PREVIOUS ACTIVITY DURING 110th CONGRESS

After the November 2006 election, House and Senate staff requested from various stakeholder communities, feedback on last year’s Senate bill S. 3818. The higher ed associations (AAU, AAMC, COGR and ACE) provided comments; the AUTM board endorsed the associations’ statement at the March 2007 Board meeting. In response to these comments, the House and Senate drafted bipartisan, bicameral bills, HR 1908 and S. 1145.

A hearing in the House Subcommittee on the Courts, the Internet and Intellectual Property was held on April 26, 2007. Testimony from the hearing can be read at: http://www.judiciary.house.gov/hearings.aspx?ID=169

William Tucker, Executive Director, OTT, of the University of California system testified at the hearing, along with industry representatives and a law professor.  A Subcommittee mark up occurred on May 16, 2007 during which Chairman Berman intended to provide a substitute bill in the form of a Managers Amendment.  Due to a parliamentary maneuver, Berman subsequently withdrew the substitute bill and HR 1908 as originally introduced was passed out of the Subcommittee to the full House Judiciary Committee.  Several Subcommittee members noted that stakeholders were still concerned about provisions in the bill and that these concerns need to be addressed.  In addition to other changes, this substitute bill contained improved grace period language that was requested by the higher ed associations (AAU, COGR, AAMC, ACE, and NASULGC) in their May 2007 position statement, but please note that the substitute bill is not yet officially in the record.  A mark up may occur as early as June 27th. 

The Senate Judiciary Committee held a hearing on June 6, 2007.  Testimony can be read at: http://judiciary.senate.gov/hearing.cfm?id=2803

Both the Senate and House held staff briefings on June 14th during which experts discussed the main elements of the patent reform bills.  The Senate Judiciary Committee held several mark ups during June during which Senator Leahy’s provided several Managers Amendments. 

In its continuing effort to keep its membership apprised on hot issues, AUTM invited 250 technology transfer directors to participate on a briefing conference call on patent reform legislation on June 14th.  56 called in, some with their federal relations officers and other interested personnel.  AUTM leadership discussed the top five issues:  the new post grant opposition procedure; apportionment of damages; the switch from a first-to-invent to a first-inventor-to-file system coupled with an effective grace period, strong inventor oath, and preservation of the provisional application process; expansion of prior user rights; and expanded rule-making authority for the USPTO.  AUTM leadership encouraged the AUTM members to voice opinions to local legislators as soon as possible as the bills were moving quickly to mark up. 

The AUTM Board voted to sign onto the June 19, 2007 Cross Coalition letter signed by over 200 organizations, universities and businesses expressing concern about four of the above five issues.  Read letter.

During the week of July 16, 2007, the House and Senate Judiciary Committees sent separate versions of the patent reform bill (H.R. 1908 and S. 1145) to the House and Senate for a vote. While the bills as originally introduced were virtually identical, the final documents out of the Judiciary Committees are different. As the bills passed out of committee, the leaders of both Committees said they recognized there were still issues to be resolved and committed to further changes before the bills came to a vote on the respective Floors. H.R. 1908 with amendments passed the House on September 7, 2007, and it is anticipated that the Senate bill will move in the near future. If the final bills passed by the two houses are different, the bills go into "conference" and selected legislators work out the differences behind closed doors with little input from the public.

Therefore, if your institution has concerns about these bills, it is imperative to inform the legislators in your state as soon as possible, with a particular focus on Senators since a floor vote is expected in late October or early November.   

While representatives from the university community still are engaged in some of the consensus building discussions occurring on the Hill, direct constituent concerns always carry the most weight in a legislator's mind.  We encourage all technology transfer managers to evaluate the impact of this legislation on your operations and if it is of concern, educate and confer with university management to develop a position, then work with your federal relations officer to contact your Senate legislators as soon as possible, either through an in-person visit in Washington D.C. or a letter encouraging legislators to work out the remaining issues with the various stakeholders before a Floor vote.  If you do make contact with your legislator, please let AUTM Executive Director Vicki Loise know (vloise@autm.net).

At the very least, we encourage you to emphasize the importance of patents and the U.S. patent system to your technology transfer operation and to urge all lawmakers to continue the dialogue with all stakeholders so that no particular constituency feels it has been substantially harmed in the passage of patent reform legislation. 

In general, the current bills would weaken the American patent system by making patents harder to protect by reducing damages that a patent holder can recover from an infringer and providing a number of new opportunities for infringers to challenge an issued patent. The current House and Senate bills have been improved since the bills were originally introduced, but still contain provisions that are problematic for university technology transfer programs across the country. 

As a reminder, the official position statement expressed by the university community (and endorsed by AUTM) is available online.

Below is additional information on some of the provisions that are still of significant interest.

APPORTIONMENT OF DAMAGES

Under current law, a court has broad discretion in determining fair compensation and penalty for infringement by considering a range of issues appropriate to the circumstances (commonly referred to as the 15 factors of the Georgia-Pacific case). The current House proposal would dramatically devalue patents which are found by a court to be infringed.  It would require a court to consider one factor over the rest – the so-called "apportionment" factor which attempts to formulaically quantify the contribution of an invention to an end product – and it would limit a reasonable royalty "only to that economic value properly attributable to the patent's specific contribution over prior art."  The bill also makes it more difficult to obtain willful damages by raising the standard for willfulness.  These proposed changes would create an additional hurdle and disincentive for companies to license university technologies.  This provision would mean that if a lawsuit is filed for patent infringement, the most a university could recover would be the amount the company would pay for a license. If this passes, a company could strategically decide to infringe, because the damages they would pay would be no more than they would pay for a license. The Senate version is even less favorable for the patent holder.  Members of the university community continue to provide input on this provision.

POST GRANT REVIEW

The bills as introduced contain 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.")  There would be limited discovery, no assumption that the patent is valid, and a looser "preponderance of evidence" legal standard.  While the House bill currently includes only one window of opportunity for challenges to the patent, a "second window" was considered in the original House bill that would allow the patent to be challenged throughout the life of the patent. In the current version of the House bill, the second window is replaced by an expanded inter partes reexamination process. The Senate bill contains a full second window that makes the patents subject to challenge throughout the life of the patent, and the challenge requires simply a notice of infringement and a showing of substantial economic harm. The challenge can be filed up to 12 months after receipt of the notice of infringement.

MANDATED SEARCH REPORTS

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.  Coupled with the lack of sufficient inequitable conduct reform, the mandated search report and analysis would be damaging to technology transfer.

PRIOR USER RIGHTS

Both the House and Senate bills have removed the expansion of prior user rights and supports a study of prior user rights in other countries.  This approach should continue to be supported. 

VENUE 

The bills contain a provision that would force patent holders to bring a patent infringement suit in the corporate location of the infringer.  Currently, the House bill contains an exception for university plaintiffs, non-profit foundations that perform patenting and licensing functions for a university, and research institutes.  The Senate version an exception for university plaintiffs and their non-profit patenting foundations.  No exceptions are made in the Senate bill for non-profit research institutes or university licensees, so the university patent holder may need to join the suit in order for the suit to be heard in the home court. 

If you would like to view the technical details of the bills, a comparison chart of the Senate and House bills is available on the AUTM Patent Reform Legislation website at http://www.autm.net/about/AboutAUTM_patentReform.cfm (courtesy of Foley Hoag LLP.)