September 7, 2007 1:24 PM PDT
House OKs revamp of patent system
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Large high-tech companies, whose products often depend on hundreds or even thousands of separate patents, have argued that the current system enables winners of patent infringement suits to obtain disproportionate damage awards--in turn, fueling inflated settlements and royalty agreements out of court. As Google public-policy wonks put it in a blog entry earlier this week, "A windshield wiper found to an infringe a patent should not spur a damage award based on the value of the entire car."
Berman acknowledged that issue was not fully addressed by any of the amendments adopted Friday. "It is my commitment...to work with people who are concerned about that language to reach an appropriate middle ground that reforms the way damages are calculated between now and conference committee, and when this comes back," he said. (A separate and slightly different bill still has to go before the full Senate, and if it passes, then those two bills must be reconciled by what is known as a conference committee.)
Besides the damages provision, some of the major changes contained in the approved bill include:
A "first to file" patent system: Critics argue that the existing "first to invent" standard is problematic because the identity of an inventor can be hard to prove. The bill would change the process to a "first to file" system, bringing it in line with all other foreign patent systems, while laying out a process for contesting an applicant's entitlement to that protection.
A new way to challenge patents out of court: The bill would create a "postgrant opposition" board within the U.S. Patent and Trademark Office, which is designed to replace what can be costly, time-consuming court challenges of newly issued patents. Under the bill, such challenges could occur up to a year after a patent is granted.
Limits on findings of "willful" infringement: If a jury decides that an accused patent infringer did so willfully, damages can be tripled. This provision would require the patent holder to show that the infringers were aware that they had copied the patent. One way of doing that would be through showing that the patent holder had notified the infringer in writing of the alleged infringement before filing a lawsuit.
Limits on courts where patent cases could be filed: Certain court districts, such as the Eastern District of Texas, have earned a reputation for being more favorable to patent holders, so a disproportionate number of suits have been brought there in recent years.
In an attempt to prevent such "forum shopping," the bill would require cases to be lodged in court districts where the defendant has a "principal place of business" or has committed most of its infringement. It would also be unlawful to "manufacture" a place of business, just to gain access to a certain court. Nonprofit organizations, universities and independent inventors, however, would be permitted to file their cases in courts where their own operations are located, which is what existing law allows.
A ban on "tax planning" patents: Since a 1998 court ruling that allowed patents on business methods, the U.S. Patent and Trademark Office has awarded some 50 such patents that relate to tax strategies, including how to minimize or defer one's tax liability. A narrow provision in this bill attempts to prohibit such inventions from gaining protection.
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