Black and White takes a look at current legislation before the 110th U.S. Congress to restructure the national patent process, the Patent Reform Act of 2007. The first part of the report examines the proposed changes, the statistics of the world’s major patent offices, and the parties on both sides of the debate. In part two of this report, John Eastman examines this issue further with a serious of interviews with stakeholders invested in, to varying degrees, the patent industry.

Current Status

H.R. 1908 and S. 1145 are patterned after The Patent Reform Act of 2003/05 and originate from a FTC Federal Trade Commission report (2003) and a National Academy of Sciences report (2004). In a broader sense, the bills would position the U.S. law consistent with many other countries by switching the priority of a patent application filing from first-to-invent to first-to-file. H.R. 1908 introduced by democrat Howard Berman passed in the U.S. House of Representatives on September 7, 2007. Senate Bill 1145 was introduced by democrat Patrick Leahy. Over 15 amendments have been circulating the floor of the Senate for consideration to alter various aspects of the bill. The Senate leadership has reaffirmed its commitment to passing the patent reform bill, but however has acknowledged four areas that are in need of refinement, namely: legislation damages, post-grant review, inequitable conduct, and venue. In February of 2008, the Bush administration sent a six page letter to chairman of the Senate Judiciary Committee Patrick Leahy opposing the bill in its current form unless the damages provisions are significantly revised, arguing that more problems would be caused then solved otherwise. The bill, with considerations and amendments added, is slated for Senate consideration as early as April 2008.

Explanation of Key Parts of the Bill

The proposed bill would change the current priority of the patent granting system from first-to-invent to first-to-file.

First-to-invent is based on the premise that priority should be given to an inventor that claims the earliest invention date. The U.S. Patent and Trade Office must, through due diligence efforts, determine if an inventor’s proclaimed date is true and resolve conflicts of competing filings. This method is thought to benefit independent inventors and small companies.

First-to-file focuses on the actual date of the filing and awards priority accordingly to the inventor with the earliest date filed. This method is thought to benefit corporate interests who have more funds and resources to navigate the bureaucratic patent filing landscape.

Should the bill become law in its current proposed form, the following changes would be applicable:

The revision of procedure in patent interference disputes

The current system uses interference proceedings to determine the priority of competing filers. Interference proceedings which are thought to be costly and time-intensive, would be replaced with a derivation proceeding. Derivation proceedings determine the true holder of the claim. The claimant must meet the burden of proof for basis of a dispute by showing that the prior applicant filed improperly.

Third party assignment rights

Allowing a third party assignee, other than the inventor, or a person with a proprietary interest to file for the patent in its own name.

Broaden definitions of an inventor to joint and co-inventor

Defining “inventor” to include a joint inventor and co-inventor.

Venue requirement changes for civil patent actions

The location requirements for civil patent actions against individuals and corporations will be revised to allow actions to be brought in the judicial district where either party resides, or where the corporation has its principal place of business or was incorporated. Currently, the venue is where the defendant resides.

Third-Party document submission

Allowing third parties to submit documents that could challenge the patent application.

Post-Grant Review

Post-grant review would allow a person who is not the patent owner to file a petition with the board to cancel a patent as invalid. This would also set forth procedures for the consideration of such petitions, including provisions to prevent harassment of patent owners and abuse of process.
A petition for cancellation may be filed if: it is within 12 months after the patent issues; reasons are apparent that the continued existence of the challenged claim will cause the objecting inventor significant monetary harm; notice has been recieved from the patentee alleging infringement; and the patent owner has consented to the proceeding in writing. In the petition, the challenger must meet proof standards of claim, and establish a valid basis.

Provision for damages of willful patent infringement

The patent infringement litigation calculations of damages would be altered. Damages would be limited to the value of the improvements of the invention over the prior art. A current rule that a reasonable royalty is the minimum damages permitted will continue to prevail, but the new bill establishes that a reasonable royalty cannot be based on any contribution from prior art. An award of damages using the “entire market value rule” is only applicable when an inventor claimant shows that the patent’s specific contribution over the prior art is the predominant basis for market demand for an infringing product or process.”

Bill Advocates

Proponents argue that the first-to-invent system encourages patent abuse and that a first-to-file system would simplify overlapping patents and battles over patent rights. They additionally argue that the switch would allow the U.S. to become standardized with the rest of the world. Organizations in favor of the bill include: the American Institute of Certified Public Accountants, the Business Software Alliance, the Intellectual Property Owners Association, and the Coalition for Patent Fairness.

Bill Opponents

Organizations opposing the bill argue that the bill weakens the rights of independent inventors and patent holders and would contribute to an outflow of jobs through outsourcing to other nations. Opposing groups include: the AFLCIO, the IEEE, the National Association of Patent Practitioners, the BioTechnology Industry Organization, and the National Small Business Association.