Eric Thomas/ethomas@fratelli.com/202/822-9491

Washington, D.C. – The Innovation Alliance expressed deep disappointment in response to the patent bills introduced jointly today in the U.S. House and Senate, noting its concerns with several key provisions that would weaken patent protections, chill innovation for large segments of the U.S. business community, and cost American jobs.

“Unfortunately, the bill introduced today is basically the same divisive bill that was opposed by a broad range of American industries, innovators, universities and labor unions when it stalled in the last Congress,” said Brian Pomper, Innovation Alliance Executive Director.  “The U.S. patent system has been critical to the success of countless American entrepreneurs, large and small businesses, and workers for over two hundred years.  At this time of grave economic uncertainty, Congress should not make changes recklessly, without compelling evidence that the proposed changes will positively strengthen the U.S. economy.  This is especially true in light of sweeping changes in recent Supreme Court patent jurisprudence.”

Pomper noted that today’s bill introduction was especially disappointing in light of a series of Supreme Court and Federal Circuit decisions that have shifted the balance of power between patent holders and patent users, in each case narrowing the scope of either patent eligibility, rights or remedies to the benefit of patent users.  Given the evolving judicial landscape, Innovation Alliance sees no need for sweeping legislation changing the fundamental foundations of U.S. patent law to address issues the courts are already addressing.

To help emphasize the potential risks of enacting patent reform legislation without careful regard for recent judicial activity, the Alliance today issued a new study, “Judicial Patent Reform: How Recent Federal Court Decisions Have Already Shifted the Balance Between Patent Holders and Patent Users” that can be viewed and downloaded at www.innovationalliance.org.
 
Specific Criticisms of Patent Reform Act of 2009

The Innovation Alliance cited the following provisions of the new bill as problematic:

1.  Damages for Infringement:  The damage provision in the 2009 legislation are essentially a repackaged formulation of the prior, broadly criticized “apportionment of damages” approach – which Congress rejected as unworkable during the 1940’s and which prominent federal jurists continue to oppose.  While proponents continue to claim this is merely a codification of existing law, in reality it is a significant substantive change that will devalue all patents, invite infringement – including from companies in China, India and other countries – and generate more litigation that will further strain the courts. 

To highlight the problems with the damages provisions in the new legislation, Innovation Alliance pointed to the recent study: “The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages” authored by Scott Shane, Ph.D., Professor of Economics at Case Western Reserve University (available at www.innovationalliance.org).  Dr. Shane’s analysis concludes that the adoption of an apportionment-based approach to damages for patent infringement would reduce patent value substantially, shrink the value of public companies, decrease investment in R&D, impose downward pressure on manufacturing jobs and compensation, and favor certain industries over others.

2.  Post-Grant Opposition: By significantly expanding administrative opportunities to challenge the validity of patents, including by creating a new quasi-judicial opposition procedure, the bill continues to subject patent holders and businesses to an unacceptable degree of additional uncertainty throughout the life of the patent.  These administrative procedures undermine the enforceability of patents and lack safeguards against abusive challenges, such as serial and harassing attacks.  In addition, the language introduced today includes new ways to invalidate a patent through administrative channels, undermining the incentives to disclose inventions to the public and fueling increased litigation.

3. Venue:  The bill fails to take into account recent case law that directly addresses the issue raised by proponents of the legislation.  The evidence supporting this provision of the current bill is simply out of date and of questionable value at this point in time.

“Promoting innovations in the green technologies that are a key part of the economic stimulus package will require a strong patent system to protect those innovations.  Without the assurance of continued quality patents and strong patent protection, innovators and investors in the green technology sector and elsewhere will lack the incentives needed to take the financial risks to ultimately build and maintain successful businesses, create jobs in the United States, and drive U.S. global competitiveness,” Pomper concluded.