By Kevin E. Noonan --
Just when you thought . . . it was safe to ignore
patent reform, and fresh off a concerted push from the new Commerce Secretary,
the new Patent and Trademark Office Director, and the new Deputy Director for
patent reform that includes fee setting and substantive rulemaking authority, a
Senate insider told a group of assembled patent attorneys and their clients
that there is an 70-80% chance that the Senate will pass a bill this year
(early next year at the latest). And the bill won't look much different from S. 515, the bill voted out of
the Judiciary Committee in May.
This news came from Joseph Matal, Republican
General Counsel, Senate Judiciary Committee, the after-dinner speaker at the IP
Counsels Committee Conference hosted by the Biotechnology Industry Organization
(BIO) in Washington, DC. Mr. Matal
shared his views that the opposing voices in the Senate will "reach a deal"
on the bill, with some minor changes, and that the House would ultimately accept the bill as passed
by the Senate.
He characterized H.R. 1908 that was passed almost
two years ago as a "terrible bill" that the big manufacturers in the
high tech industry -- Intel, Microsoft, Cisco and others in the (oxymoronic)
Coalition for Patent Fairness (CPF) -- not only supported but practically wrote, and
said that these companies "did enough fundraisers that they thought they
would ram it through." Fortunately, he said, the Founders wisely conceived of the Senate, which
fulfilled its constitutional role as "a killing field" for a bad bill,
one that had some "bad provisions that would have done real damage to U.S.
economy in the medium and far term." He characterized S. 515 as a "real compromise" where "most
of the noxious provisions were removed entirely or made inoffensive" in
the form voted out of the Judiciary Committee.
Mr. Matal garnered his first round of applause when
he announced that, with regard to proposed provisions in the bill granting
substantive rulemaking authority to the Patent Office, it "ain't gonna
happen." Regarding other provisions,
he shared the following insights on the probable final form of the bill:
• Inequitable conduct: there is a "slim chance" that the bill will
contain any extensive reform of inequitable conduct. This he attributed to the last two election cycles, saying "elections
have consequences," and while it wasn't as simple as saying Republicans
supported innovator pharma while Democrats support generic pharma, it would
have been possible to "wipe out" inequitable conduct 2 elections and
15 Republican Senators ago, but not now.
However,
he did say that Senator Hatch was insisting on a form of reissue proceeding, to
be called "supplemental examination," which would permit a patentee
to submit art to the Office that had not been submitted during initial examination. New submissions would be limited to
patents and printed publications, and submitting a patent to this reissue
procedure would preclude inequitable conduct from being raised in any
subsequent litigation. However,
there would be procedural limitations, such as having to complete the reissue
process before litigation commenced, so that there would be a risk of laying
out an inequitable conduct case for a defendant if a patentee was forced to
litigate before completing reissue.
These provisions would not apply in the same way for declaratory
judgment actions, so a potential defendant could not force a patentee in
reissue to lose the protections provided by submitting unconsidered art to the
Office.
The way the Senate works, according to Mr. Matal,
the fact that Senator Hatch is insisting on these provisions makes it likely
that something along these lines will be in the final bill.
• Post-grant review: Mr. Matal recounted the story of what happened after the
House passed its patent "reform" bill two years ago (H.R. 1908) that
contained post-grant review provisions. It seemed that several Patent Office officials, including Mr. Toupin and
Mr. Love came to the Hill and explained that the post-grant provisions in the
bill were "unadministrable." Moreover, they told members
of Congress that if the bill passed into law, they would be inundated by
petitions and would "never dig themselves out" of the ensuing
backlog. Mr. Matal worked for
Senator Kyl at the time, and in looking into the matter found that no one in
the House had consulted with the PTO on whether the Office could handle the
post-grant provisions in the bill. This work was the basis for Senator Kyl's bill introduced at the end of
the last Congress, and provided the Senator and Mr. Matal with the hope that
S. 515 would have better language. He described the goal as coming up with a system that "strikes a
reasonable balance" between the interests of patentees and
requestors. He also ventured the
opinion that it was a fair question whether inter
partes reexam is a good idea in the first instance, saying that it is a
reasonable position that litigation should be the way to resolve these
issues. However, he said Senator
Kyl agreed that this was too radical a position that wouldn't be politically
possible to enact.
Unfortunately,
as it turns out the language in S. 515 is the same as the language in H.R. 1908,
and Senator Kyl's amendment directed at "striking a balance" was
defeated 4-15 in committee. However, since then Senators committed to having different language --
describing a system that was developed in consultation with PTO officials --
have been lobbying ("It's the Senate") the leadership to convince
Senator Leahy to consider changing the language; Director Kappos has also
gotten involved. Mr. Matal
conceded that he wasn't privy to the discussions between Majority Leader Reid
and Senator Leahy, but that he thought "what we are waiting for" was
some movement on Senator Leahy's part to negotiate alternative language
acceptable to the Senators and the Patent Office.
What
could that language look like? It
would likely remove the "could have raised" estoppel provisions in
the current inter partes
reexamination statute, and would also remove the preclusion of pre-1999 patents
from the inter partes reexamination
regime. However, in return
patentees would get a higher threshold for initiating reexamination, requiring
a showing of a prima facie case of
invalidity -- evidence that, if unrebutted, would be sufficient to invalidate a
patent. While describing this
change as being good for patentees, he also said it was considered good for the
Patent Office, which is inundated with requests that are granted about 95% of
the time under the current threshold showing standard. In addition, there would be a sharp limit
on "successive proceedings," i.e.
patents undergoing repetitive inter partes reexaminations. (He noted in this regard that Patent
Office statistics showed that "successive" inter partes reexamination requests constituted 25% of the total in
2008.) The bill would permit one inter partes reexamination, after which
any challenge would be by litigation. Initiating a reexamination for patents in litigation would also be
limited to a time early in the litigation, to prevent defendants from adopting
a "go long" strategy for a case that was going badly. Finally, the Office has agreed to a
12-month time limit on reexaminations, and has identified procedural changes
to be instituted to achieve this goal.
• Best mode: would remain in the statute, but
be unavailable in litigation to invalidate a patent.
• Venue: to be limited to codification of the TS Tech case, at the insistence of
Senator Cornyn of Texas.
• Damages: "specific contribution over
the prior art" and apportionment are not going to get back into the bill
(for at least the reason that not even proponents could satisfactorily
define what was meant by the former language, and "if you don't know what
legislative language means, you shouldn't enact it"). There might be some provisions for
enhanced Daubert-like considerations
of how damages are calculated, and some practices prohibited (such as
subjecting a defendant to questioning over the size of its liability before a
patentee has established infringement and defeated any invalidity challenges --
something that Mr. Matal says makes the defendant "look guilty" and
isn't fair). Practices "at
the margins" that have this quality of unfairness might be proscribed by
the bill, but he expects no big changes on the grand compromise cobbled
together by Senators Leahy, Specter and Feinstein.
Mr. Matal finished his remarks by noting that the
CPF and others may want changes in the bill, and may resist supporting the bill
in the hopes of getting such changes, but that in his view the amended bill --
which he has shown only to PTO management -- can be expected to be passed in
this Congress.
Well, when I read all that pragmatic stuff, about inter partes proceedings being inappropriate to the PTO and better handled in the courtroom, I get even more convinced that an ex parte system that duly issues patents with a Presumption of Validity, which validity can be disturbed only when the petitioner has "clear and convincing" evidence of invalidity, is not an optimal balance between the class of patent owners trying to intimidate, and the class of employers, trying to earn an honest crust out of making and selling things.
Posted by: MaxDrei | October 29, 2009 at 02:37 AM
Kevin,
I kept hoping that the health care debate in Congress would distract them from S. 515/H.R. 1260. The health care debate could still sink this so-called "patent law reform" beneath the morass. I hope eternal!
Posted by: EG | October 29, 2009 at 01:44 PM