Wegner on Patent Reform

By Hal Wegner

Before an overflow hearing room on an internationally available web broadcast, Chairman Howard Berman of the House Judiciary Subcommittee relevant to patents hosted a most informative and candid hearing yesterday afternoon joined by roughly ten of his committee colleagues, including Rep. Dan Issa, undoubtedly the most patent-interested member of Congress in some time (and like Abraham Lincoln an inventor-user of the patent system). 

Going into the hearing, the Chairman clearly recognized the total impasse from the last Congress over "second window" post-grant review and that the current legislation as introduced is dead in the water. Yet, the Chairman and the bipartisan participation manifested a determination to find a solution, best marked by the announcement of the intention of the Chairman to hold a markup hearing in May – which, coincidentally or not – will take place in all likelihood shortly after the KSR decision is reached by the Supreme Court, and possibly before the Supreme Court Microsoft decision.

The Public Perception of Patent Importance: Just a decade ago, a patent hearing would have drawn gaping yawns from the public with a smattering of a few Washington regulars and largely vacant seats, both for the members and the audience. Yesterday, eighty minutes before the hearing the attendants' line stretched down the corridor with numerous ill-dressed folks lounging on the floor or in chairs ("seat holders" selling their places in line to corporate VP's and lobbyists); those coming later had to sit in an overflow video-feed room; ten or so members of the subcommittee participated in the hearings, some showing significant insight. The press table was overflowing; the beat reporter for Reuters was unable to get a seat at the table. A former Chairman of the Subcommittee staff sat in the very last row of the audience, along with other pooh bahs.

The point? Patent reform is perceived by Congress as important; the presence of myriad lobbyists manifests the money that is being spent by industry to deal with reform.  Patent reform legislation will continue center stage, whether it passes or not. 

Potential Abuses of the "Second Window": Perhaps the single most constructive development that arose from the hearing was the focus upon the abuse of the current reexamination system that foreshadows similar problems under the proposed post-grant review system: Serial reexaminations and post-litigation reexaminations even after a final court decision have been unreasonable and made it impossible for the winner of a trial costing the parties millions of dollars to enjoy a quiet patent title: Even after winning at trial, reexaminations can be filed that may take many years to resolve, some just rehashing old issues lost at trial.

A Single, Joined Proceeding to Avoid "Second Window" Abuses: A possible solution that was not considered at the hearing; the subcommittee should consider a "one window" solution where a first-filing of a post-grant proceeding would result in a publication in the Official Gazette that would give the public a six month window to join in a single, one time only post-grant proceeding. Additionally, the filing of any patent litigation should also be noticed in the Official Gazette to similarly set a six month period to commence a post-grant proceeding: Failure to file within this period would forever shut the door to a post-grant proceeding to the extent that the litigation goes to a final decision on the merits. And, of course, after a final decision on the merits in patent litigation, no further post-grant proceeding should be permitted.

Rep. Issa's "One Window" and Judge-Opened Window Proposals: Rep. Issa suggested that perhaps "one window" might be provided for a post-grant proceeding, one shot at a patent, no matter when that window would be. Another thought that was put on the table was the idea that there could be a restricted "first window" but that a trial court could later order reopening a "second window" by referring a case to the post-grant authority. This would have the great benefit to the public of providing a better assurance that a patent-experienced tribunal would consider patent validity. (Presumably, for the roughly ten of the ninety-four District Courts that already provide excellent patent justice in a timely fashion, judges would decline to exercise this option but retain patent validity issues for their own tribunals. But, for the more than eighty other District Courts where a typical judge may be hearing his or her first or second patent case, the option of opening the "second window" may be very attractive.)

KSR, Microsoft, eBay - Looming Shadows from the Supreme Court : The Subcommittee is keenly aware of the presence of the Supreme Court in the patent arena. There was open discussion of the relief that Congress felt with the eBay decision that judicially resolved an issue this past Term that had been a bottleneck to progress on patent reform last year. Several references were made to the absence of any remedy to remove 35 USC § 271(f) and the hope that perhaps there would be a judicial solution in the Microsoft case that would remove yet another contentious issue; it was particularly for the reason of the pendency of the Microsoft case that the current legislation lacks any provision to deal with 35 USC § 271(f) repeal.

The 800 pound gorilla that was not mentioned is the KSR case that in all likelihood will be decided before the May markup session. (The earliest date now that a decision could be forthcoming is this coming Monday when the court sits merely to deliver opinions. The Court has concluded all of its arguments for the October 2006 Term and is now regularly meeting on Mondays to hand down decisions, which will continue until the end of June.) To the extent that the KSR decision may represent a major disruption in the case law of obviousness, this will be a certain signal to the leaders of the patent community that there must be a post-grant solution to cull out invalid patents. The continued grant of "gas pedal" patents cannot be avoided; but, what must be avoided is the continuation of an absence of mechanisms to remove such patents from the rolls.

Witness Selection to Highlight the "Second Window" Impasse: While apportionment of damages in the legislation was also an important theme, it was clearly secondary to the issue of the "second window" for a post-grant review. The Chairman candidly announced that his subcommittee was focusing upon the differences between the industries. (Clearly, without resolution of the "second window" debate, there will be no comprehensive patent reform bill that can be enacted in this or any near term bill.) With this theme in mind, the Chairman noted the appearance of five witnesses:

(1) Kevin Sharer, Chairman and CEO of Amgen, accompanied by Vice-President David W. Beier, III, former Subcommittee Staff Chair , pointed to the necessity for (a) a more reliable post-grant procedure; and (b) the necessity of freedom from a "second window" for biotechnology.

The Sharer testimony and the silent but visible presence of Beier stole the show, both in terms of persuasiveness as well as for the special deference given by the Subcommittee to the Sharer-Beier entourage. Amgen was seeded first at the hearing and, pursuant to a special announcement by the Chairman at the outset, was given a preferred early set of questions to permit a Stage Right exit in the midst of the hearing, leaving the other witnesses at the table.

The Amgen testimony noted that a new biotechnology drug has a development cost running at the rate of $ 1.2 billion spread over a 15 year period.  Amgen itself pours out $ 3.4 billion in research costs each year, 90 % of which advances science but represents false starts in terms of any commercial possibilities. Quiet patent title at an early date is an absolute requirement for such expenditures.

One Size Doesn't Fit All: Quite clearly, the Amgen testimony, better than any representative for any of the various organizations, demonstrated the absolute, positive necessity the biotechnology community has for a highly reliable post-grant proceeding and one where there is early, quiet patent title ensured. Amgen persuasively explained the position of his company in a scenario that is echoed by all major pioneer pharma and biotech entities and manifests the futility of any attempt to ram through Congress a one-size-fits-all "second" window solution.

The Need for Independent PTO-Free Post-Grant Governance: The Amgen testimony implied a need for a very reliable post-grant system. While not a subject of the Congressional testimony yesterday, previous notes by this writer have suggested that as an imperative for any post-grant reform the proceedings must be divorced from the political control of the PTO. The BlackBerryGate and other long-running reexaminations manifest the necessity of this reform. It must be remembered that the 1980 original reexamination law could have been effective, including inter partes participation and including expedited consideration, all possible within the scope of the reexamination law and certainly within the budget of the PTO. The fact that the PTO today denies the "special dispatch" examination of a reexamination proceeding of importance speaks for itself. There is nothing to preclude a PTO-run post-grant review from similar political interference from the Director.

(2) Gary L. Griswold, 3M, for the 21st Century Patent Coalition spoke, as usual, strongly opposing any "second window" post-grant review and opposing other IT/EE initiatives. While the death of the current legislation is a certainty with or without the strident voice of the 21st Century Patent Coalition, the intransigence of the 21st Century Patent Coalition is perhaps the best indicator that no Phoenix can ever arise from the ashes of the current legislation.

Where is the AIPLA? The vast, overwhelming majority of the membership of the AIPLA favors reasonable patent reforms and can hardly be cast in the position of favoring the intransigent position taken by the 21st Century Patent Coalition. To say that the leadership of AIPLA is through an Executive Committee controlled by the common interests of the 21st Century Patent Coalition is difficult to dispute. (Oddly, AIPLA is the only bar association that is a member of this coalition, now just one of forty members of an otherwise industry coalition,  "plus Patent Cafe", identified as a post-script to this note.)

IPO has disappeared: It was nowhere to be seen nor heard. [DDC: IPO Continues to be a Major Player in this Reform]

(3) Prof. John R. Thomas, Congress' CRS in house researcher dismissed the post-grant legislation as "marginal". Rebutting those that portray the post-grant proceeding proposed by Congress as a "sea change", the professor said that the legislation would represent a "marginal change".

(4) William T. Tucker, California university system, stayed away from the "second window" debate, but uniquely focused upon a need to retain the "first inventor" system.

(5) Anthony Peterman, Dell Patent Counsel, expressed EE/IT views on the essential nature of the "second window" for his industry. Pointedly asked by the Chairman whether he understood the viewpoint of the biotech industry as expressed in the earlier testimony to avoid a late-stage "second window", Peterman agreed with the need to see whether a solution could be reached that would satisfy both sectors.

Notes:

The Coalition for 21st Century Patent Reform members include (per its announcement): "3M, Abbott Laboratories, Air Liquide, Air Products, AstraZeneca, Baxter Healthcare Corp., Beckman Coulter, Bridgestone Americas, Bristol-Myers Squibb, Cargill Incorporated, Caterpillar, Cephalon, CheckFree, Corning, Dow Chemical, Eastman Chemical, Electronics for Imaging, E.I. du Pont (DuPont), Eli Lilly, ExxonMobil, General Electric, Genzyme, GlaxoSmithKline, Henkel Corporation, Hoffman-La Roche, Johnson & Johnson, Merck, Millennium Pharmaceuticals, Monsanto, Motorola, Novartis, Patent Cafe.com Inc., Pfizer, Procter & Gamble, Sangamo BioSciences, Texas Instruments, UnitedTechnologies, Weyerhaeuser, Wyeth, and AIPLA."

Comments

[Malcolm Mooney]

"The Amgen testimony noted that a new biotechnology drug has a development cost running at the rate of $ 1.2 billion spread over a 15 year period. Amgen itself pours out $ 3.4 billion in research costs each year, 90% of which advances science but represents false starts in terms of any commercial possibilities. Quiet patent title at an early date is an absolute requirement for such expenditures."

Of course, quiet patent title is relatively straightforward when the invention is non-obvious and the claims are narrowly drawn.

To the extent that Big Pharma is struggling with breathtaking costs, I wonder if better solutions lie outside of the patent system.

[Derrick and the Dominoes]

Great summary of the proceedings. I also like to viewpoint that the legislation is stillborn. Could it be a simple hat trick by Congress to generate PAC money knowing damn full well that the lions' share of the change will be attributable to the Supreme Court in the near future. In other words Congress has proved itself completely inept at dealing with the corporate interests making tons of money from the calamity in Iraq and now has seen itself as lacking the intestinal fortitude to take on the corporate interests in the patent reform situation. It begs the question. Does democracy exist? I mean the Articles of Imeachment of THE vice president DICK cheney have yet to be heard on any major news outlet and yet they have been pending in committee for nearly four days.

Why in the hell do we pay these guys in Washington, anyway!

[steve]

Am I reading this wrong or does "open discussion of the relief that Congress felt with the eBay decision" mean Congress is happy that injunctions are fading.

[mpbk]

Awesome threadjack attempt, Derrick!

[Derrick and the Dominoes]

Sorry about the thread jack but the entire executive part of the Federal Government appears to be completed F-ed. At least Congress is thinking of stopping the salaries of the FDA for allow us to be poisoned. beyond that Congress ain't doing a thing except grandstanding. Wooo weee a hearing on legislation that failed last time and now has been reintroduced. They just don't give a damn about IP. I am happy the Supremes are at least doing something.

[metoo]

Derrick, your hijack of this thread to criticize the executive branch is comically ironic given that the thread was, for the most part, a critical look at the actions of the legislative branch. Even more ironic is that Hal's original post also addressed concerns about what the judiciary might do in the patent arena. Sadly, the trifecta of the Patent Reform Act, the PTO's new rules on continuations/claims, and the Supreme Court's KSR decision has the real potential of fundamentally undermining a patent system that has served this country well for many decades. Worse yet, none of the three branches seems to be taking into account what the other two are doing.

Where is Judge Rich when we really need him? I think he is looking down on things right now and shaking his head in disbelief.

[InterestedOne]

I just want to say that the webcast was terrific - a great way to "attend" and listen without having to interrupt the day. I recommend it to everyone for the Senate hearing. The written statements also will be online and likely will be very worth reading. We all need to keep aware of what's happening here since it will affect our lives and livelihoods for a very long time

[Joe Smith]

"Serial reexaminations and post-litigation reexaminations even after a final court decision have been unreasonable and made it impossible for the winner of a trial costing the parties millions of dollars to enjoy a quiet patent title:"

All of this discussion of first window and second window ignores how bad and vague the drafting of many patents are. Patent holders and possible infringers can go for years without recognizing that a patent could be interpreted to apply to the "infringer"'s product. What sense then to say that the whole world has only a six month window to challenge an issued patent. What sense to say that if a patent holder litigates the application of his patent to gadgets and gets a court ruling of validity that that finding of validity should preclude all the widget makers from seeking to challenge the patent when the patent holder decides years later that his patent applies to widgets as well as gadgets.

[CaveMan]

I'm getting my resume together... I hear there'll be big money in knocking off articles of manufacture after everyone gets done gutting our fine patent system.

[Ari A]

America has become a shameless plutocracy.

I say, don’t deconstruct, fine tune.

A good, innovation promoting patent reform should only include:

a) Doubling the budget of the USPTO – adding better paid and trained patent examiners will relieve the backload and enhance the quality of patents granted.

b) Doubling the first patent continuation fee – would encourage most "bad patent" owners to abandon their "bad" patent while preserving the PTO's income.

c) Instating a compulsory 2X bond to be levied once a company is found to infringe – if a company is found to infringe a valid patent, applying a compulsory 2X on royalty asked or court determined would de-motivate companies from venturing infringement.

d) Leaving the rest of the currant patent system intact – the current patent system though not perfect served us well for generations, wakening the ability to receive patent protection and the ability to enforce patents in court would cripple America irrepably.