On Sept. 7, the US House of Representatives passed sweeping legislation to overhaul the US patent system by a vote of 220 to 175. The Patent Reform Act of 2007 (H.R. 1908), authored by Rep. Howard Berman, D-Calif., seeks to try to restore some balance to the patent system in the face of radical changes in information technology by introducing a number of changes increasingly sought by the software industry in particular:
- First to File. The awarding of a patent will go to a First to File, rather than First to Invent, standard. The concept of First to File has been adopted throughout both Europe and Asia, and such a move would make it much more difficult to raise potential patent issues based upon debatable prior claims.
- Post Patent Review Process. After a patent has been awarded, the legislation would provide a review period in which other claimants to the patent (or those that may object to the patent) may challenge the validity of the patent. This post-evaluation period makes it easier to forestall “midnight” patents that are approved with no chance for objection from other potential stakeholders who may already have prior claim.
- Component Patents. In the event of a patent violation in which the patented technology is only a component of the overall application, damages can only be applied based upon the degree to which that component enabled the functionality of the application overall. This recognizes that some patents are more significant than others, and a patented technology which performs only a minor part of the overall capabilities of an application should not be used to justify lawsuits claiming compensatory damages far in excess of what the patented technology itself provided.
- Strengthen PTO Rules. The Patent and Trademark Office is now able to institute its own rules for streamlining the processing of patent applications, though Congress would retain a sixty day evaluation period on any new PTO rules before they go into effect.
- Patent Case Jurisdiction. Challenges to patents must be filed within the legal jurisdiction of the individual, company or organization that received the initial patent. Currently there is no restriction of jurisdiction, so many patent vultures seek out jurisdictions that have previously proven friendly to granting large awards against patent holding companies.
- Reasonable Obviousness. The legislation comes on the heels of a Supreme Court decision in 2006 which strengthened what was meant by the obviousness of a given patent; proposed changes in the legislation more clearly articulate what is meant by an informed expert, and lay in provisions for such informed experts to comment upon such patents as it is being both developed and presented.
The bill was supported heavily by the IT industry, largely in reaction to the Research in Motion (RIM) lawsuit which came close to shutting down the Blackberry infrastructure as well as a steady stream of patent insults coming from patent vultures that buy up the patent portfolios of defunct companies then use the threat of litigation against companies to extort large out of court settlements, as well as raising the level of difficulty in both receiving patents and reducing the potential punitive damages for patent violation.
Sectors opposed to the bill, however, include agribusiness, pharmaceutical companies, and biotech companies that are concerned that the change in legislation will significantly weaken their ability to fight against the genericization of their products and will reduce the incentive to invest large amounts of money into a product that may not have an extended patent protection (and they are especially concerned about the componentization language, which could reduce what they can in fact protect. The White House (which has long had a close relationship with both agribusiness and Big Pharma) has also indicated that Bush will not sign the legislation as it is currently written.
The Senate is preparing to take up similar legislation in Fall 2007, and both sides expect there will be significant change once the bills make their way into joint committees.
My personal take on this is that such legislation is long overdue. While there is an increasing amount of evidence to show that software patents in particular, and the patent system overall in general, provide only marginal benefit to the initial inventor (especially if they are small), the current system has turned patents into individual asset speculation instruments that serve only as a drag on the overall development of technology. Patents will not be abolished completely because too many companies are vested in some way with the status quo, so realistically, the next logical step would be to make some efforts to make patents less potent as trading assets. Ideally, this would also involve reducing the effective time that a patent remains in force, but that won’t happen given the current political environment.
If this legislation makes it past the White House’s veto pen (or more likely, gets overridden) it would represent a welcome and long overdue updating of the patent system. One can only hope.