Patent Reform Bill Passes Judiciary Committee

April 6, 2009

The contentious patent reform bill finally passed the Senate Judiciary Committee, though without the vote of one of its key sponsors.

The Committee passed the bill 15-4 ,  a vote which should send the bill to the Senate Floor for a vote. Sen. Orrin Hatch of Utah voted against the bill, stating that he does not believe it achieves the goals of improving patent quality and decreasing litigation costs.

Promote the Progress links to the bill as it passed the Committee.the controversial reform to damages, described in my post here, has been replaced with a provision that codified the current damages regime but makes the District Court judge a sort of a gatekeeper on damage issues. The amended provision was brokered by Senators Feinstein of California and Spector of Pennsylvania, according to links to the bill as it passed the Committee, according to PatentlyO . Different reports abound on why Senator Hatch voted against the bill. CNET and Reuters suggested it was because of the compromise on damages that was reached, as noted in a comment by Senator Leahy directed to Senator Hatch. Senator Leahy supposedly said that he would have preferred to have the originally proposed revision to damages calculations. Others, including Promote the Progress and the Salt Lake City Tribune, suggest it was because the bill failed to revise the standard for inequitable conduct.

The full text of the damages provision is below:

§ 284. Damages
(a) IN GENERAL.—
(1) COMPENSATORY DAMAGES AUTHORIZED.— Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. In determining damages, the court will direct the jury to consider any relevant factors or methodologies, under applicable law, based on the evidence presented.

(2) USE OF EXPERTS PERMITTED.—The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

(b) PROCEDURE FOR DETERMINING DAMAGES.—
(1) IN GENERAL.—The court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.

(2) DISCLOSURE OF CLAIMS.—By no later than the entry of the final pretrial order, unless otherwise ordered by the court, the parties shall state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages under this section, specifying the relevant underlying legal and factual bases for their assertions.

‘‘(3) SUFFICIENCY OF EVIDENCE.—Prior to the introduction of any evidence concerning the determination of damages, upon motion of either party or sua sponte, the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis. After providing a nonmovant the opportunity to be heard, and after any further proffer of evidence, briefing, or argument that the court may deem appropriate, the court shall identify on the record those methodologies and factors as to which there is a legally sufficient evidentiary basis, and the court or jury shall consider only those methodologies and factors in making the determination of damages under this section. The court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.’

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Patent Reform 3-10 Hearing Commentary

March 14, 2009

Senator Leahy convened a hearing earlier this week, and as predicted the bulk of commentary and controversy was over the issue of damages.  

CNNMoney and eweek noted this in their summaries early in the week.  

The press has generally reported the now familiar rift between “High Tech” companies favoring reforms that may serve to limit patent damages, and the representatives of “Bio/Pharma” arguing that the case for reform has not been made.  Phillip Johnson of Johnson & Johnson was quoted the most in articulating that position, while various persons in favor of the reform were cited, including Stanford professor Mark Lemley.  

Lemley was quoted as decrying the “significant judicially created problem with litigation abuse of the patent system that Congress should address: the problem of damages calculation in reasonable royalty cases”.  In fact, Lemley’s position is more nuanced than that.  His prepared testimony noted that since Congress began debating patent reform, several decisions by the Supreme Court and the Federal Circuit have fixed some of the problems he saw in patent law.  These include eBay v. Mercexchange (regarding the availability of injunctive relief), KSR v. Teleflex (relating to obviousness), In Re Seagate (willful infringement), and others.  In fact, Lemley recommended holding off on patent damages reform until after the Federal Circuit has ruled on several cases that will affect the reasonable royalty analysis, including the entire market value doctrine potentially at issue in the Lucent v. Gateway case currently pending before the Federal Circuit.

Richard Cauley has an excellent guest post in PatentlyO about the proposed reforms to patent damages. He notes that while the intent of the proposed reforms are noble – limiting patent damages to the economic value of the patent – the effect will be to create a judicial nightmare of hearings on how to apply the Georgia Pacific factors – or “damages Markmans”.

Patent Reform Legislation Introduced In Congress

March 6, 2009

Patent Law blogs are buzzing about the patent reform legislation introduced this week in Congress.  PatentlyO has a good summary here, including a link to the proposed legislation.  Probably the most contoversial provision, indeed the provision that derailed patent reform in 2008, is the proposed amendment to the current patent damages regime.  The proposed amendment directs the Court to determine which of three methods a jury should use to calculate damages:

(A) Entire Market Value – if the Court finds that the claimed invention’s specific contribution over the prior art is the decisive generator of revenues, damages can be based on the entire market value;

(B) Established Royalty Based on Marketplace licensing – damages will be based on the value of an established rate of the patent, or of a non-infringing substitute.

(C) Valuation Calculation – Damages based on an the portion of the product that can be attributed to the patent (apportionment).

The intended effect is to significantly curtail the application of the Georgia Pacific factors, which require consideration of these among several other factors, but do not mandate that damages be limited to a minimal license rate or an apportioned value of the patent.

Patent reform opponents lost no time in beginning to fight the measure.  EE Times reports:

“Within hours after the new bill was introduced, two industry groups and two members of the House of Representatives came out against the new measure. The issue of damages quickly emerged as the central issue.”

Indeed, the two HR members, Don Manzullo (R-Ill.) and Mike Michaud (D-Maine, put out a joint statement saying:

“By diminishing the damage awards in patent infringement cases, this bill would encourage intellectual property theft by foreign competitors, putting 298,000 American manufacturing jobs at risk and curtailing U.S. research and development spending by $66 billion, according to a recent economic study”.

The congressmen are likely getting their numbers from a study put out by the anti patent reform group Innovation Alliance, by Case Western economist Scott Shane.  Shane argues that the reform would cause a reduction in the value of U.S. patents, which in turn would cause a reduction in the public value of U.S. Companies, causing a drop in R&D investment of $66 billion and a loss of anywhere from 51,000 – 298,000 manufacturing jobs.  Julian Sanchez’s excellent analysis of the patent reform bill dismantles Shane’s study, noting the fallacies in (1) assuming that any increase in patent damages automatically increases the value of U.S. companies, without accounting for the savings in reduced awards paid by accused infringers, and (2) assuming that a reduction in patent damages will cause a dollar for dollar reduction in the value of U.S. patents (in fact anticipated damages are only one factor in the complex formulas used to value intellectual property).

Patent Reform Organizations Gearing Up for Legislative Battle

February 22, 2009

The various organizations created to advance particular interests in patent reform have started to prepare for the coming legislative battles.  Not surprisingly, they have styled their messages around the recent economic storms, arguing that their policies will improve American economic health and competitive ness.

The National Journal reports that the Coalition on Patent Fairness has revamped its website and focused its message on the economic benefits of patent  reform.  The Coalition’s website includes a new blog where they announce the changes.  The National Journal notes that the Coalition joins other organizations gearing up both sides of the aisle, including the Manufacturers Alliance on Patent Policy, the Innovation Alliance, and the Coalition for 21st Century Patent Reform.

Indeed, the Manufacturers Alliance on Patent Policy recently coordinated a letter by over 130 manufacturers to President Obama asking that the administration approach patent reform at a much slower pace (or perhaps even exchewing the idea entirely).  The Manufactuers’ Alliance essentially argues that the changes wrought by the Supreme Court and Federal Circuit in patent litigation relieve the need for patent reform.  Their letter is reported by IP Watchdog here and PHOSITA here.

IP Watchdog: Top 25 Blogs

February 21, 2009

IP Watchdog compiled through Technorati the top 25 Blogs based on Technorati’s rankings.

Top 25 Patent Blogs

Michael G. Sullivan’s IP Law Outline & Analysis

January 23, 2009

Michael Giles Sullivan’s IP Law Outline & Analysis is a very useful source of information on Federal Circuit jurisprudence.   He provides a comprehensive summary of Federal Circuit case law, making it one of the best free resources on patent law on the web.

I have not read every page, of course, and cannot vouch for or sanction every statement contained within it.

Sullivan’s outline is here.