The leaders of the Senate and House Judiciary Committees today introduced the Patent Reform Act of 2009. The bills - identical in both houses - promise the most substantial overhaul of the patent laws in the last fifty years.
Congress's last effort at patent reform ended in January 2008 when the Senate version of the Patent Reform Act of 2007 failed to make its way to the floor of the Senate. (A somewhat different version of the legislation passed the House in late 2007.)
The patent system clearly needs revamping, principally to accomplish two, arguably opposite, goals: more thorough, yet faster, examination of patent applications and reexamination of issued patents. The real risk of reform legislation is that by passing new statutes and implementing new procedures, the already complex system will struggle even more.
A first read of the reform legislation is both promising and frustrating. (More after the break.)
On the promising side: The new bill (adopting the House approach from 2007) tries to fix the broken reexamination process instead of implementing (as the previous Senate bill would have) a completely new and untested scheme for post-issuance challenges. The bill also eliminates a provision from the earlier Senate bill that would have essentially imposed a compulsory license for certain electronic-check-processing technologies. Finally, the bill keeps from the 2007 legislation the first-to-file protection for patentees, which is consistent with practice everywhere else in the world and provides greater notice to the public about the validity of patents.
On the frustrating side: I'll put patent reexamination here, too, because while it's good not to dispense with the reexamination scheme, it is not clear that the proposed language can fix a system in which it can take eight or more years for reexamination to conclude. Congress proposes eliminating the publication requirement for patent applications; no longer will patent applications filed in (and only in) the United States be published eighteen months after issuance. The idea, apparently, is that certain patent applicants want to obtain patent rights in the United States and yet maintain trade secrecy overseas. The maintenance of secrecy is at odds with the patent system in the first place, contravenes the practices of other Western nations, and hampers the patent examination process for later-filed applications. Also frustrating is that today's venue provision is flawed for the same reasons as that from 2007, about which I recently wrote.
The most noted reform in today's bills - perhaps the one that received the brunt of industry lobbying - is that to patent damages. As in the 2007 bills, damages are to limited to the economic value of the patent. There is a lot of sense in such a provision: a patent that covers a $5 modem in a computer should not result in damages based on the value of the $1000 computer in which it is incorporated. Yet, the risk of such a provision is that it will be used to create a system where patentees can only receive a modest "reasonable royalty" for the infringement that fails to sufficiently reward the patentee for the risks and efforts undertaken in litigation. Thus, while the damages provisions go in the right direction, one wonders whether Congress may have gone a bit too far. Senator Arlen Specter of Pennsylvania apparently felt that way about the 2007 legislation, which is what caused it to derail in the Senate Judiciary Committee. There is no indication, publicly, that Senator Specter has retreated from that position. It thus remains to be seen whether the 2009 bills suffer a similar fate at similar hands. In light of these uncertainties, hearings on the House bill are being held in abeyance pending developments on the Senate side. Senate hearings on the bill start next week.