By Kevin E. Noonan —

It appears that rising chorus of naysayers against S. 1145 is larger than we thought.  After our post on Friday, Patent Docs has been contacted by two other groups who have organized a letter-writing campaign to Senate leaders beseeching them not to pass S. 1145, the so-called "patent reform" legislation.

One of these is a letter sent on October 23rd to Senate Majority Leader Sen. Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY).  This letter has more than 430 signatories, including organizations such as the Institute of Electrical and Electronics Engineers (IEEE)-USA; American Seed Trade Association; United States Business & Industry Council; the Biotechnology Industry Organization (BIO); the Financial Services Industry Intellectual Property Law Association; and the Pharmaceutical Research and Manufacturers of America (PhRMA); and companies including Abbott; Allergan, Inc.; Alnylam Pharmaceuticals; American Solar, Inc.; ARYx Therapeutics; Amylin Pharmaceuticals; BASF Corporation; Biogen Idec, Inc.; Bayer Corporation; Beckman Coulter, Inc.; Boston Scientific Corporation; Cargill Incorporated; Caterpillar Inc.; Cephalon, Inc.; Carbide Derivative Technologies; CIMA Nanotech; Coca-Cola Company; Corning Incorporated; DuPont; Eli Lilly and Company; Firefly Energy Inc.; Gen-Probe Incorporated; Genzyme; Human Genome Sciences, Inc.; Johnson & Johnson; Invitrogen Corporation; Maxygen, Inc.; Millennium Pharmaceuticals Inc.; Monsanto Company; Novo Nordisk; Polestar Capital Associates; QUALCOMM Inc.; Rigel Pharmaceuticals; Syngenta Seeds, Inc.; Vical Incorporated; and ZymoGenetics, Inc.

The letter’s message is clear:  the bill "contains provisions that will create uncertainty and weaken the enforceability of validly issued patents."  Specifically mentioned in this regard are the expanded apportionment of damages provisions, the post-grant opposition (characterized in the letter as "indefinite") (see "Draft Report on Senate Patent Reform Bill: Post-Grant Procedures"), venue restrictions, and the "burdensome and expensive mandatory search requirements."  These and other provisions "pose serious negative consequences for continued innovation and American technological leadership in a competitive global economy."  The letter also objects to shortcomings in the provisions on inequitable conduct, which merely "codifies the current inequitable conduct doctrine rather than to make broadly supported reforms to eliminate litigation abuse of the doctrine and gain increases in patent quality" (see "Draft Report on Senate Patent Reform Bill: Inequitable Conduct Provisions").  The letter asserts that there is "[n]o compelling case" for passing the bill in its present form, and that the "reform" provisions are the result of "claims of a crisis in the current patent system that does not exist, supported by selective assertions which do not hold up under scrutiny."  Although the sentiments of some of the signatories may (or may have) changed depending on what amendments ultimately make it into the bill, the overwhelming message is a negative one:  don’t pass this bill!

The second letter (not yet sent), also addressed to Senators Reid and McConnell, has 105 signatories and is just as adamant that S. 1145 as it currently stands should not be passed.  This letter cites deficiencies in almost all of the bills provisions, including first-to file, which:

will create a race to file at the USPTO, which will severely handicap smaller entities, due to their limited budgets.  Such a system would also not provide adequate time for inventors to develop their concepts, resulting in a much lower quality of filed patent applications.  Larger entities would have the advantages of larger budgets and in-house patent counsel, which individual inventors rarely have.

post-grant review, which

will allow literally anyone to challenge a granted patent for one year, and anyone with an economic interest to challenge a patent for its entire life, at a very low cost.  Competitors can just keep filing inexpensive challenges until the inventor’s finances are exhausted trying to defend their legitimately granted patent, forcing the inventors to abandon their honestly created inventions.  It will create a scenario where the value of patents will be much less certain, which will severely impact the availability of private investment to help develop emerging technologies.

apportionment of damages, which:

will drastically reduce the damages that infringers will have to pay for willful infringement to a small fraction of what it is and has been for decades.  Courts will be forced to try to determine what apportionment of damages should be awarded to the plaintiffs, which in many cases will reduce the penalties for infringement dramatically.  The courts are ill equipped to determine these factors, in that it will require expert testimony as to how the damages should be apportioned, at great expense to the inventors attempting to defend their patents.  Essentially a patent will become much less valuable to the inventor, due to insecurity about what the courts might decide is deemed an appropriate penalty for willful infringement.

mandatory 18-month publication rule, since:

the rest of the world will have more than a year to copy almost all American inventions before a patent has even been granted, again creating uncertainty for private investments in new technologies.  The publication of the patent application on the Internet long before the patent has been granted will allow nearly anyone to be able to design around the invention, and then file their own applications that anticipates all of the inventors claims, effectively destroying much of the value of the inventor’s patent, once it is finally allowed by the USPTO.

and the applicant "quality" submission requirement, which:

would significantly increase the cost of obtaining a patent, which will cause many independent inventors to abandon valuable inventions.  The process of adequately developing and attempting to acquire a patent for an invention is already expensive of both time and money, as patent professionals are required to be able to determine what claims the applicant may be able to obtain with a patent.  The AQS mandate would require the inventor and their patent attorney to attempt to play the role that has traditionally been the duty of the examiners, at great expense to the inventor.  It would also cause a conflict of interest for the patent attorney, who is being required to provide a professional opinion that may be contrary to their client’s best interests.

The letter asserts that the proposed changes are "being driven by the interests of a few large transnational corporations" and "will erode much of the value of U.S. Patents, especially for independent inventors and small businesses, which currently create about 40% of the new inventions, and consequently many new jobs in America."  The Senate patent reform bill as written "will do serious and long term damage to the future of American innovative efforts, and will detract from the ability of the U.S. Economy to continue to prosper in a rapidly evolving global marketplace" by destroying the incentive for independent inventors and small businesses to disclose their inventions (the much-overlooked benefit of the patent system).

As with the U.S. Patent and Trademark Office’s misguided (and preliminarily enjoined) "new rules" concerning continuation and claims practice, S. 1145 seems to be a case of the federal government ignoring the concerns of its citizens.  This may be understandable for the Patent Office, since no one elected them and the officials in the executive branch who were elected have a track record of doing what they think is right without regard to consensus building or considering the views of their constituents when so informed (vocally, if not vociferously, in the case of the "new rules").  But Senators are elected, and the signatories of at least one of these letters come from every state.  Perhaps the time is past for merely writing your Congressman.  Maybe the time has come to inform them, as citizens, organizations, and businesses, that the consequences of passing this bill will be that we will actively work for their defeat in the next election, and mean it.  This may be the only message that they can understand, since they don’t seem to be listening no matter how many letters we send them.

    By Sherri Oslick —

As we reported last week, a draft of the Senate Judiciary Committee’s report on the Patent Reform Act of 2007 (S. 1145) has been circulated on the internet.  The 106-page draft report
contains sections on the background and purpose of the bill, the
legislative history of the bill, a section-by-section summary of the
bill, a placeholder for a cost estimate, a regulatory impact
evaluation, and a list of the changes to Titles 15, 28, and 35 that
would result if the Senate bill were passed into law.  The circulation
of the draft report suggests that Senator Patrick Leahy,
Chairman of the Senate Judiciary Committee, intends to keep his
mid-December patent reform bill pledge to seek "favorable Senate action
as early as the floor schedule permits" (see "Patent Reform Discussed on Senate Floor").  In view of the length of the draft report, Patent Docs
has been
providing a discussion of selected sections of the bill since the draft
report began to circulate.  Today, we address section 5 of the bill.

Section 5 of the draft report begins by noting the original intent of Congress in enacting laws providing for reexamination of issued patents — "to serve as an effective and efficient alternative to often costly and protracted district court litigation" — but quickly launches into a recitation of the deficiencies of the current reexamination format.  First, as the Report notes, a third party challenger seeking reexamination has available to it only a limited subset of the validity challenges it would be permitted to raise in district court.  Second, while as of 1999 a third party could participate in reexamination proceedings via inter partes reexam, the relevant statutory provisions estopped that party from pursuing later in court challenges based on issues not even raised during the reexamination proceedings.  And third, a third party challenger who did not prevail in reexam had no right to appeal, administratively or in court, the Patent Board’s decision.  Finally, the draft report noted that reexamination proceedings were both costly and time consuming (citing that, in some cases, reexamination proceedings have been pending before the USPTO for more than four years).

The current reexamination system, concluded the Senate Judiciary Committee, "remains troublesomely inefficient and ineffective as a truly viable alternative for resolving questions of patent validity."  The Committee therefore elected "not to try to adopt another, and necessarily massive, set of amendments to the current system.  Rather, the Committee determined that it would be simpler, and ultimately better, to make a clean start."  The Committee retained ex parte reexamination initiated by the patentee, however a third party wishing to challenge a patent would necessarily need to do so through a newly created post-grant review (PGR).  The provisions of the proposed PGR system are summarized below.

There are three ways, or "windows," in which a third party can raise a challenge to an issued patent under the PGR.

The first window is considered to be an extension of the examination process and includes the following features:

• The request for PGR must be filed within 12 months of issuance of the patent.
• The presumption of patent validity does not apply.
• The petitioner must prove invalidity by a preponderance of the evidence.

The second window is an effort to balance the need to ensure that invalid patents do not exist with the values of certainty (and consequent business decisions based on this) for the patentee.  The second window includes the following features:

• The request for PGR may be filed throughout the life of the patent but only if:  1) the continued existence of the challenged patent claim(s) is likely to cause the petitioner significant economic hardship, and 2) the petitioner filed the petition within 12 months of receiving notice of infringement.
• The presumption of patent validity does apply.
• The petitioner may challenge the patent on any grounds available to it in district court litigation, but the existence, authentication and scope of any evidence supporting invalidity must be established by clear and convincing evidence.
• If such facts can be established, they must demonstrate invalidity by a preponderance of the evidence.
• The patent holder will have an opportunity to file a response.
• The patent holder will have one opportunity as a matter of right to amend the claims; additional amendments may be subsequently made only on motion and a showing of good cause (and no amendment may enlarge the scope of a claim or add new matter).

The third way of initiating PGR proceedings is through the patentee’s consent.  In addition to providing the methods of initiating a PGR, the draft report notes that various provisions have been included to prevent the use of PGR for harassment:

• Every petition for a PGR must raise a substantial new question of patentability.
• The same party who has once filed a PGR (whether in first or second window) regarding any claim of a patent may not file another PGR petition on the same patent.
• A petitioner who has challenged the validity of a patent in court may not file a petition for PGR on any grounds they raised, or could have raised, in the district court.

The USPTO, for their part, has a number of obligations under the new system:

• The USPTO must complete its work on a PGR within one year in most instances, and 18 months in only those cases where additional time is justified.
• PGR proceedings are conducted by three Patent Board judges, not by an examiner as is the case with current reexamination proceedings.
• The Director of the UPTO is instructed to issue regulations for rules and procedures governing PGR proceedings, and is charged in particular with ensuring that regulations forbidding and penalizing harassment are enacted and enforced.

Any petitioner unhappy with a Board PGR decision may appeal to the Federal Circuit, and all parties to the PGR proceeding may participate in such an appeal.  The PGR system would take effect on the date one year after the date of enactment of the Act.  After that time, first window petitions may be filed against any patent, provided the requirements noted above are met.  Second window petitions for PGR, as well as consented petitions, could only be filed on patents that issue based on applications filed after November 29, 1999 (the date for determining eligibility for inter partes reexam under the current system).

For additional information on the draft report, please see:

• "Inequitable Conduct Provisions," Section 12, January 21, 2008
• "First Inventor to File Provisions," Section 2, January 17, 2008
• "Assignee Filings, Mandatory Publication, and Third Party Submissions," Sections 3 and 7, January 16, 2008
• "Late Patent Filings," Section 13 January 15, 2008
• "Draft Report on Senate Patent Reform Bill Circulated," Sections 9 and 15, January 14, 2008

For additional information regarding this topic, please see:

• "U.S. Senate Mailbox Filling with Letters against Passage of Patent ‘Reform’ Bill," January 18, 2008
• "Patent Reform Discussed on Senate Floor," December 21, 2007
• "Enjoined New Rules and Patent Reform Finally Appearing on Biotech Industry’s Radar," December 20, 2007
• "Chinese IP Judge Discusses Implications of U.S. Patent Reform Bill and Two Congressmen Heed Warning," December 17, 2007
• "IPO President Seeks Deletion of Patent Reform Provision," December 12, 2007
• "Senate May Act on Patent ‘Reform’ Bill in the New Year," December 2, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007
• "BIO CEO Provides Briefing on Follow-On Biologics and Patent Reform," September 18, 2007
• "Patent ‘Reform’ Bill Passes House of Representatives," September 9, 2007
• "Reversal in Microsoft Case Weakens Patent Reform Argument," August 7, 2007
• "San Francisco Chronicle Opines on Patent Reform," August 6, 2007
• "Patent Reform Bill to Be Delayed?" June 12, 2007
• "Senate Judiciary Committee Holds Hearing on Patent Reform," June 10, 2007
• "Could Creating a U.S. ‘Utility Model’ Patent Fulfill the ‘Need’ for Patent Law Reform?" May 21, 2007

    By Kevin E. Noonan —

As we reported last week, a draft of the Senate Judiciary Committee’s report on the Patent Reform Act of 2007 (S. 1145) has been circulated on the internet.  The 106-page draft report
contains sections on the background and purpose of the bill, the
legislative history of the bill, a section-by-section summary of the
bill, a placeholder for a cost estimate, a regulatory impact
evaluation, and a list of the changes to Titles 15, 28, and 35 that
would result if the Senate bill were passed into law.  The circulation
of the draft report suggests that Senator Patrick Leahy,
Chairman of the Senate Judiciary Committee, intends to keep his
mid-December patent reform bill pledge to seek "favorable Senate action
as early as the floor schedule permits" (see "Patent Reform Discussed on Senate Floor").  In view of the length of the draft report, Patent Docs has been
providing a discussion of selected sections of the bill since the draft report began to circulate.  Today, we address section 12 of the bill.

Section 12 of S. 1145 amends Title 35 to add new Section 298, as follows:

§ 298. Inequitable conduct

A party advancing the proposition that a patent should be cancelled or held unenforceable due to inequitable conduct shall prove independently, by clear and convincing evidence, that material information was misrepresented, or omitted, from the patent application with the intention of deceiving the USPTO.  Information is material if a reasonable examiner would consider such information important in deciding whether to allow the patent application; any such information is not cumulative.  Although intent to deceive the USPTO may be inferred, it may not be done so based solely on the gross negligence of the patent owner or its representative, or on the materiality of the information misrepresented or not disclosed.  The party asserting the defense or claim shall comply with the pleading requirements set forth under Federal Rules of Civil Procedure 9(b).  If the court finds inequitable conduct, the court has discretion to (1) hold the entire patent unenforceable, (2) hold 1 or more claims unenforceable, or (3) hold that patentee is not entitled an injunction.

The draft report advises that the intent of this new section is to codify (for the first time) the inequitable conduct defense and the consequence of unenforceability to a finding that a patent (or any claim thereof) was obtained through inequitable conduct.  Like obviousness (in the context of patentability), the inequitable conduct defense was originally developed by the courts; unlike obviousness, the defense was not codified in the 1952 Patent Act.  A succinct statement of the equitable basis for the defense can be found in the Supreme Court’s Precision Instrument Mfg. Co. v. Automotive Maintenance Machine Co. opinion:

A patent by its very nature is affected by a public interest.  As recognized by the Constitution, it is a special privilege designed to serve the public purpose of promoting the "Progress of Science and useful Arts."  At the same time, a patent is an exception to the general rule against monopolies and to the right to access a free and open market.  The far-reaching social and economic consequences of a patent, therefore, give the public a paramount interest in seeing that patent monopolies spring from backgrounds free from fraud or other inequitable conduct and that such monopolies are kept within their legitimate scope.

324 U.S. 806, 816 (1945).  Despite this "paramount [public] interest," however, there was no positive, affirmative requirement in either the Patent Act or USPTO regulations that an applicant honor a duty of candor until 1977.  The first version of Rule 56, embodying and imposing this duty of candor, required disclosure of "[material] information where there is a substantial likelihood that a reasonable examiner would consider [the information] important in deciding whether to allow the application to issue as a patent."  This standard was modified in 1992, to recite that "information is material to patentability when it is not cumulative to information already of record or being made of record in an application, and (1) it establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or (2) it refutes, or is inconsistent with, a position the applicant takes in: (i) opposing an argument of unpatentability relied upon by the Office or (ii) asserting an argument of patentability"; which is the current standard.

In practice, the inequitable conduct defense is almost always asserted, becoming by the late 1980’s a "plague on the patent system."  Burlington Industries Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988).  Part of that plague, according to the draft report, has been inconsistent definitions of what constitutes a reference "material to patentability" under the Federal Circuit’s jurisprudence.  (This assertion, as well as the revisions to statutory damages provisions, both evince the same disparagement of the Federal Circuit’s work by Congress as has been evidenced by the Supreme Court (see "Is It Time for the Supreme Court to Stop Flogging the Federal Circuit?") and a desire for the Court’s discretion to be bounded by more certain statutory requirements.)  These five definitions are (according to the draft report):

(1) the objective "but for" standard, where the misrepresentation was so material that the patent should not have issued;
(2) the subjective "but for" test, where the misrepresentation actually caused the examiner to approve the patent application when he would not otherwise have done so;
(3) the "but it may have" standard, where the misrepresentation may have influenced the parent examiner in the course of prosecution;
(4) the old Rule 56 standard where it is likely a reasonable examiner would have considered the information important in deciding whether to issue of the patent; and
(5) the new Rule 56 standard where the information is not cumulative and (i) establishes a prima facie case of unpatentability (either alone or in combination with other references), or (ii) refutes or is inconsistent with a position the applicant has taken (the new Rule 56 standard).

See Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309, 1314-16 (Fed. Cir. 2006); see also American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984).  The Federal Circuit justifies these different tests on the grounds that there is "no reason to be bound by any single standard," a stance the draft report clearly rejects.

The Senate Judiciary Committee’s report asserts that the new Section 298 of Title 35 "codifies and improves the doctrine of inequitable conduct."  The draft report discusses the purpose and intent of each subsection:

• Subsection 298(a) requires a party advancing an inequitable conduct argument to prove that claim by clear and convincing evidence, as does current inequitable conduct jurisprudence.

• Subsection 298(b) codifies the "reasonable examiner" test, finding a reference to be material to patentability if the reasonable examiner would consider the non-cumulative information important in deciding whether to allow the patent application.  The draft report singles out this provision as being relevant to overcoming a misapplication of the law by the Federal Circuit.  Specifically, the draft report states that the Federal Circuit has appeared "to emphasize improperly the first part of this definition (reasonably important to an examiner) without giving necessary consideration to the latter part of the definition (in deciding whether to allow the patent)," citing Nilssen v. Osram Sylvania, Inc., 2007 WL 2937322 (Fed. Cir. 2007); McKesson Information Solutions, Inc. v. Bridge Medical, Inc., 487 F.3d 897 (Fed. Cir. 2007); Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1309 (Fed. Cir. 2006).  However, nothing in the cases cited in the draft report indicates that the Federal Circuit failed to consider the entire scope of the materiality standard with respect to the "ultimate" question of whether a patent would have been granted over the undisclosed prior art.

• Subsection 298(c), consistent with current case law, permits an intent to deceive the Patent Office be inferred, but limits the inference to exclude cases of merely "gross negligence" (on either the applicant’s or their representative’s part) and further is not to be based on the materiality of the information or reference either misrepresented or not disclosed.  This portion is the most significant change, since it prevents application of the "balancing test" used by the court to find inequitable conduct when information of high materiality is misrepresented or not disclosed.  While having some logic with regard to the "gross negligence situation," this subsection would appear to make more difficult a challenge based on nondisclosure of highly material information where there is little or no evidence of intent.  Since the Federal Circuit, and the draft report, recognize that there is rarely direct evidence of intent, this provision may reduce the effectiveness (and as a consequence, the frequency) of inequitable conduct determinations.

• Subsection 298(d) that a party asserting the defense or claim comply with the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure.  The pleadings requirement is intended to address the potential for harassment by infringers during patent litigation.

• Subsection 298(e) grants the court discretion to fashion the appropriate remedy (presumably under the "exceptional case" standard).  The remedies section is intended to address the potential for harassment by infringers during patent litigation, and the remedies section is intended to give District Courts greater discretion than they currently have (where an inequitable conduct finding renders all claims unenforceable); the provision regarding injunctions is consistent with the equitable nature of injunctive relief and inequitable conduct itself.

The entire new Section 298 is intended, the draft report asserts, to "not chill meaningful disclosures with the Office for fear of a future allegation."  The section clarifies at least three aspects of the inequitable conduct defense:  imposition of the "reasonable examiner" test; elimination of the balancing inquiry between materiality and evidence of intent; and increased discretion for courts to decide how draconian (or not) is the penalty a patentee must pay for committing inequitable conduct.  It also would appear to refute the proposition that misrepresentation is almost always material and/or evinces an intent to deceive.  In this respect it is a more certain codification of the inequitable conduct doctrine than § 103, where more than a half-century after the statute was enacted the courts are still trying to define the standard of non-obviousness (see KSR Int’l Co. v. Teleflex Inc.).  It is clear, however, that the provisions of § 298 address (and seem to correct) the problems the Committee considered in current inequitable conduct jurisprudence.

For additional information on the draft report, please see:

• "First Inventor to File Provisions," Section 2, January 17, 2008
• "Assignee Filings, Mandatory Publication, and Third Party Submissions," Sections 3 and 7, January 16, 2008
• "Late Patent Filings," Section 13 January 15, 2008
• "Draft Report on Senate Patent Reform Bill Circulated," Sections 9 and 15, January 14, 2008

For additional information regarding this topic, please see:

• "U.S. Senate Mailbox Filling with Letters against Passage of Patent ‘Reform’ Bill," January 18, 2008
• "Patent Reform Discussed on Senate Floor," December 21, 2007
• "Enjoined New Rules and Patent Reform Finally Appearing on Biotech Industry’s Radar," December 20, 2007
• "Chinese IP Judge Discusses Implications of U.S. Patent Reform Bill and Two Congressmen Heed Warning," December 17, 2007
• "IPO President Seeks Deletion of Patent Reform Provision," December 12, 2007
• "Senate May Act on Patent ‘Reform’ Bill in the New Year," December 2, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007
• "BIO CEO Provides Briefing on Follow-On Biologics and Patent Reform," September 18, 2007
• "Patent ‘Reform’ Bill Passes House of Representatives," September 9, 2007
• "Reversal in Microsoft Case Weakens Patent Reform Argument," August 7, 2007
• "San Francisco Chronicle Opines on Patent Reform," August 6, 2007
• "Patent Reform Bill to Be Delayed?" June 12, 2007
• "Senate Judiciary Committee Holds Hearing on Patent Reform," June 10, 2007
• "Could Creating a U.S. ‘Utility Model’ Patent Fulfill the ‘Need’ for Patent Law Reform?" May 21, 2007

    By Kevin E. Noonan —

A rising chorus of naysayers from the patent bar, industry, and international opinion is beseeching the Senate leadership and the Chairman and ranking Republican member of the Judiciary committee not to pass S. 1145, so-called "patent reform" legislation.  Perhaps the letter-writers have learned a lesson from the experience with the U.S. Patent and Trademark Office’s misconceived and ill-advised "new rules" regarding limitations on continuation application practice and claiming.  There, only an eleventh-hour injunction from Judge Cacheris sitting in the Eastern District of Virginia prevented the new rules from being implemented.  Despite having fair warning about the rules, up until and including publication of the final version in the Federal Register on August 21, 2007, only sole inventor Dr. Triantafyllos Tafas acted promptly to try to thwart implementation of the rules.  It was only when GlaxoSmithKline entered the fray (see "Hooray! – (Finally) the Big Dogs Have Joined the Hunt") that numerous amici joined in admonishing the Court to grant a preliminary injunction, which it did on October 31, 2007 (just one day prior to the planned implementation date of November 1st) (see Patent Docs report).  And to be fair, these amici have remained engaged in the judicial process, many filing additional amicus briefs in support of GSK and Dr. Tafas’ motion for summary judgment and permanent injunction of the new rules.

The House passed its version of patent "reform" legislation last year (see "Patent ‘Reform’ Bill Passes House of Representatives") and the Senate is considering a companion bill that, while not identical, is directed to many of the same goals as the House version:  limiting venue and damages in patent litigation, changing the U.S. patent system from "first-to-invent" to "first-to-file," making it easier for corporations to file in the name of an inventor, and granting the Patent and Trademark Office expanded powers (including the power to require applicants to provide search and extensive characterization of "relevant" prior art).  These provisions of the Senate bill are summarized and discussed in a draft report from the Judiciary Committee circulating this week, and Patent Docs has been providing summaries of key provisions (see links below).

Gene Quinn from the PLI Patent Blog alerted us that GSK, the heroes of the "new rules" battle, has sent a letter to Senators Patrick Leahy (Chairman; D-VT) and Arlen Spector (ranking Republican; R-PA) regarding this bill.  The GSK letter is directed specifically to provisions of the bill that give the PTO expanded power to require searching and characterization of references.  However, the letter pointedly asserts that failure to discuss other provisions should not be taken as acquiescence or support for them, particularly with regard to the venue and inequitable conduct portions of the bill.

With regard to the search provisions, the letter professes wonder and bewilderment that the pending version of the Senate bill contains these provisions, in the face of Judge Cacheris’ preliminary injunction.  (The letter helpfully contains a copy of the decision in an Appendix.)  Specifically, the letter notes that one basis for the injunction was Judge Cacheris’ belief that the new rules provisions, that required the same sort of disclosure (and are evidence of how the Office can be expected to implement any Congressional permission to impose this requirement), were deemed "unconstitutionally vague for failing to provide any boundaries on the scope of the search."  GSK asserts in its letter that the statute would have to contain "intelligible principles to guide and limit the scope of the delegated authority" to the PTO, at a minimum, for the statute to pass constitutional muster.  Otherwise, GSK states, the PTO would be able to promulgate rules requiring applicants to search and characterize prior art "worldwide" without regard to cost, and to arbitrarily define the meaning of the statutory term "any other information relevant to patentability" in an arbitrary and capricious manner.  It would fall to the courts, then, to either narrow the meaning of the statute or strike it altogether.  The result would be a transfer of Congressional authority to the courts and loss of Congressional control of the U.S. Patent and Trademark Office as an administrative agency with limited rights to exercise Congressional power.

The letter "applauds" the Senate bill for lacking any grant of substantive rulemaking authority to the Office (something contained in the House bill).  GSK warns that granting substantive rulemaking authority to the PTO, presumably resulting in implementation of the type of limitations on patenting intended by the "new rules," would subject the federal government to liability under the Takings Clause, as well as harm U.S. innovation.

The letter is signed by both CEO Jean-Pierre Garnier and Corporate IP Vice President Sherry K. Knowles, another hero of the October 31st skirmish with the PTO.  It includes a list of seventeen foreign and domestic companies and organizations that support GSK in its litigation efforts against the PTO over the new rules.

This letter comes on the heels of a report in The Providence Journal by Gernot Pehnelt (at right) from the Friedrich-Schiller University in Jena, Germany regarding the proposed changes in U.S. patent law (see "Don’t Ruin the U.S. Patent System").  Dr. Pehnelt, a lecturer in economics and a research associate, also believes that the proposed changes in the law are a bad idea and will hurt innovation.  Dr. Pehnelt goes further, and states that such changes will harm German innovation (and, presumably, innovation in other countries).  According to Dr. Pehnelt, the availability of U.S. patent protection is responsible for one out of every four high-tech jobs in Germany, and permits German-made goods to be exported to the U.S. without fear of copying.  Industries including chemicals, pharmaceuticals, advanced medical devices, and industrial machinery are cited by Dr. Pehnelt as having benefitted from the U.S. patent system.  Ironically, Dr. Pehnelt says that the European patent system is "inferior" to the U.S. system, in part because of the extensive post-grant review period and caps on damages for "stolen patents" (honesty sounds refreshing, doesn’t it?).  He characterizes the patent reform bills before Congress as "replacing many of the best aspects of the U.S. patent system with the worst aspects of the European patent system."

These benefits are not all one-sided, either; Dr. Pehnelt notes that the U.S. and Germany are strong trade partners, and each country has extensive investments in the other.  The result:  millions of jobs created.  He ends his statement by imploring Congress to "think twice before ‘fixing’ a patent system that is the envy of the world."

The National Association of Patent Prosecutors (NAPP) has also weighed in on the side of scuttling the proposed legislation.  In a letter to the Senate leadership, NAPP says that the proposed legislation "will make U.S. patents less strong and would reduce patent-owners’ ability to enforce U.S. patents."  This is because patents "would become harder to get, more subject to challenge, harder to enforce, and able to justify only lower infringement damages."  The resulting state of affairs would "embolden infringers to ignore patents instead of settling or otherwise dealing with the patents," leading to more lawsuits, not less, and reducing inventor rights and innovation, with the consequences of lost jobs and manufacturing.

There is little that NAPP likes in S.1145, which will weaken patents in almost all its provisions.  These include provisions intended (according to NAPP) at making it easier to challenge patents (the inequitable conduct provision will make such charges easier to make and sustain, the damages provisions will change a system that is "working well," and the mandatory publication provision will just give infringers and knock-off artists more time to copy a product prior to patent grant).  The provisions for challenging patents and applications (post-grant review and public art submissions) are criticized for reducing the presumption of validity and the presumption that the patent examining corps is performing examinations properly, and for permitting post-grant opponents to preserve issues for later challenge and pre-grant opponents to submit argument as well as art.  Changes in venue and creation of interlocutory appeals (of claim construction decisions, for example) are said to reduce the patentee’s ability to choose its forum and to add additional cost layers to patent infringement litigation.  In all, the NAPP letter describes the bill as an "anti-patent wish list" that requires significant amendment to be acceptable.  NAPP volunteers to help the Senate make these amendments, including suggestions for "new, pro-patent changes that would tend to make patents more valuable and encourage invention."

There is evidence that at least some of our political leaders are listening.  In late October, Senator Schumer (D-NY; at left) sent a letter to Jon Dudas, Director of the Patent and Trademark Office, asking him to delay implementing the new rules until after the merits of GSK and Dr. Tafas’ challenge had been litigated (see "Senator Schumer Sends a Signal").  And at least one Presidential candidate, Mitt Romney, appears to understand the importance of protecting rather than killing the goose that laid the golden egg of technological innovation that has sustained the U.S. economy since the dark days of the mid-1980’s (see "Mitt Romney on Patents").  The Senate could do great harm to the American economy by passing S. 1145.  As our civics teacher used to say, write you Congressman.

For additional information regarding this and other related topics, please see:

• "Draft Report on Senate Patent Reform Bill: First Inventor to File Provisions," Section 2, January 17, 2008
• "Draft Report on Senate Patent Reform Bill: Assignee Filings, Mandatory Publication, and Third Party Submissions," Sections 3 and 7, January 16, 2008
• "Draft Report on Senate Patent Reform Bill: Late Patent Filings," Section 13 January 15, 2008
• "Draft Report on Senate Patent Reform Bill Circulated," Sections 9 and 15, January 14, 2008
• "Patent Reform Discussed on Senate Floor," December 21, 2007
• "Enjoined New Rules and Patent Reform Finally Appearing on Biotech Industry’s Radar," December 20, 2007
• "Chinese IP Judge Discusses Implications of U.S. Patent Reform Bill and Two Congressmen Heed Warning," December 17, 2007
• "IPO President Seeks Deletion of Patent Reform Provision," December 12, 2007
• "Senate May Act on Patent ‘Reform’ Bill in the New Year," December 2, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007
• "BIO CEO Provides Briefing on Follow-On Biologics and Patent Reform," September 18, 2007
• "Patent ‘Reform’ Bill Passes House of Representatives," September 9, 2007
• "Reversal in Microsoft Case Weakens Patent Reform Argument," August 7, 2007
• "San Francisco Chronicle Opines on Patent Reform," August 6, 2007
• "Patent Reform Bill to Be Delayed?" June 12, 2007
• "Senate Judiciary Committee Holds Hearing on Patent Reform," June 10, 2007
• "Could Creating a U.S. ‘Utility Model’ Patent Fulfill the ‘Need’ for Patent Law Reform?" May 21, 2007