IP group concerned over new patent reform bid

Efforts by US Congress to restart a bid for widespread patent reform have drawn concern from some of America's biggest corporations. Joined together as the Coalition for 21st Century Patent Reform, a range of innovation-rich blue-chips including General Electric, Johnson & Johnson and 3M have criticised the legislation as pro-infringement. Introduced by Democrat Senator Patrick Leahy, the 2009 Patent Reform Bill restates the aims of similar bills dating back to 2005.

The main point of contention over the new Bill's content is the provision for damages where infringement has been proven. Rather than allowing the ruling court to set the level of damages to which a patent holder is entitled, the legislation would index the sum to the holder's original royalty agreement and the relevant innovation's market performance.

As Senator Leahy explained in a press release, a court would be 'required to identify the factors that will be considered in determining a reasonable royalty, ensuring that the record is clear on what considerations the judge or jury assessed in awarding damages. The court must also consider any non-exclusive marketplace licensing of the invention, if there is such a history, in determining a reasonable royalty.'

In the Coalition's view, the disparity between sums calculated from royalties and sales and those set by court rulings is so great that the deterrent posed by infringement suits would be undermined. 'The damages methodology in this bill heavily favours infringers over inventors,' it said in a statement. 'At a time when we need to stimulate our innovation and aid US manufacturers, this bill sends an international signal that patented American technology can be copied with little or no consequence. We will erode our global leadership in research and invention if we eviscerate this cornerstone of our patent system.' The group added that 'provisions intentionally designed to reduce damages, such as "prior art subtraction," should not be part of any patent reform enacted by Congress.'

IP courts have ordered royalties in several recent cases, such as Paice v Toyota Motor Corp, in which a fee of $25 per infringing unit sold was levied against the infringing party. However, royalty rulings have become unpopular among infringed manufacturers, who have viewed them as compulsory licenses on their technologies: without the punitive threat posed by lump-sum damages, defendants are free to continue infringing as long as they pay their court-ordered fees.

Supporters of US patent reform point out that a compulsory license is government-issued, enabling any manufacturer who can meet its technical criteria to make the relevant product. Ongoing royalties are only levied against one defendant or group of defendants, providing efficient settlement solutions that can be less draining than scaling multiple levels of the US legal system in search of lump sums. One group that embodies this outlook is the Coalition for Patent Fairness (CPF), which backs Leahy's bill. According to the CPF, 'Engineers are spending more time in courtrooms than in the labs focusing on good science, new products and imaginative solutions.' Anxious over the average $4.5 million running cost of a typical patent suit, the CPF comprised of technology firms such as Dell, Google and Cisco advocates a more streamlined litigation process, plus improved patent quality at examination level.

Nonetheless, ongoing royalties jar with the Coalition for 21st Century Patent Reform, which represents the commercial and employment prospects of its members' R&D interests across 18 industry sectors including consumer products, energy and IT. In its reaction to Leahy's announcement, the group recommended that Congress should consider a bill that would 'enhance the patent system so that valid patents are issued promptly and cost-efficiently, thereby encouraging innovation that will create jobs and promote America's economic recovery. Legislation that makes these kinds of changes will permit Congress to reach useful and effective reforms to the patent system.

'In that regard,' added the Coalition, 'we look forward to working with Chairman Leahy and members of the Senate, as well as members of the House of Representatives to reach a consensus that is fair, balanced and allows us to continue fostering innovation and job creation in the United States.'