Obama Administration Weighs in Supporting Patent "Reform"

    By Kevin E. Noonan --

Commerce Secretary Gary Locke (at right) has written a letter to the Senate Judiciary Committee giving qualified support to S. 515, the patent "reform" bill voted out of committee months ago but languishing in the wake of more pressing health care reform legislation.  Unfortunately, upon close reading, the Secretary's letter seems to say much more that it does.

The letter begins with the usual platitudes about the patent system:

The American spirit of innovation is essential to creating jobs and hastening that recovery.  Innovation and creativity are the wellspring of economic growth and progress.  As the framers of the Constitution recognized, a robust system of intellectual property protection ensures that innovation will flourish.  To this end, landmark patent reform is urgently needed.  We believe S. 515 incorporates the essential elements of patent reform; and, therefore, the Department of Commerce supports the bill with additional recommendations below.

In the 21st Century, innovations in science and technology are crucial drivers of our economy.  Now, more than ever, strong, transparent, and predictable incentives to invest in research and development are vital.  At the same time, legislative and administrative actions involving the establishment and enforcement of intellectual property rights must encourage healthy competition and facilitate continuing innovation.  A 21st Century U.S. patent system must balance incentives for innovation and competitive markets through strong intellectual property protections and by only rewarding truly innovative ideas with those protections.

We must recognize the international dimensions of innovation by encouraging reforms that promote innovation in the United States and success in the global marketplace.  A more harmonized international patent system will benefit U.S. applicants by simplifying the patent process, reducing legal costs, and enabling American innovators to obtain patents more quickly, both domestically and abroad.  Developing an effective international system will help ensure that American intellectual property rights are protected around the world.

And of course, the goal is fairness:

The cornerstone of our comments is therefore to provide balance, flexibility and efficiency in the U.S. patent system.  The Administration seeks reforms that fairly balance the interests of innovation and competition across all industries and technologies without favoring one industry or any particular area of technology over another.

Number one on the list of priorities is the Patent Office, and (understandably, perhaps, in view of the current fiscal situation), the number one priority is fees.  The Office needs to be able to set fees, according to the Secretary, to address the backlog of pending applications and its "recent financial challenges" (many of which, ironically, are caused by its ineffective attempts to address a "patent quality" problem that may not have existed).  The letter also calls for the Office to be given substantive rulemaking authority, which Congress has not seen fit to grant to the Office.  Unfortunately, the letter tries to support its call for substantive rulemaking authority with a specious argument about the Tafas v. Kappos case, which the letter states has raised doubt regarding this authority.  There was no such doubt on the part of the Federal Circuit:  the Tafas decision affirmed that the PTO had procedural rulemaking authority, but not substantive authority, and that all four of the ill-advised "new rules" at issue were procedural (although one of them was contrary to 35 U.S.C. § 120).  Indeed, the debacle surrounding the "new rules" should be enough to affirm the wisdom of preventing the Office from enacting substantive rules; no matter what one thinks of the nascent Kappos regime, eventually it will be replaced, perhaps (God help us all) by a reincarnation of the Dudas/Toupin regime.

The letter supports a post-grant review procedure that is "phased-in," without providing any substance on how and what would be "phased."  The Secretary uses this aspect of the current reform bill to advocate again for fee-setting flexibility for the Office, but is silent on the substance of the kind of post-grant review or its implementation that the Administration supports.

The Secretary also supports "transitioning" the U.S. patent system to a "first to file" system, in the name of harmonization and with the purported benefits of "simplify[ing] the patent system, reduc[ing] legal costs, [and] improv[ing] fairness [to whom, one wonders]."  The "complex, time-consuming and resource intensive" costs of global patent procurement is the supposed target of this "reform," which the letter asserts would benefit American innovators with "greater predictability, reliability and competitiveness."  Again, however, this section of the letter ends with vague references to making "various adjustments" to the provisions of S. 515, also for the sake of "fairness" to "all stakeholder" interests, without any hint of what those "adjustments" might be.

The Secretary is direct in opposing provisions of the bill regarding patent search and examination, motivated (creatively) by the fear that such provisions might impede current and future work-sharing efforts between the USPTO and foreign patent offices.  In addition, the letter raises concerns about the "sovereign function" provisions with regard to including the public and U.S.-based "vendors of patent-related services" (presumably, search firms) from participating in the patent examination process.

Turning to litigation, the Secretary's letter "generally supports" the Grand Compromise worked out between Senators Leahy, Feinstein (at right), and Specter (when he sat on the other side of the aisle as the Ranking Republican Member) giving a "gatekeeper" role to the Federal judiciary on patent damages.  The Administration wants to avoid damages provisions that give "lottery-atmosphere awards" to prevailing patentees while ensuring "fair compensation" (which suggests that compensation becomes more unfair the more egregious the scope of the infringement).  But the support is provisional:  the letter notes that "the median jury award for patent damages increased significantly from 1991 to 2005," suggesting that the gatekeepers of the judiciary were asleep at the switch (or at least dozing) during that time.  Thus, recognizing that "substantial work" has been done in reaching the compromise, the Administration seems content to take a "wait and see" approach to this aspect of "reform."  The Secretary also expresses a desire to "work with Congress" on provisions involving willful infringement to "ensure a fair enhanced damages standard" without setting out any specifics, instead talking vaguely about the "quite substantial threat of enhanced damages" (ignoring, apparently, the reality that the threat of enhanced damages is the point of the willful infringement section of the statute).

Finally, the letter ends with a hodge-podge of provisions relating to telework for examiners, virtual marking, the inventor's oath or declaration, prior art submissions by the public during ex parte examination, best mode, venue, interlocutory appeals, and the patent expertise for judges pilot program, all of which the Administration supports with reservations about "a number of technical concerns" with the language of these provisions; the substance of these concerns is not disclosed.

In short, the letter is a disappointment for anyone intending to understand the extent of the Administration's support of S. 515.  It is even more disappointing to anyone looking for an understanding of the Administration's vision for the patent system, or any concrete ideas that Secretary Locke, Director Kappos, or anyone else in the Administration may have regarding improving the patent system.  It is certainly the case that neither the Secretary nor (even more so) the Director have had much time in their respective positions to fully address the concerns and issues surrounding patent reform.  But besides jump-starting Senator Leahy's (at left) efforts to get S. 515 passed in this Congress (something fully understood by the Senator, who issued a press release attesting to his renewed commitment to the bill), there is little that needed to be said in Secretary Locke's letter.  Indeed, it is just as likely that the letter will galvanize the opposition to the bill, which fails to address the concerns (however ephemeral) of the major proponents of "reform" -- the IT community.  In addition, the bill has dedicated opponents in Senators Kyl and Hatch, with Senator Hatch angrily storming out of the committee room during the vote that sent the bill to the Senate floor.  The Obama Administration may have good ideas or bad ones on the patent system, but this letter does little to inform those interested in the debate about ideas of either kind.

For additional information on this and other related topics, please see:
• "Not Everyone Thinks "Patent Reform" is a Great Idea," April 7, 2009

• "Senate 'Patent Reform' Bill (S. 515) Voted out of Judiciary Committee,"April 2, 2009

• "Some (But Not All) Amendments Introduced in 'Patent Reform' Bill," April 1, 2009

• "'Progress' on Senate 'Patent Reform' Bill," March 31, 2009

• "Senate Judiciary Committee Discusses S. 515 at Executive Business Meeting; Adopts "Technical" Amendment GRA09350," March 26, 2009

• "Senate Judiciary Committee Places Patent Reform Bill on Agenda," March 15, 2009

• "Senate Judiciary Committee Holds Hearing on Patent Reform," March 10, 2009

• "Senator Specter Seeks Resolution of Issues before Vote on Patent Reform Bill," March 5, 2009

• "Senate and House Introduce New Patent Reform Legislation," March 3, 2009

Comments

[EG]

Kevin,

I'm with you. This Locke lette is more likely to stir up opposition to, rather than support for, S. 515.

After the "Tafas Affair," I give an absolute unqualified "thumbs down" on granting the PTO substantive rulemaking authority. That would be only an invitation for further abuse.

But what I find astonishing is the statement in the Locke letter that "At a minimum, USPTO should have procedural rulemaking authority over proceedings in the agency." They already had that authority before Tafas. Put it this way what additional "procedural rulemaking authority" is the PTO looking for?

The discussion of "Assessment of Damages" is based on "old tapes" and especially old data. It certainly doesn't reflect the recent Lucent Technologies case which shows the Federal Circuit is no longer (if it ever was) "asleep at the switch" when it sees a mega damage award which is based on flimsy or nonexistent evidence. The Georgia-Pacific factors (including the "entire market value" rule) work as the recent Lucent Technologies case shows. There's no need now to upset this applecart.

Like I've said before, I would be perfectly happy if S. 515 and its "evil twin" H.R. 1260 simply sank with no survivors.

[staff3]

"We believe S. 515 incorporates the essential elements of patent reform..."

Sure, just what Microsoft and their thieving pals want.

Patent reform is a fraud on America...
Please see http://truereform.piausa.org/ for a different/opposing view on patent reform.