Mark of the covenant

Having failed to reform US patent law in the 1990s, the authorities are doing a better job of convincing everyone this time round. William Rooklidge reports

The US Congress is spending considerable time and resources evaluating proposals that would reform significantly the country’s patent laws. In the wake of reports by the Federal Trade Commission (FTC), the National Academies of Sciences (NAS) and many industry and bar groups, there is now on the table the most dramatic overhaul of the patent system since 1952.

In detailed replies to the NAS and FTC studies, the American Intellectual Property Law Association (AIPLA) largely agreed with the recommendations that resulted from their work. Subsequently, through a blue-ribbon committee, it developed a series of specific proposals for patent law reform. The AIPLA joined with the NAS and FTC to co-sponsor patent reform ‘town meetings’ to initiate a dialogue among stakeholders and to begin the process of developing a consensus on its proposals. The AIPLA has also worked closely with other interested IP organisations, including the Intellectual Property Owners Association, the Intellectual Property Law Section of the American Bar Association, the Biotechnology Industry Organisation and, more recently, the Business Software Alliance, to reach a consensus on the needed reforms.

On 14 April, congressman Lamar Smith, chairman of the House Subcommittee on Courts, the Internet and Intellectual Property, distributed a draft version of patent reform legislation. This ‘committee print’, which included many elements of the AIPLA proposal, was the focus of two April hearings before Smith’s subcommittee and will be addressed by the subcommittee again in May. Senator Orrin Hatch, chairman of the senate subcommittee on IP, devoted the inaugural hearing of his newly re-created subcommittee in April to the issue of patent reform as well.

The AIPLA proposals included in the committee print would simplify US patent law to make it less complex and less expensive, while making it more certain, predictable and transparent. One of the principal reforms to that end would be to award patents not simply to the ‘first to invent’, but rather to the ‘first inventor to file’. The current first-to-invent system has added a layer of complexity and uncertainty to patent protection in the US that increases cost and complexity without compensating benefits. The reform also recognises the inherent advantages of first filers in any system and attempts to adapt the conditions of patentability to that reality. Adopting a first-inventor-to-file system would also make US law conform to the law of the rest of the world and make possible patent law harmonisation that could lead to significant work-sharing among patent offices.

Another part of the committee print supported by the AIPLA is the elimination or limitation of certain “subjective elements” in US patent law – ie elements that turn on a party’s state of mind. High on this list is the requirement that an inventor disclose the “best mode” for carrying out the invention that they contemplated when the patent application was filed. In view of the entirely separate requirement that the inventor disclose how to make and use their invention, the requirement of disclosing the ‘best’ mode has served primarily to add unnecessarily to litigation costs.

The committee print would also limit allegations of a defendant’s “willful infringement” or a patent owner’s “inequitable conduct”. Under the proposal, a patent challenger could raise the inequitable conduct defence only with evidence of an actual fraud, ie evidence that the patent would not have issued in the form that it did but for some intentional misconduct by the patent owner or their attorney. Allegations of willful infringement, raised but seldom proved in more than 92 per cent of all patent infringement suits, would be reined in tightly to focus on the truly ‘bad actors’. These reforms, endorsed by the NAS, should reduce dramatically costs of patent litigation and enhance the predictability of litigation outcomes by reducing the frequency of these overused contentions.

Most importantly for patent quality, the committee print would create a new opposition procedure to permit validity challenges to patents in the Patent & Trademark Office (PTO). This “post-grant opposition” would have to commence within the nine months following the patent grant, and it would have to be completed within a year after it begins. When coupled with the improvements in a first-inventor-to-file system, the opposition proceeding represents a simpler, fairer and more economical way for correcting mistakes made in the patent issuance process.

The committee print also includes provisions suggested by the software industry on issues of specific concern to its members. Most problematic of these for the AIPLA is the proposal to limit the availability of permanent injunctions against infringement of valid and infringed patents. This provision would eliminate the presumption of irreparable harm that has long been basic to the consideration of whether to grant an injunction permanently barring violations of a patent right to exclude. The AIPLA believes this provision would erode severely the value of patents and would be especially harsh to universities and independent inventors.

Other software industry proposals in the committee print would limit compensatory damages where the infringing device is a relatively small component of a larger device. Another software industry proposal would cut back on the statute that makes it an infringement to send abroad for assembly components which, if assembled in the US, would be infringing. This proposal would limit the provision to “tangible” components, ostensibly excluding software from the scope of the statute. While differences remain regarding these proposals, the AIPLA and other industry and bar groups continue their efforts to resolve them.

Attempts in the late 1990s to reform US patent law fell short due to opposition from the independent inventor and small business communities. The AIPLA believes, however, that the present proposals enjoy much wider support, in part due to the in-depth analysis of the NAS and FTC, as well as more recent studies that show how the current system actually disadvantages independent inventors. In addition, the ‘town meetings’ played a constructive role, both in educating the public about the reform proposals and in developing consensus on how those proposals should be crafted. The result is that substantial US patent reform appears to be on the horizon, and may well be implemented before the end of 2006.

William Rooklidge is apartner in the Irvine, California office of Howrey and president of the American Intellectual Prpoerty Law Association