Groups raise concerns about patent reform bill

Patent reform legislation introduced last week would create uncertainty about the validity of many U.S. patents, critics said Thursday.

Officials from Amgen, 3M, and the University of California all raised concerns about the Patent Reform Act, hailed by many tech vendors as a needed overhaul of the U.S. patent system.

Major objections voiced during a hearing before the House of Representatives Subcommittee on Courts, the Internet, and Intellectual Property centered around the bill’s creation of a new post-grant procedure to challenge a patent and its restriction on patent infringement awards that would eliminate any preexisting products from being considered. The bill requires that only the patent’s “specific contribution” be considered in infringement awards.

But 3M’s patent on Post-it Notes would have little value if juries had to disregard the value of the preexisting inventions of paper and adhesive, said Gary Griswold, president and chief counsel of intellectual property at 3M.

“Limiting damages tilts the balance in favor of infringers at the expense of American researchers and innovators,” Griswold said. “An infringer of the Post-it Note patent would be permitted to argue that the value of the paper and adhesive … should be subtracted from the value of the infringing note, leaving essentially nothing on which to base a calculation of damages.”

Biotech Amgen can spend $1.2 billion and take 15 years to develop a new drug, and most of the company’s projects “result in failure,” added Kevin Sharer, the company’s chairman and CEO. The bill’s new post-grant patent challenge procedure would create uncertainty about the few patents the company is granted, he said.

The bill “expands dramatically the ability to invalidate patents,” Sharer added. “We seek a clear and quiet title we can rely on going forward.”

Representative Darrell Issa, a California Republican and patent holder, also expressed concerns about the post-grant opposition procedure in the bill, saying it could allow challengers to “have bite after bite after bite” into a patent.

Others at the hearing praised the bill, saying an overhaul of the U.S. patent system is long overdue. The U.S. tech industry has been victimized by “excessive” patent infringement awards, said Anthony Peterman, patent counsel for Dell.

“Plaintiffs are exploiting litigation rules and seeking artificially high damages,” Peterman said. “It’s litigation as a business.”

Many companies, because of the fear of “irrational” patent awards, settle lawsuits even when they don’t believe they’ve infringed a patent, he added. “This patent reform legislation is needed, and needed now, to help sustain America’s growth and vitality,” Peterman said. “The problem hurts American competitiveness and the U.S. economy.”

Patent reform has been at the top of the agenda for many tech companies and trade groups for several years. Tech groups have argued that many invalid patents are being granted in the U.S. and that infringement litigation is out of control.

The bill would also give more resources to the U.S. Patent and Trademark Office. It would award patents to people who first file for the patents, instead of those first to invent, and limit the jurisdictions where patent holders could file infringement lawsuits. The U.S. has the only first-to-invent patent system worldwide.

Patent reform is needed, said Representative Lamar Smith, a Texas Republican and cosponsor of the bill. “This bill represents a good starting point for us to work through the many issues,” he said. “This is the most significant, comprehensive update to patent law within the past decade.”