Sunday, November 8, 2009

US Congress Should NOT Enact Costly Patent Review Procedures That Expose Small Inventors To Big US & Foreign Company IP Poachers

Proposed Change in Patent Policy Pits Big Firms vs. Small


Wall Street Journal

Nov. 4, 2009

WASHINGTON -- Congress is considering an overhaul of U.S. patent policy that would bring the first major changes in more than half a century. But a disagreement between big and small companies over one aspect of the bill could derail its passage.

The effort marks the third time in five years that lawmakers have tried to change the nation's patent laws, as they have struggled to balance the competing interests of big technology companies, small start-ups and individual inventors.
The bill would seek to bring the U.S. patent system in line with international standards and streamline the operations of the U.S. Patent and Trademark Office, which is facing a backlog of applications.

The Senate Judiciary Committee approved one version of the bill in April, shortly after the introduction of a similar measure in the House. Democratic and Republican staff members from the House and Senate committees are negotiating changes, and hope a widely acceptable version will hit the Senate floor this fall.

The most contentious aspect of the bill concerns what happens after the patent office approves an application. The Senate measure proposes expanding the avenues for challengers to ask the patent office to examine already-granted patents.

The office currently has two systems for reviewing approved patents. One method permits challengers to remain more involved in the review, while the requester has only limited participation in the other. In the last fiscal year, there were 2,120 pending re-examinations, including both types.

The new re-examination process would bring complaints on a broader range of challenges in front of patent judges rather than patent examiners to create the atmosphere of a court inside the patent office, but without the expense of litigation. Rulings would occur on a tight timeline: within a year from the filing date. The new bill would also change the way subsequent challenges to the same patent can be made. Critics say it would become easier to launch serial attacks.
The proposed new review process is pitting larger, established companies against smaller or start-up firms.

Many big technology companies argue that the proposed process would strengthen the patents that make it through. The review would be "essential to maintaining high-quality patents because it allows the validity of questionable patents to be tested," said Horacio Gutierrez, deputy general counsel of Microsoft Corp. International Business Machines Corp. in a statement called the process "a low-cost alternative to litigation."

Many small companies and research universities fear that deep-pocketed businesses could attempt through the review to keep innovative products from hitting the market. The National Venture Capital Association and other critics said it could be harder for start-ups to secure funding if their patents were targeted by repeated attacks.

"This may be catastrophic for a start-up or small inventor," said Dean Kamen, inventor of the Segway, a personal electric scooter. "You get this young guy who quit his job to make this gizmo and he shows up at the bank or to his father-in-law. The first thing the bank or that venture capitalist will say is, 'Do you have a patent?'"

A dozen Republican senators voiced support for the smaller firms in an Oct. 15 letter to leaders of both parties. Congressional aides said that unless both sides could reach agreement, lawmakers were unlikely to introduce the bill for a floor vote in the Senate, which is tackling health care and other issues.

David Kappos, director of the U.S. patent office, said he had urged lawmakers to set a high threshold for reviews. He also wants safeguards against serial attacks on patents.

A coalition of major technology companies, the Coalition for Patent Fairness, voiced disagreement in a letter to Mr. Kappos in September. "We would very strongly oppose changes to the Senate and House bills that would dilute in any way the efficacy of post-grant challenges," the letter said.

If this Congress doesn't pass patent legislation, it won't likely come up again soon. In the two previous congressional sessions, attempts at passing patent legislation collapsed.
Senators, Inventors Criticize Patent Bill Favored By Tech Cos
By Kristina Peterson
Wall Street Journal
Oct. 15, 2009
WASHINGTON (Dow Jones)--Twelve Republican U.S. senators on Thursday sent a letter to Senate leaders criticizing pending patent legislation, saying the bill "threatens to diminish the value and enforceability of U.S. patent rights."

The Oct. 15 letter backs criticism against the legislation being levied by independent inventors and academics who argue the bills favor major technology companies. If approved the legislation would be the most sweeping rewrite of federal patent law in 50 years.

Critics say two similar bills now in Congress would broadly make it harder for individuals, universities and start-ups to defend their inventions against companies with deeper pockets. Opponents are also upset that Obama administration officials with past ties to International Business Machines Corp. (IBM) and Microsoft Corp. (MSFT) are supporting the bill.

At issue is a provision giving outside challengers expanded ability to initiate review of newly approved patents. "These so-called post-grant review provisions, as currently crafted, are quite problematic," the Republican senators said in the letter written by Sen. Sam Brownback, R-Kan., and signed by 11 other Republicans.

Microsoft and IBM are two of the most active companies involved in filing patents; IBM, for example, earns over $1 billion each year in intellectual property-related income. Both companies have ties to top government officials with authority over patent policy, including U.S. Patent and Trademark Office Director David Kappos.

In testimony before Congress last March, Kappos - who was, back then, the head of intellectual property at IBM - praised the post-grant review. Kappos, who spent 26 years at IBM, said in an interview Thursday that he recuses himself from IBM-specific matters and has taken pains since his appointment to listen to the concerns of independent inventors.

"If I wanted to do the right thing for a specific company, I could have stayed there," he said. IBM declined to comment.

Kappos also said he told lawmakers in private meetings they should establish a high threshold for reviews and include safeguards against serial challenges.

But even one post-grant review can cause an inventor to lose market advantage and venture capital funding.

"Patent certainty is critical to the ability of a venture capitalist to be able to invest," said Kelly Slone, director of the National Venture Capital Association's medical industry group. More than a dozen research universities have also sent letters opposing the post-grant review provision.

Microsoft, too, has connections in the Commerce Department. Marc Berejka, a senior official handling intellectual property matters, worked for Microsoft for the 12 years leading up to his July 2009 hiring, including eight years as a lobbyist for the company.

Commerce Secretary Gary Locke, who endorsed most of the bill in an Oct. 5 letter, received campaign donations from Microsoft employees as Washington state governor. Locke accepted $96,900 in cash donations from company employees while running for re-election in 2000, according to state public records. In total, Locke raised $3.8 million in that election cycle. He also owned between $100,000 and $250,000 of Microsoft stock until divesting it on June 22 as a condition of his appointment.

A Commerce spokesman said the agency is deferring to Congress on how to alter patent laws.

Pat Choate, an economist and board member of American Innovators for Patent Reform, said he was troubled by the process. "Patent policy is suddenly being run by advocates for Microsoft and IBM," Choate said.

But some representatives of small companies say they think the government is trying to work in good faith.

"It is certainly the case that big companies have a lot of very well-qualified people who work with them and then go and do other things," said Brian Pomper, executive director of Innovation Alliance.
Opposition Grows to Post-Grant Review Provisions in Proposed Patent Reform Act of 2009
(I-Newswire) October 20, 2009 - New York, N.Y. – October 20, 2009 – “Patent policy is suddenly being run by advocates for Microsoft and IBM,” says Pat Choate, noted economist and writer, and a board member at American Innovators for Patent Reform (AIPR), a nonprofit organization dedicated to promoting and defending American innovation.
Dr. Choate was quoted in an article, “Senators, Inventors Criticize Patent Bill Favored by Tech Cos,” that appeared in the Friday, October 16, Wall Street Journal and was distributed by the Dow Jones Newswire Service. Dr. Choate’s comment was in response to criticism that U.S. Patent and Trademark Office Director David Kappos spent 26 years at IBM, and Commerce Secretary Gary Locke received campaign contributions from Microsoft employees.
At issue is proposed post-grant review provisions in the pending Patent Reform Act of 2009 that would give third parties – such as IBM, Microsoft and other giant high tech corporations – expanded ability to challenge newly issued patents. The Wall Street Journal article also addressed another challenge to the Patent Reform Act of 2009 that came from 12 Senators who co-signed a letter from Sen. Sam Brownback, a Republican from Kentucky. In the letter, the senators wrote that the proposed legislation “threatens to diminish the value and enforceability of U.S. patent rights.” The letter also stated that the Senators found the proposed bill’s post-grant provisions to be “quite problematic.”
About American Innovators for Patent Reform
Headquartered in New York City, American Innovators for Patent Reform (AIPR) represents a broad constituency of American innovators and innovation stakeholders, including inventors, engineers, researchers, entrepreneurs, patent owners, investors, small businesses, and intellectual property professionals such as patent attorneys, patent agents, tech transfer managers and licensing executives. AIPR opposes the Patent Reform Act of 2009 (H.R. 1260 and S. 515) and its proposed apportionment of damages, post grant opposition and a change to the first-to-file regime. AIPR advocates strengthening the U.S. intellectual property regime and increasing the funding of the U.S. Patent and Trademark Office. AIPR advocates patent reform that creates a multi-tier patent system, synchronizes patent and copyright laws, and clearly strengthens U.S. patents.
For more information about AIPR, please visit .### About American Innovators for Patent Reform: Trade association representing inventors, patent owners and patent professionals that promotes strengthening the US Patent system.Company Contact Information American Innovators for Patent Reform 244 Fifth Avenue, Suite A253 New York, New York 10001-7604 Phone : 212-726-1114

What Needs To Change
White Paper By: Coalition for Patent Fairness
The Coalition for Patent Fairness supports a modern and efficient patent law that will promote innovation and spurs job creation and economic growth by encouraging commercialization of new and better products and services.

Post Grant Review
Improving the existing process for challenging questionable patents will lead to better patent quality and will benefit everyone: patent holders, patent users and consumers. Allowing third parties to institute a reexamination early in the process will clarify the breadth and applicability of these patents, thereby leading to fewer later challenges. Patent reform legislation should establish a new administrative procedure for review of patent decisions so that wrongfully-issued patents can be effectively reviewed and redressed within the PTO, rather than in the courts.

Myths and Facts of Patent Reform
White Paper By: Coalition for Patent Fairness

MYTH: Patent Reform Act of 2009 would hurt American competitiveness by empowering Chinese and Indian citizens to both evade their intellectual property obligations and undermine the interests of American inventors.

FACT: This is a fanciful charge without any basis in the provisions of the 2009 bill. Improving patent quality – ensuring that only meritorious inventions receive a patent – is a high priority of the bill. Every witness at the more than 20 hearings held over the past three Congresses testified that poor patent quality creates severe and immediate problems. [THIS IS TRUE]
The Patent and Trademark Office (PTO) proposed establishing a post-grant opposition system to challenge patents. As introduced, HR 1908 (the Patent Reform Act of 2007) adopted the PTO’s proposal. It would have created a post-grant opposition mechanism enabling challenges of patents within 12 months of their being issued, or at any time during the life of the patent – the so-called "second window" – if the challenger could meet certain very rigorous criteria.
The bill as introduced came under considerable criticism, primarily by US drug makers. Their objection was limited to the "second window." They argued that the ability to challenge a patent at any time would empower the very kind of challenges those quoted in the India Times greet with such glee.
The Judiciary Committee took these concerns to heart. The 2009 bill no longer has a "second window" for post-grant opposition. The bill permits challenges only in the first 12 months after a patent is granted. For most drugs, because its takes about 7 years after the patent is granted to begin selling the drug, these challenges will simply not be available when a drug is actually marketed. [PERHAPS. BUT THE PROPOSED POST-GRANT REVIEW PROCEDURES STILL RENDER SMALL INVENTORS AND START-UPS VULNERABLE TO LARGE OPPORTUNISTIC U.S. AND FOREIGN IP POACHERS].
The Patent Reform Act of 2009
The Patent Reform Act of 2009 is a bill that has been causing lots of controversy ever since Senators Orrin Hatch and Patrick Leahy introduced a Senate bill on March 3, 2009 and Representative John Conyers introduced the House version of the bill on the very same day. This bill is very similar to the Patent Reform Acts of 2005 and 2007 and, although some of the controversial parts have been taken out, if this bill is passed, it will be disastrous for small and independent inventors. The good news is you can take part in the effort to stop this bill. We talked to retired patent examiner and registered patent agent, Albert W Davis Jr, Reg. No. 38773, to talk about why the patent office needs change, but how this bill is the wrong kind of change for inventors and what he suggests to do to stop it.

First, we will give you a very brief rundown of a few of the major aspects of the bill.

If the Act was passed, one of the major results would be a big change in the way patent infringement litigation works and the amount of damages an inventor can receive if his or her patent is infringed upon. The Act would do this in the following ways: only allowing the plaintiff to bring a suit in the states where the defendant has a physical place of business, broadening the use of appeals, creating stricter criteria for "willful infringement" and "reasonable royalty" and allows defendants to win with a "good faith" defense, in effect saying they didn't know they were infringing or they thought your patent was unenforceable or invalid. All of these changes greatly favor big businesses that infringe on inventors' patents and greatly limits inventors chance to be reimbursed when a company steals their idea.

Other important aspects of the bill are that it would allow any party to challenge a patent within 12 months of being issued and the system would switch from a first-to-invent system, to a first-to-file system. Both of these changes heavily favor large corporations, with lots of money to spend, and makes it harder for often under-financed small inventors.

One of the difficulties of this bill is that almost everyone is calling for reform of the Patent Office.
As Davis says:
Right now the cost of attaining a patent has risen substantially. That is because the Agent or Attorney for the Applicant (Inventor) has to answer more rejections from the Patent Office. Each rejection costs more money to the Applicant in fees paid to argue the rejection. This situation has been brought about because, for the last 6 years at least, the Patent Office has not been functioning correctly. Examiners are afraid to issue or "allow" patents because of a review by the Quality Group of the Patent Office on applications that are issued into patents. Even the smallest mistake in the allowed or issued patent is treated as a critical error. Then, Quality Review goes back through the last 10 applications that the Examiner has issued or allowed. Again, it is easy to find a minor error in any application. These minor errors are then used to prevent advancement, demote or possibly fire the Examiner.

So, what the Examiners are doing is to reject most applications whether the rejections are good or not. Then, the Applicant can only re-file the application or appeal to the Board of Appeals. All of this costs the Individual Inventor a lot of money. Eventually, the Inventor may run out of money or just give up because the system does not make sense.

But, as Davis adds,
"This bill does nothing to cure the current problems of the Patent Office and adds more expenses to getting a patent by subjecting the patent to more attacks by big companies." So instead of reforming the patent system, the Patent Reform Act is really just an attempt by big businesses to run over small inventors. So why don't more people speak out? "The issues are complex so it is not always obvious that they are bad for the Individual Inventor. But, the bill is bad. Call your congress persons local office and tell them to vote against the bill and save the Individual inventor," says Davis.

So who is supporting the bill? One of the big supporters of the bill is the Coalition for Patent Fairness. Over the period of 1996-2006, seven of the corporations who lead this coalition are responsible for paying out half of all awards given in patent infringement lawsuits! Simply said, this bill is supported by patent infringers who want to continue to steal patents, but not pay for them.

So what can we do to stop this bill? "Call your Congress person every day until they agree to help stop the current bill of Sen. Leahy, really misnamed the Patent Reform Act. It should be named the Patent Deform Act," says Davis. You can find your congress people at this website:

So does the Patent Office have hope for the right kind of change? "I believe that the Patent Office will become functional in a little while," says Davis, "maybe this year but probably next year."

Davis continues:

While I worked there, the Patent Office changed several times. Currently, there is a money pressure on the Office because they are receiving a lot fewer Maintenance Fees and Allowance fees. Also, there is a big back-up at the Board of Appeals because Applicants have appealed all of the suspect rejections. The Board will not be able to keep up in a timely fashion with this new workload. Congress made the Patent Office guarantee that the average time to abandonment or allowance would not exceed 18 months. The Office is way over 18 months pendency now and has a 1,000,000 applications waiting for a first action. These pressures will eventually cause a change in the Office to a more rational approach to rejecting and a more rational approach to Quality.

Inventors should try to hang in until the change occurs. Inventors can re-file their applications for very little money and add a new set of claims to prevent a first action Final Rejection.
There hasn't been an overhaul of the patent system since 1952, but let's make sure we get the right change. Contact your Congress persons today.
General Patent Corporation Calls New Patent Reform Bill Harmful to Inventors and Entrepreneurs
April 13, 2009
SUFFERN, N.Y.--(Business Wire)--General Patent Corporation chairman and CEO Alexander Poltorak, writing in the popular syndicated "Washington Watch" column circulated throughout the country, strongly criticized the proposed Patent Reform Act of 2009, and said that"recycling a piece of failed legislation is not the best way to protect American inventors and spur innovation."
Calling the proposed new bill "a warmed-over version of a proposed policy package that didn`t pass the first time it was introduced in 2007," Dr. Poltorak said "the apportionment of damages and other changes would weaken patents and make it easier for offshore copycats to bring pirated goods into the U.S. This,"he continued, "could have serious consequences for American jobs and thecountry`s competitiveness in the global economy."
The proposed changes would transform the U.S. system for granting patents from a"first-to-invent" basis to the European-style "first-to-file" system, which would lead to a "race to the Patent Office" that favors large corporations over small inventors. "Many critics," Dr. Poltorak said, believe the proposed changes as currently written "will diminish many of the protections offered by the current law and discourage innovation and venture investment, and make it even more difficult to enforce a patent."
Dr. Poltorak`s company, General Patent Corporation, has for the past 22 years assisted inventors and entrepreneurs with licensing and enforcement of their patents, and helped them protect their intellectual rights and property under the law. Dr. Poltorak, a national expert on the U.S. patent system and co-author of two books on the subject, says that the new bill "will devalue patents, and stifle innovation and entrepreneurship."
He is also founder and president of thenon-profit organization American Innovators for Patent Reform (AIPR), andsuggests that readers write to their respective Senators and Congressional Representatives to express their views about the Patent Reform Act of 2009. For further information, contact General Patent Corporation at , write to or telephone 845-368-4000 x116.
About General Patent Corporation General Patent Corporation (GPC), headquartered in Suffern, New York, is the premier intellectual property (IP) boutique focusing on patent licensing andpatent enforcement, as well as IP strategy and IP valuation. GPC represents clients in assertive licensing, patent infringement claims and patentinfringement litigation on a contingency basis. For more information, visit .
Opposition Mounts to Patent Reform Act of 2009
By Kevin L. Kearns
American Economic Alert
March 18, 2009
Dear Senators Reid and McConnell, Speaker Pelosi and Congressman Boehner:
We are writing to ask you to strongly oppose the passage of The Patent Reform Act of 2009, S. 515 and HR. 1260, legislation sponsored by Senator Leahy and Rep. Conyers, respectively. These bills, under the mantle of "reform," will actually severely damage U.S. international competitiveness and threaten most American businesses - along with the jobs they create - by undermining America's historically strong intellectual property rights. This legislation will threaten America's smaller inventors, large and small domestic manufacturers, venture capitalists, agricultural entities, biotech and pharmaceutical firms, non-profit research consortia, and research universities, among others. Downgrading patent rights – which are fundamentally property rights – will seriously constrict innovation and the ability of domestic manufacturers to turn good ideas into products consumer want, and thus good jobs for working Americans.
A series of U.S. Supreme Court and Federal Circuit decisions have already shifted the legal balance of power to favor patent users, tightening standards of patentability and narrowing patent rights and remedies. These judicial reforms eliminate any need for sweeping legislative changes to the patent system. Foreign interests, who for years have been trying to slow America's innovation engine through measures to weaken and devalue patent rights, are very happy with the proposed changes. In fact, commentary by patent experts in the Chinese and Indian press indicates they believe that intellectual property theft will be much easier under the proposed bill. Unfortunately, these foreign experts are correct in their assessment.
Yongshun Chen, former Senior Judge and Deputy Director of the Intellectual Property Division of Beijing High People's Court China, said this about the patent bill: "This bill will give companies from developing countries more freedom and flexibility to challenge the relative U.S. patent for doing business in the U.S. and make it less costly to infringe.... The bill will weaken the rights of patentees greatly, increase their burden, and reduce the remedies for infringement" (Intellectual Property News, November 2007).
This bill will lead to many additional American factories and jobs, even entire industries, being lost to overseas competitors. During this economic recession, more market uncertainty is the last thing that our economy needs.
To put the matter plainly, this bill is written to devalue patents – to the detriment of almost every industrial, service, and financial sector of the economy. Certain high-tech companies who are pushing this bill want to make it cheaper and easier to infringe others' patents. But Congress should safeguard innovation as the backbone of our economy and reject this legislation.
The patent system is rooted in the Constitution. Congress is charged with "securing for limited times to authors and inventors the exclusive right to their respective discoveries." The Founders understood that protection of intellectual property was vital to innovation and progress. James Madison wrote in the FederalistPapers,"The utility of this power will scarcely be questioned." Yet, today it is being threatened in the Congress.
Small enterprises often drive innovation. About one-third of all patent applications are made by independent inventors, small companies, universities, and nonprofit research groups. Small businesses produce more patents per employee than larger businesses, and small-firm patents are more "innovative" and technologically important than large firm patents. Because small firms must work with others to commercialize and manufacture their innovations, they need strong patents to realize a return on investment.
American manufacturers do about 65 percent of the R&D in this country and hold 60 percent of the patents. Over the last 40 years, we have witnessed a startling transformation of our economy. Whereas previously about two-thirds of a company's wealth was in physical assets, such as land, buildings, and machinery, now the opposite is true. The vast majority of a company's worth is in its intellectual property, not its physical assets. We cannot afford to jeopardize what is in effect America's balance sheet with an ill-advised, special-interest bill, particularly in the midst of a severe economic crisis.
The legislation creates a new, expensive quasi-judicial system within the USPTO to challenge the validity of a patent throughout its entire life. The proposed system would expose patent holders to a perpetual threat of abusive, serial attacks, and, as a result, undermine the benefits of patent ownership for patent-holders and their financial backers. In addition, it would create even greater operational challenges within the USPTO. Incentives to seek patents would be weakened, and venture capitalists, who supply the life blood of the patent system with their investment monies, would face far higher risks when backing new ideas.
The Leahy bill raises multiple barriers to independent innovation. The pending legislation would also make it harder for patent-holders to enforce their rights or win just compensation from those who steal their ideas. Under the bill, it would be harder to prove "willful" infringement, which serves as an important deterrent to deliberate theft. Perhaps, most significantly, the bill strikes at the very core of the patent system by changing the way infringement and resulting damages are treated. Instead of restoring the pre-infringement parity between the patent holder and the potential licensee, the bill calculates damages in an after-the-fact manner that lessens the value assigned to patents in most products. It throws out the window the venerable Georgia Pacific case and with its time-tested factors in determining a patent's value. In effect, the bill invites an infringe-now-and-(maybe)-pay-later business strategy, which destroys the "exclusive use" given to the patentee by the Constitution and the risk/reward ratio that has so successfully driven American innovation for over two centuries.
According to a recent study, the proposed damages amendment would reduce the value of U.S. patents by as much as $85.3 billion; reduce R&D expenditures by up to $66 billion per year; and potentially cost the U.S. economy 298,000 manufacturing jobs. This bill is bad for American businesses; it is bad for American workers; it is bad for American inventors; it is bad for American research universities; thus it is bad for America. We ask that you oppose this legislation, protect the property rights enshrined in the Constitution, and preserve a patent system that for over 200 years has provided great technological advances, material progress, and a high standard of living for all Americans. Thank you for your serious consideration of our views.
Kevin Kearns US Business and Industry Council David KeaneAmerican Conservative Union Rev. Lou Sheldon Traditional Values CoalitionJim Backlin Christian Coalition of AmericaSusan Carleson American Civil Rights Union Jim Martin60 Plus Association C. Preston Noell III Tradition, Family. Property, Inc.Harry Valentine Capitol Hill Prayer AlertBarrett Duke Ethics and Religious Liberty Commission of the Southern Baptist ConventionGary AldrichCNP Action, Inc John Kwapisz VA Coalition for common sense on Climate Change and EnergyPhyllis Schlafly Eagle Forum Morton Blackwell Conservative Leadership PAC Frank Gaffney Center for Security Policy Colin A. HannaLet Freedom Ring Ron Pearson Council for America Jeffrey Gayner Americans for Sovereignty Alex St. JamesAARLC Organization Connie Marshner American Family Business InstituteJim Backlin Christian Coalition of AmericaCarmen Mercer Minuteman Civil Defense Corps.Mark de Bernardo Council for Employment Law and Equality Laszlo Pasztor National Federation of American Hungarians
And They’re Off: Patent Reform Act of 2009 Unleashed
by Stephen Albainy-Jenei
Patent Baristas
March 3, 2009
Following hot on the heels of the Patent Reform Acts of 2005, 2006, 2007 and 2008, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and former chair Orrin Hatch (R-Utah), along with House Judiciary Committee Chairman John Conyers (D-Mich.) and ranking minority member Lamar Smith (R-Texas), introduced, you guessed it, the “Patent Reform Act of 2009.”

The legislation (S.515 and H.R.1260) is set to pick up where patent-reform efforts left off last year. Controversial provisions remain so get ready to see continued efforts at lobbying for changes. Sens. Leahy and Hatch conceded during a press conference that more work needed to be done on the legislation but said reforms were needed urgently to improve patent quality and create more certainty in patent litigation.

In a nutshell, the Patent Reform Act of 2009 Senate Bill provides for the following:
...Sec. 4. Right of the inventor to obtain damages

Damages. Requires the court to conduct an analysis to ensure that, when a “reasonable royalty” is the award, it reflects the economic value of the patent’s “specific contribution over the prior art”, i.e. the contribution the invention makes to promoting science and the useful arts per the requirement of Article I, Section 8 of the Constitution. The court also is required to identify the factors that will be considered in determining a reasonable royalty, ensuring that the record is clear on what considerations the judge or jury assessed in awarding damages.

Willful infringement. This section changes the doctrine of willful infringement in both procedural and substantive respects. Courts will now require a plaintiff to demonstrate with clear and convincing evidence that the infringer acted in a manner that was objectively reckless, which is also subject to a good faith defense.
Prior User Rights.­ If the same invention is later patented by another party, the prior user may not be liable for infringement to the new patent holder, although all others will be. This section permits the defense to be used by entities controlling or controlled by the prior user.
Sec. 5. Post-grant procedures and other quality enhancements

The section expands the evidence that a party may cite to the USPTO under § 301 to include written statements of the patent owner regarding the scope of the patent claims and evidence that the claimed invention was in public use or on sale in the United States more than one year prior to the application. Requests for reexamination under § 302 can be based on either prior art or prior public use or sale, as can requests for inter partes reexamination under chapter 31. Inter partes reexamination will now be heard by an administrative patent judge in accordance with procedures established by the Director. Inter partes reexamination is further improved by permitting a third-party requester to file written comments.

A third-party requester is estopped from asserting the invalidity of any claim determined to be valid in inter partes reexamination on any ground that was raised in reexamination. Further, the estoppel bar to instituting an inter partes reexamination proceeding after a judicial determination of patent validity is lowered from a “final decision” to a judgment of the district court.

This section also creates a new post-grant review procedure that can be instituted either within 12 months after the issuance of a patent or a reissue patent, or if the patent owner consents. The post-grant review begins with a cancellation petition and moves forward only if the Director determines that there is a substantial new question of patentability. The presumption of validity does not apply in this proceeding, but the burden of proof is on the party advancing a proposition. The Director will prescribe rules governing the proceeding, including rules to sanction abuse. This section prohibits successive filings or filings after a final decision in a civil action.

Calendar No. 46

To amend title 35, United States Code, to provide for patent reform.

MARCH 3, 2009
introduced the following bill; which was read twice and referred to the Committee on the Judiciary

APRIL 2, 2009
Reported by Mr. LEAHY, with amendments


(a) SHORT TITLE.—This Act may be cited as the ‘‘Patent Reform Act of 2009’’



‘‘321. Petition for post-grant review.
‘‘322. Timing and bases of petition.
‘‘323. Requirements of petition.
‘‘324. Prohibited filings.
‘‘325. Submission of additional information; showing of sufficient grounds.
‘‘326. Conduct of post-grant review proceedings.
‘‘327. Patent owner response.
‘‘328. Proof and evidentiary standards.
‘‘329. Amendment of the patent.
‘‘330. Decision of the Board.
‘‘331. Effect of decision.
‘‘332. Settlement.
‘‘333. Relationship to other pending proceedings.
‘‘334. Effect of decisions rendered in civil action on post-grant review proceedings.
‘‘335. Effect of final decision on future proceedings.
‘‘336. Appeal.

‘‘§ 321. Petition for post-grant review

‘‘Subject to sections 322, 324, 332, and 333, a person who is not the patent owner may file with the Office a petition for cancellation seeking to institute a post-grant review proceeding to cancel as unpatentable any claim of a patent on any ground that could be raised under section 282 (relating to invalidity of the patent or any claim). The Director shall establish, by regulation, fees to be paid by the person requesting the proceeding, in such amounts as the Director determines to be reasonable.

‘‘§ 322. Timing and bases of petition

‘‘A post-grant proceeding may be instituted by the Director under this chapter pursuant to a cancellation petition filed under section 321. Such proceeding may be instituted only if—

‘‘(1) the petition is filed not later than 12 months after the issuance of the patent or a reissue patent, as the case may be; or
‘‘(2) the patent owner consents in writing to the proceeding.

‘‘§ 323. Requirements of petition

‘‘A cancellation petition filed under section 321 may be considered only if—

‘‘(1) the petition is accompanied by payment of the fee established by the Director under section
‘‘(2) the petition identifies the cancellation petitioner;
‘‘(3) for each claim sought to be canceled, the petition sets forth in writing the basis for cancellation and provides the evidence in support thereof, including copies of patents and printed publications, or written testimony of a witness attested to under oath or declaration by the witness, or any other information that the Director may require by regulation; and
‘‘(4) the petitioner provides copies of the petition, including any evidence submitted with the petition and any other information submitted under 2 paragraph (3), to the patent owner or, if applicable, the designated representative of the patent owner.

‘‘§ 324. Prohibited filings

‘‘A post-grant review proceeding may not be instituted under section 322 if the petition for cancellation requesting the proceeding—

‘‘(1) identifies the same cancellation petitioner and the same patent as a previous petition for cancellation filed under such section; or
‘‘(2) is based on the best mode requirement contained in section 112.

‘‘§ 325. Submission of additional information; showing of sufficient grounds

‘‘(a) IN GENERAL.—The cancellation petitioner shall file such additional information with respect to the petition as the Director may require. For each petition submitted under section 321, the Director shall determine if the written statement, and any evidence submitted with the request, establish that a substantial question of patentability exists for at least one claim in the patent. The Director may institute a post-grant review proceeding if the Director determines that the information presented provides sufficient grounds to believe that there is a substantial question of patentability concerning one or more claims of the patent at issue.

‘‘(b) NOTIFICATION; DETERMINATIONS NOT REVIEWABLE.—The Director shall notify the patent owner and each petitioner in writing of the Director’s determination under subsection (a), including a determination to deny the petition. The Director shall make that determination in writing not later than 60 days after receiving the petition. Any determination made by the Director under subsection (a), including whether or not to institute a post-grant review proceeding or to deny the petition, shall not be reviewable.

‘‘§ 326. Conduct of post-grant review proceedings

‘‘(a) IN GENERAL.—The Director shall prescribe regulations, in accordance with section 2(b)(2)—

‘‘(1) establishing and governing post-grant review proceedings under this chapter and their relationship to other proceedings under this title;
‘‘(2) establishing procedures for the submission of supplemental information after the petition for cancellation is filed; and
‘‘(3) setting forth procedures for discovery of relevant evidence, including that such discovery shall be limited to evidence directly related to factual assertions advanced by either party in the proceeding, and the procedures for obtaining such evidence shall be consistent with the purpose and nature of the proceeding.

In carrying out paragraph (3), the Director shall bear in mind that discovery must be in the interests of justice.

‘‘(b) POST-GRANT REGULATIONS.—Regulations under subsection (a)(1)—

‘‘(1) shall require that the final determination in a post-grant proceeding issue not later than one 10 year after the date on which the post-grant review proceeding is instituted under this chapter, except that, for good cause shown, the Director may extend the 1-year period by not more than six months;
‘‘(2) shall provide for discovery upon order of the Director;
‘‘(3) shall provide for publication of notice in the Federal Register of the filing of a petition for post-grant review under this chapter, for publication of the petition, and documents, orders, and decisions relating to the petition, on the website of the Patent and Trademark Office, and for filings under seal exempt from publication requirements;
‘‘(4) shall prescribe sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or unnecessary increase in the cost of the proceeding;
‘‘(5) may provide for protective orders governing the exchange and submission of confidential information; and
‘‘(6) shall ensure that any information submitted by the patent owner in support of any amendment entered under section 329 is made available to the public as part of the prosecution history of the patent.

‘‘(c) CONSIDERATIONS.—In prescribing regulations under this section, the Director shall consider the effect on the economy, the integrity of the patent system, and the efficient administration of the Office.

‘‘(d) CONDUCT OF PROCEEDING.—The Patent Trial and Appeal Board shall, in accordance with section 6(b), conduct each post-grant review proceeding instituted by the Director.

‘‘§ 327. Patent owner response

‘‘After a post-grant proceeding under this chapter has been instituted with respect to a patent, the patent owner shall have the right to file, within a time period set by the Director, a response to the cancellation petition.The patent owner shall file with the response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response.

‘‘§ 328. Proof and evidentiary standards

‘‘(a) IN GENERAL.—The presumption of validity set forth in section 282 shall not apply in a challenge to any patent claim under this chapter.

‘‘(b) BURDEN OF PROOF.—The party advancing a proposition under this chapter shall have the burden of proving that proposition by a preponderance of the evidence.

‘‘§ 329. Amendment of the patent

‘‘(a) IN GENERAL.—In response to a challenge in a petition for cancellation, the patent owner may file one motion to amend the patent in one or more of the following ways:

‘‘(1) Cancel any challenged patent claim.
‘‘(2) For each challenged claim, propose a substitute claim.
‘‘(3) Amend the patent drawings or otherwise amend the patent other than the claims.

‘‘(b) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted only for good cause shown.

‘‘(c) SCOPE OF CLAIMS.—An amendment under this section may not enlarge the scope of the claims of the patent or introduce new matter.

‘‘§ 330. Decision of the Board

‘‘If the post-grant review proceeding is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision addressing the patentability of any patent claim challenged and any new claim added under section 329.

‘‘§ 331. Effect of decision

‘‘(a) IN GENERAL.—If the Patent Trial and Appeal Board issues a final decision under section 330 and the time for appeal has expired or any appeal proceeding has terminated, the Director shall issue and publish a certificate canceling any claim of the patent finally determined to be unpatentable and incorporating in the patent by operation of the certificate any new claim determined to be patentable.

‘‘(b) NEW CLAIMS.—Any new claim held to be patentable and incorporated into a patent in a post-grant review proceeding shall have the same effect as that specified in section 252 for reissued patents on the right of any person who made, purchased, offered to sell, or used within the United States, or imported into the United States, anything patented by such new claim, or who made substantial preparations therefor, before a certificate under subsection (a) of this section is issued.

‘‘§ 332. Settlement

‘‘(a) IN GENERAL.—A post-grant review proceeding shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Patent Trial and Appeal Board has issued a written decision before the request for termination is filed. If the post-grant review proceeding is terminated with respect to a petitioner under this paragraph, no estoppel shall apply to that petitioner. If no petitioner remains in the proceeding, the panel of administrative patent judges assigned to the proceeding shall terminate the proceeding.

‘‘(b) AGREEMENT IN WRITING.—Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in the agreement or understanding, that is made in connection with or in contemplation of the termination of a post-grant review proceeding, must be in writing. A post-grant review proceeding as between the parties to the agreement or understanding may not be terminated until a copy of the agreement or understanding, including any such collateral agreements, has been filed in the Office. If any party filing such an agreement or understanding requests, the agreement or understanding shall be kept separate from the file of the post-grant review proceeding, and shall be made available only to Government agencies on written request, or to any person on a showing of good cause.

‘‘§ 333. Relationship to other proceedings

‘‘(a) IN GENERAL.—Notwithstanding subsection 135(a), sections 251 and 252, and chapter 30, the Director may determine the manner in which any reexamination proceeding, reissue proceeding, interference proceeding (commenced with respect to an application for patent filed before the effective date provided in section 5(k) of the Patent Reform Act of 2009), derivation proceeding, or post-grant review proceeding, that is pending during a post-grant review proceeding, may proceed, including providing for stay, transfer, consolidation, or termination of any such proceeding.

‘‘(b) STAYS.—The Director may stay a post-grant review proceeding if a pending civil action for infringement of a patent addresses the same or substantially the same questions of patentability raised against the patent in a petition for the post-grant review proceeding.

‘‘(c) EFFECT OF COMMENCEMENT OF PROCEEDING.—The commencement of a post-grant review proceeding—

‘‘(1) shall not limit in any way the right of the patent owner to commence an action for infringement of the patent; and
‘‘(2) shall not be cited as evidence relating to the validity of any claim of the patent in any proceeding before a court or the International Trade Commission concerning the patent.

‘‘§ 334. Effect of decisions rendered in civil action on post-grant review proceedings

‘‘If a final decision is entered against a party in a civil action arising in whole or in part under section 1338 of title 28 establishing that the party has not sustained its burden of proving the invalidity of any patent claim—

‘‘(1) that party to the civil action and the privies of that party may not thereafter request a post-grant review proceeding on that patent claim on the basis of any grounds, under the provisions of section 321, which that party or the privies of that party raised or could have raised; and
‘‘(2) the Director may not thereafter maintain a post-grant review proceeding that was requested, before the final decision was so entered, by that party or the privies of that party on the basis of such grounds.

‘‘§ 335. Effect of final decision on future proceedings

‘‘If a final decision under section 330 is favorable to the patentability of any original or new claim of the patent challenged by the cancellation petitioner, the cancellation petitioner may not thereafter, based on any ground that the cancellation petitioner raised during the post-grant review proceeding—

‘‘(1) request or pursue a reexamination of such claim under chapter 31;
‘‘(2) request or pursue a derivation proceeding with respect to such claim;
‘‘(3) request or pursue a post-grant review proceeding under this chapter with respect to such claim;
‘‘(4) assert the invalidity of any such claim in any civil action arising in whole or in part under section 1338 of title 28; or
‘‘(5) assert the invalidity of any such claim in defense to an action brought under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337).

‘‘§ 336. Appeal

‘‘A party dissatisfied with the final determination of the Patent Trial and Appeal Board in a post-grant proceeding under this chapter may appeal the determination under sections 141 through 144. Any party to the post-grant proceeding shall have the right to be a party to the appeal.’’.

(g) CONFORMING AMENDMENT.—The table of chapters for part III of title 35, United States Code, is amended by adding at the end the following:

‘‘32. Post-Grant Review Proceedings ......................................... 321’’.

(h) REPEAL.—Section 4607 of the Intellectual Property and Communications Omnibus Reform Act of 1999, as enacted by section 1000(a)(9) of Public Law 106–113, is repealed.


(1) IN GENERAL.—The amendments and repeal made by this section shall take effect at the end of the 1-year period beginning on the date of the enactment of this Act.

(2) APPLICABILITY TO EX PARTE AND INTERPARTES PROCEEDINGS.—Notwithstanding any other provision of law, sections 301 and 311 through 318 of title 35, United States Code, as amended by this section, shall apply to any patent that issues before, on, or after the effective date under paragraph (1) from an original application filed on any date.

(3) APPLICABILITY TO POST-GRANT PROCEEDINGS.—The amendments made by subsections (f) and (g) shall apply to patents issued on or after the effective date under paragraph (1).
(j) REGULATIONS.—The Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (in this subsection referred to as the ‘‘Director’’) shall, not later than the date that is 1 year after the date of the enactment of this Act, issue regulations to carry out chapter 32 of title 35, United States Code, as added by subsection (f).

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