz.blogspot.com/2007/04/somers-on-bon

    While there is much discussion on techliberation about bad patents being enforced against competitors, there is not so much discussion about the use of bad patents against patentees, as is happening in the Thomson case. Issued US patents are presumptively valid, and Thomson now gets to explain how his (real) “product” is distinct from the non-existent, prophetic “products” of earlier workers who merely guessed about things might be.

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