By Kevin E. Noonan —

Commerce Secretary Gary Locke (at right) has written a letter
to the Senate Judiciary Committee giving qualified support to S. 515, the patent
"reform" bill voted out of committee months ago but languishing in
the wake of more pressing health care reform legislation.  Unfortunately, upon close reading, the
Secretary's letter seems to say much more that it does.

The letter begins with the usual platitudes about
the patent system:

The
American spirit of innovation is essential to creating jobs
and hastening that recovery.  Innovation and creativity are the wellspring of economic growth and progress.  As the framers of the Constitution recognized, a robust system of intellectual property protection ensures that innovation
will flourish.  To this end, landmark patent reform is urgently needed.  We
believe S. 515 incorporates the essential
elements of patent reform; and, therefore, the
Department of Commerce supports the bill with
additional recommendations below.

In the 21st Century, innovations in science
and technology are crucial drivers of our
economy.  Now, more than ever, strong, transparent, and predictable incentives
to invest in research and development are vital.  At the same time, legislative and administrative actions involving the
establishment and enforcement of intellectual property rights must
encourage healthy competition and facilitate continuing innovation.  A 21st
Century U.S. patent system must balance incentives for innovation and
competitive markets through strong intellectual property protections and by
only rewarding truly innovative ideas with those protections.

We must
recognize the international dimensions of innovation
by encouraging reforms that promote innovation in the United States and success
in the global marketplace.  A more harmonized international
patent system will benefit U.S. applicants by simplifying the patent process,
reducing legal costs, and enabling American innovators to obtain patents more
quickly, both domestically and abroad.  Developing an effective international
system will help ensure that American intellectual property rights are
protected around the world.

And of course, the goal is fairness:

The cornerstone of our comments is therefore to provide
balance, flexibility and efficiency in the U.S. patent system.  The Administration seeks reforms that
fairly balance the interests of innovation and competition across all industries
and technologies without favoring one industry or any particular area of
technology over another.

Number one on the list of priorities is the Patent Office, and
(understandably, perhaps, in view of the current fiscal situation), the number
one priority is fees.  The Office
needs to be able to set fees, according to the Secretary, to address the
backlog of pending applications and its "recent financial challenges"
(many of which, ironically, are caused by its ineffective attempts to address a
"patent quality" problem that may not have existed).  The letter also calls for the Office to
be given substantive rulemaking authority, which Congress has not seen fit to
grant to the Office.  Unfortunately, the letter tries to support its call for substantive
rulemaking authority with a specious argument about the Tafas v. Kappos case, which the letter states has raised doubt
regarding this authority.  There
was no such doubt on the part of the Federal Circuit:  the Tafas decision affirmed that the PTO had procedural rulemaking authority,
but not substantive authority, and that all four of the ill-advised "new
rules" at issue were procedural (although one of them was contrary to 35 U.S.C.
§ 120).  Indeed, the debacle
surrounding the "new rules" should be enough to affirm the wisdom of
preventing the Office from enacting substantive rules; no matter what one
thinks of the nascent Kappos regime, eventually it will be replaced, perhaps
(God help us all) by a reincarnation of the Dudas/Toupin regime.

The letter supports a post-grant review procedure that is "phased-in,"
without providing any substance on how and what would be "phased."  The Secretary uses this aspect of the
current reform bill to advocate again for fee-setting flexibility for the
Office, but is silent on the substance of the kind of post-grant review or its
implementation that the Administration supports.

The Secretary also supports "transitioning" the U.S.
patent system to a "first to file" system, in the name of
harmonization and with the purported benefits of "simplify[ing] the patent
system, reduc[ing] legal costs, [and] improv[ing] fairness [to whom, one
wonders]."  The "complex,
time-consuming and resource intensive" costs of global patent procurement
is the supposed target of this "reform," which the letter asserts
would benefit American innovators with "greater predictability,
reliability and competitiveness."  Again, however, this section of the letter ends with vague references to
making "various adjustments" to the provisions of S. 515, also for the
sake of "fairness" to "all stakeholder" interests, without
any hint of what those "adjustments" might be.

The Secretary is direct in opposing provisions of the bill
regarding patent search and examination, motivated (creatively) by the fear
that such provisions might impede current and future work-sharing efforts
between the USPTO and foreign patent offices.  In addition, the letter raises concerns about the "sovereign
function" provisions with regard to including the public and U.S.-based "vendors
of patent-related services" (presumably, search firms) from participating in
the patent examination process.

Turning to litigation, the Secretary's letter "generally
supports" the Grand Compromise worked out between Senators Leahy,
Feinstein (at right), and Specter (when he sat on the other side of the aisle as the
Ranking Republican Member) giving a "gatekeeper" role to the Federal
judiciary on patent damages.  The
Administration wants to avoid damages provisions that give "lottery-atmosphere
awards" to prevailing patentees while ensuring "fair compensation"
(which suggests that compensation becomes more unfair the more egregious the
scope of the infringement).  But the support is provisional:  the letter notes that "the median jury award for patent damages
increased significantly from 1991 to 2005," suggesting that the
gatekeepers of the judiciary were asleep at the switch (or at least dozing)
during that time.  Thus,
recognizing that "substantial work" has been done in reaching the
compromise, the Administration seems content to take a "wait and see"
approach to this aspect of "reform."  The Secretary also expresses a desire to "work
with Congress" on provisions involving willful infringement to "ensure
a fair enhanced damages standard" without setting out any specifics,
instead talking vaguely about the "quite substantial threat of enhanced
damages" (ignoring, apparently, the reality that the threat of enhanced
damages is the point of the willful infringement section of the statute).

Finally, the letter ends with a hodge-podge of provisions relating
to telework for examiners, virtual marking, the inventor's oath or declaration,
prior art submissions by the public during ex
parte examination, best mode, venue, interlocutory appeals, and the patent
expertise for judges pilot program, all of which the Administration supports
with reservations about "a number of technical concerns" with
the language of these provisions; the substance of these concerns is not disclosed.

In short, the letter is a disappointment for anyone intending to
understand the extent of the Administration's support of S. 515.  It is even more disappointing to anyone
looking for an understanding of the Administration's vision for the patent
system, or any concrete ideas that Secretary Locke, Director Kappos, or anyone
else in the Administration may have regarding improving the patent system.  It is certainly the case that neither
the Secretary nor (even more so) the Director have had much time in their
respective positions to fully address the concerns and issues surrounding
patent reform.  But besides
jump-starting Senator Leahy's (at left) efforts to get S. 515 passed in this Congress
(something fully understood by the Senator, who issued a press release
attesting to his renewed commitment to the bill), there is little that needed
to be said in Secretary Locke's letter.  Indeed, it is just as likely that the letter will galvanize the opposition
to the bill, which fails to address the concerns (however ephemeral) of the
major proponents of "reform" — the IT community.  In addition, the bill has dedicated
opponents in Senators Kyl and Hatch, with Senator Hatch angrily storming out of
the committee room during the vote that sent the bill to the Senate floor.  The Obama Administration may have good
ideas or bad ones on the patent system, but this letter does little to inform
those interested in the debate about ideas of either kind.

For additional information on this and other related topics, please see:
•
"Not Everyone Thinks "Patent Reform" is a Great Idea,"
April 7, 2009

• "Senate 'Patent Reform' Bill (S. 515) Voted out of Judiciary Committee,"April 2, 2009

•
"Some (But Not All) Amendments Introduced in 'Patent Reform' Bill,"
April 1, 2009

•
"'Progress' on Senate 'Patent Reform' Bill," March 31, 2009

• "Senate Judiciary Committee Discusses
S. 515 at Executive Business Meeting; Adopts "Technical" Amendment
GRA09350," March 26, 2009

•
"Senate Judiciary Committee Places Patent Reform Bill on Agenda,"
March 15, 2009

•
"Senate Judiciary Committee Holds Hearing on Patent Reform," March
10, 2009

•
"Senator Specter Seeks Resolution of Issues before Vote on Patent Reform
Bill," March 5, 2009

•
"Senate and House Introduce New Patent Reform Legislation," March 3,
2009