September 15, 2005 12:52 PM PDT

Techies weigh in on patent bill

WASHINGTON--A pending patent reform bill still needs work, tech interests said Thursday at a Congress hearing.

At the session--convened by the House Subcommittee on Courts, the Internet and Intellectual Property--a panel of witnesses aired their views on two sets of proposed changes to the Patent Reform Act of 2005. The panel included people from the software, pharmaceutical and biotechnology industries.

Both sets of changes would pare down the original proposal, introduced in June by Rep. Lamar Smith, a Texas Republican. Notably absent in the latest drafts is a "second window" provision that would have established a system for challenging patents virtually any time after they're granted. That change elicited some concern at the hearing from companies that are members of the Business Software Alliance and from Rep. Howard Berman, a California Democrat.

But many other portions of the bill remain intact and enjoy support.


Special report:
Pondering patents

Namely, under the proposal, a patent for an invention would be awarded to the first person to file for it, as opposed to the current system, which awards the patent to the first person to invent the item or process. The "first to file" standard is common outside the United States.

The measure also outlines an out-of-court "post-grant opposition" process, which would establish a nine-month period after the granting of a patent during which people could dispute it. The goal of that provision is to curb excessive litigation.

In the tech sector, the bill has generated a mix of praise and criticism, a theme that continued in Thursday's hearing.

"Notwithstanding our progress to date, the legislation is at a crossroads," Smith, who chairs the subcommittee, said in his opening remarks.

Smith asked the panelists to focus on the idea of damage apportionment--that is, how to allocate monetary awards to patent holders when infringement has been found. On that topic, software, pharmaceutical and biotech interests continue to clash.

Emery Simon, chief counsel for the Business Software Alliance, said his organization's large member companies--including Microsoft, Apple Computer, Macromedia and Symantec--favor a system that would award damages "based on the proportional value of patented invention(s) alone, not on the cumulative value of all features included on a large product, which, for a computer, can be thousands and thousands of features."

A late-July amendment of Smith's bill meets that standard, Simon said, but the language of the latest version of that amendment, circulated on Sept. 1, raises the possibility that patentees could claim damages based on the value of the entire product.

The latter approach is favored by the pharmaceutical industry, whose companies typically operate under a business model in which they want protection for entire drugs.

A system of giving "only partial credit" to a product in infringement disputes would "trivialize patent damages" and "undermine the patent process as a whole, which is to reward inventors for the entirety" of their inventions, said Philip Johnson, speaking for Pharmaceutical Research and Manufacturers of America.

Meanwhile, the biotechnology community is still divided on how to proceed, said Robert Chess, executive chairman of Nektar Therapeutics, speaking on behalf of the Biotechnology Industry Association.

When the 90-minute hearing concluded, it remained unclear when a consensus would be met among the groups. Talks will continue, Smith said.

Hewlett-Packard, which did not testify at the hearings, released a statement Thursday that echoed the stance of the Business Software Alliance, of which it is a member.

"It does not make sense that abusers of the patent system can claim damages beyond the value of the contribution of the invention," John Hassell, the computer maker's director of federal and state government affairs, said in the statement. "In HP's case, our potential liability on a small microprocessor could be extended to the cost of an entire computer system."

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Is anybody asking small businesses?
In this report, I saw no mention of the effects of the proposed legislation on small business. I work for a small (less than 20 employees) engineering firm. We can invent and bring to market innovative products in months rather than years. Yet in some years, we pay the (outside) patent lawyers more than the engineers. The goal of the patent system is to foster technical innovation, not legal innovation. If the new system is created to serve only large firms, then it will be unlikely to improve this situation.
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