Patent reform debate heats up

Companies on both sides of a patent overhaul debate in the U.S. Congress are stepping up the pressure on lawmakers, as some observers expect a vote soon in the Senate.

Two groups, one supporting patent legislation before the Senate and one against it, held dueling media briefings on patent reform on Capitol Hill Thursday. Members of the Coalition for Patent Fairness, including lawyers from Hewlett-Packard, Cisco Systems, and SAP, said they see broad support for the Patent Reform Act in the Senate and hope senators will soon follow the House of Representatives’ lead and pass the bill.

The coalition sent a letter to Senate leaders Wednesday, calling on them to pass the Patent Reform Act. The bill will “benefit all American workers and American consumers,” said the letter, signed by 128 companies and organizations, including Amazon, Dell, eBay, and Intel.

But another group, the Innovation Alliance, sent a letter to Senate leaders Tuesday urging them to reject the legislation.

“No compelling case has been made for a bill written in this fashion,” read the Innovation Alliance letter, signed by 430 companies and organizations. “It is based on claims of a crisis in the current patent system that does not exist, supported by selective assertions which do not hold up under scrutiny.”

Among the companies and organizations signing the Innovation Alliance letter were the Institute of Electrical and Electronics Engineers-USA, the NanoBusiness Alliance, Cargill, Coca-Cola, and Qualcomm.

Both the House and Senate versions of the Patent Reform Act would overhaul the U.S. patent system, but two pieces of the legislation have generated the most controversy. The bills would create a new way to challenge patents after they’ve been granted, and it would allow courts to change the way they assess damages in patent-infringement cases.

Currently, courts generally consider the value of the entire product when a small piece of the product infringes a patent. The legislation would allow courts to base damages only on the value of the infringing piece.

Those changes would create uncertainty about the validity of patents and drive venture capital money away from innovative companies, said Joe Kiani, CEO of Masimo, a medical equipment vendor in Irvine, Calif.

Combined with recent U.S. Supreme Court rulings, including one limiting the use of injunctions by plaintiffs in patent infringement lawsuits, the Patent Reform Act would significantly decrease the value of many patents, argued Kiani and other participants in an Innovation Alliance forum.

The bill “opens the way for other countries like China to bring technology here that will be a fraction of the cost and will be copies of our technology,” Kiani said.

Panelists at the Innovation Alliance forum said they’d support patent reform that gives more money to the U.S. Patent and Trademark Office (USPTO), allowing examiners to better research patent applications. “We support prudent patent reform,” said Sean Murdock, executive director of the NanoBusiness Alliance, a trade group representing nanotech companies. “Simply stated, the current bill, in its current form, is not prudent.”

But members of the Coalition for Patent Reform, in a press briefing a couple of hours later, said Congress needs to fix problems with “patent speculators” suing established companies. The Supreme Court rulings and more money for the USPTO aren’t enough, said Tim Crean, chief intellectual property officer for SAP.

In the past two years, the Supreme Court has ruled on several patent issues, including a case involving eBay. In May 2006, the court overturned a long-term U.S. court practice of issuing injunctions against infringing products in nearly all patent cases.

Despite the Supreme Court rulings, the number of patent lawsuits continues to grow, said Crean and Michael Holston, general counsel for HP. This year is shaping up to be a record year for patent lawsuits, Holston said.

The coalition found about 625 patent lawsuits in 20 selected U.S. district courts in 1990. Through Sept. 30, the same 20 courts have seen about 1,550 patent lawsuits in 2007, the coalition said.

HP will spend about $75 million defending against patent lawsuits this year, Holston said. More than half of those lawsuits come from patent “speculators” — companies that buy patents for the purpose of filing lawsuits, he added.

The patent system is “being exploited through litigation games,” added Mark Chandler, general counsel for Cisco.