Patent Reform Legislation
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ALERT: Spotlight on Patent Reform Legislation The U.S. House of Representatives passed H.R. 1908, the Patent Reform Act, on September 7, 2007, and now it’s time to look toward the Senate. The companion Senate bill, S. 1145, was passed by the Senate Judiciary Committee in July and is expected to be taken up on the Senate floor in the very near future. You may recall that the original bills had a number of provisions that were of concern for universities, the biotech industry, pharmaceutical companies, manufacturing companies, early-stage high technology companies, and venture capital firms. Those concerns remain and may make it more difficult and costly to obtain, maintain, defend, and enforce patents, all of which are critical to academic technology transfer, both university transferors and licensees. Because the Senate bill may move to the Senate floor soon (informal discussions began last week), this is an ideal time to voice any concerns to your senators about the legislation. AUTM members are strongly encouraged to 1) work with your university management and federal relations officer to evaluate the impact of this legislation on your technology transfer operations to determine an institutional position and 2) together contact your legislators by talking to or visiting your senator’s staffer who handles patent reform or faxing a letter, or both, to emphasize the importance of strong patent protection for university technology transfer and encourage them to pass legislation only when all stakeholders are helped, not harmed, by the passage of patent reform legislation. Another approach might be to visit your senator with one of your licensees to express common concerns. The following tools will assist you in this process:
There is other useful information as well on the AUTM Patent Reform Web page. It is anticipated that Senators Leahy and Hatch will introduce a manager’s amendment with further changes to S. 1145 that will address some of the concerns expressed by numerous entities, including the university community. We do not know, however, what will be in the amendment or how much time will be available to analyze the provisions for their impact on university technology transfer. In addition, Senator Specter is circulating informally a slightly different version of the bill. Therefore, it is imperative that university technology managers take action as soon as possible. The current Senate version contains disincentives for companies to license technologies from universities. Combined with recent Supreme Court cases and pending USPTO rule changes, it will be more difficult and costly to obtain, maintain, defend and enforce a patent. The bill may also make it more difficult for university start up companies to attract venture funding. Listed below are some specific issues of concern in the current Senate bill: CREATE A BALANCED POST-GRANT OPPOSITION PROCEDURE S. 1145 contains a new USPTO process called Post Grant Review, in which a party could challenge a patent within 12 months after the patent is issued (“first window”) which would extend the prosecution period. A full second window, however, makes the patents subject to challenge throughout the life of the patent which raises the uncertainty of patent validity. The net effect of this proposed change would be to subject validly issued patents to lengthy, continuous, and costly challenge, particularly by accused infringers. This would create extreme uncertainty to patents, technology licensing transactions and the technology licensing marketplace. The challenge requires an implicit or explicit notice of infringement and a showing of substantial economic harm and can be filed up to 12 months after receipt of the notice of infringement. Some suggested improvements would be to include presumption of validity for all issued patents, a higher “clear and convincing evidence” standard (instead of a lower “preponderance of evidence” standard) and a stronger estoppel provision to prevent serial challenges, to delete the subjective “implicit” notice being a trigger for a post grant review, and to narrow or eliminate the “second window” all together. REQUIRE USPTO TO CONDUCT INDEPENDENT ANALYSIS The mandated search report and analysis relevant to patentability under Section 11 of S. 1145 will be costly and burdensome to universities, non-profit research institutes and their small business licensees who have limited resources. The search report and analysis must be done for all patent applications or the application will be considered abandoned. AUTM believes that search reports are the responsibility of the reviewing agency and transferring that cost to applicants is excessively burdensome. LEAVE DETERMINATION OF MONETARY DAMAGES TO THE COURTS S. 1145 attempts to codify and alter the complex circumstances surrounding the apportionment of monetary damages determined by federal judges upon a finding of patent infringement. Under current case law, judges have discretion about how to proceed taking into consideration the myriad factors for the case-specific circumstances. S.1145 would mandate one-size-fits all criteria, which some believe favors some industries and their use of patented technologies over others. Universities believe that patent law should protect all patent holders regardless of industry affiliation and that congressional intervention into the independence of the judicial branch of government, without a manifest showing of need in the hearing record, would be unwise and unnecessary. CLARIFY INEQUITABLE CONDUCT As a method to invalidate a validly granted patent, current law provides avenues for accused infringers to virtually automatically accuse technology creators of engaging in misconduct when filing a patent application. The subjective and complicated nature of a patent examination requires judgment to determine what information is relevant and what is not in the course of an examination. Currently, the law provides for criticism and accusations of virtually any application of subjective judgment. This is not only unreasonable and unfair, it also incentivizes prosecuting attorneys to over-disclose information and therefore drives up the cost of an examination process. Congress should statutorily clarify the law in clear and unambiguous terms. Legislation should define “materiality of patentability” and “intent to deceive” in accordance with current USPTO regulations. The importance of such clarity is magnified by the new proposed mandatory search report and analysis submissions as proposed in Section 12 of H.R. 1908 and Section 11 of U.S. Senate Bill 1145 as well as recent USPTO rule changes. The lack of sufficient inequitable conduct reform, coupled with the mandated search report and analysis would be damaging to technology transfer. VENUE REFORM The bill contains a provision that would force patent holders to bring a patent infringement suit in the corporate location of the infringer. Currently, S. 1145 contains an exception for primary plaintiffs who are universities or non-profit organizations that serve as the patent and licensing organization for a university. The Senate bill does NOT contain an exception for non-profit research institutes or university licensees. These multiple standards will create inequity in the system and will provide unacceptable circumstances where a university licensee is not as able to protect and defend against infringement of licensed technology than the universities itself. One major concern is that over time this will result in a shift of the enforcement burden from licensees back to universities.
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