A Worried Welcome for a Patent Bill


Joseph Schuman
November 8, 2013

Sometimes angst is a good thing.

Such was the case at the House Judiciary Committee’s first hearing on patent legislation since Chairman Bob Goodlatte last month introduced the omnibus patent-system overhaul his staff quietly prepared over the summer.

In contrast with the skein of Capitol Hill hearings held earlier this year that at times felt like a stampede toward devaluing patents, Democratic and Republican lawmakers at Goodlatte’s hearing last week appeared spooked by the prospect of overreaching and heedless lawmaking as a response to abusive lawsuits.

“Our first rule should be to make sure we do no harm to our patent system or take any actions which unintentionally discourage innovation or increase litigation,” Rep. John Conyers, the committee’s ranking Democrat, said at the top of the hearing. “Our patent system, while not perfect, is the envy of the world and perhaps the most significant driver of growth in our economy.”

Rep. Mel Watt, ranking member of the Subcommittee on the Courts, Intellectual Property and the Internet, expressed a similar vigilance.

“While the Chairman’s bill proposes a number of creative solutions, we need to carefully examine how they will affect not only the bad actors, but how they will affect all participants in the patent system,” Watt said.

In particular, Watt echoed Conyers’ unease about the bill’s possible intrusion into judicial rules of procedure that have been managed by federal judges for the past eight decades, as well as the committee’s reluctance to examine how the bill could affect small and midsized inventors whose livelihoods rely on patents.

“If we move forward precipitously with this bill, we risk jeopardizing comity with the federal judiciary with overly prescriptive mandates, losing the trust and confidence of the small and independent inventors with unbalanced remedies that leave them out of the equation and, even worse, we run the risk of enacting measures that could not only be ineffective but could exacerbate the current problem or invite new, unintended problems,” Watt said.

Republican Reps. Ted Poe and Doug Collins also expressed skepticism about changing the patent system, noting that the biggest patent overhaul in more than a generation took place just two years ago when Congress passed the America Invents Act (AIA).

Worries About ‘Today’s Edisons’

A common theme at the hearing was the need to properly fund the U.S. Patent and Trademark Office (USPTO) at a time when patent application fees nominally due to the agency are being diverted to help the rest of the overstretched federal budget, or what Conyers called “the single most important problem facing our patent system today.”

A second bill introduced in the committee with bipartisan support is aimed at giving patent examiners “the resources they need to review and analyze the hundreds of thousands of complex and interrelated patent applications they receive every year,” Conyers noted.

But the most frequently mentioned watchword of the day was “caution.”

“We are not tinkering with just any system here. We are reworking the greatest innovation engine the world has ever known, almost instantly after it has just been significantly overhauled,” former USPTO Director David Kappos told the committee. “If there were ever a case where caution is called for, this is it.”

Kappos called on the committee to slow its work on the bill and “reach out and listen” to individuals and businesses who depend on the strength of their intellectual property rights.

“Many small innovators -- today’s Edisons -- have not had time to make their views heard,” he said.

There’s no need to act urgently, no “emergency that requires immediate action,” Kappos told the committee. He noted a recent Government Accountability Office report found the patent-licensing companies often derided as “patent trolls” in this debate are not the entities driving patent litigation, and that in recent years there has been no significant increase in patent lawsuits.

“Simply put, there is no fire,” he said.

But the legislation in its current form, he said, poses significant risks.

Why Devalue Software?

In particular, Kappos warned Goodlatte and the rest of the committee to rethink extending a temporary program established by the AIA that allows alleged infringers to request a USPTO reexamination of “covered business method patents” used in “the practice, administration, or management of a financial product or service.” Patent critics want the CBM program to become permanent and to cover all software patents, a move Kappos called dangerous.

“It devalues innovation implemented in software -- one of America’s most important and innovative sectors; it overtly discriminates against a critical and growing field of technological innovation, likely in violation of our treaty obligations; and it reneges on the balance between the AIA’s numerous post-grant provisions,” he said.

“Why in the world would we, the country that is home to the world’s most dynamic software industry -- an industry that dominates and dazzles the world -- want to tell ourselves and the world that we’ve decided software innovation is less important than other kinds of innovation?” Kappos asked.

It’s too early to say whether the CBM reviews are even achieving their intended goal, he added, while diminishing the value of software inventions at home would send “a terrible policy message” to potential patent infringers abroad.

Several Democrats and Republicans said they shared Kappos’s skepticism. And though variations of the CBM extension are also included in some of the patent bills working their way through the Senate, it seems the most controversial proposal in the debate.

Judges Urge Congress to Be Cautious

But wariness about most of the envisioned changes can be heard far beyond Capitol Hill.

Judge Paul Michel, retired chief of the Court of Appeals for the Federal Circuit and one of the most experienced patent-law jurists in the country, wrote to the committee warning the bill ignores the main problem -- insufficient funds to pay for thorough patent examinations – and will only make the problems worse.

“Patent suits already have too many issues, too many motions, too much cost and delay. The bill, as written, would further increase all these ills,” Michel said. “And it would do so without actually helping those defendants wrongly accused of infringement. The proposed provisions would seldom end a frivolous suit on a motion to dismiss and seldom” help wronged defendants recover their litigation costs.

Michel’s successor at the Federal Circuit, Chief Judge Randall Rader, has also joined the debate, telling lawyers gathered at the Eastern District of Texas Bench Bar Conference on Friday that the federal judiciary is already adopting new rules to improve the situation – an area where judges have more experience than Congress.

“Because I have confidence in the ability of the Judiciary to address these issues in a more flexible and thus just manner, I consequently encourage the legislative branch to proceed with great caution in attempting to solve specific and evolving problems with sweeping definitions,” Rader said.  “By addressing litigation abuse, I have full confidence that the judiciary has the tools to restore confidence in the patent system.”