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The End Is Near? Senate Committee Votes On Patent Reform

The Senate Judiciary Committee [1] voted to approve [2] a patent reform bill, despite opposition from Sen. Orrin Hatch. This will send the bill to the Senate for a vote after including amendments. The Senate Judiciary Committee held an Executive Business Meeting to consider S.515 [3], the Patent Reform Act of 2009 (Leahy, Hatch, Schumer, Whitehouse).  The legislation   is set to pick up where patent-reform efforts left off last year.

hatchHatch, a sponsor of the bill, said he could not support the amendment to the bill. Hatch and Sen. Patrick Leahy, chair of the committee and a chief sponsor of the bill, preferred the original language, which would have changed damages from total market value of the product to “a reasonable royalty.”

Hatch: I am afraid that the bill, as currently written, has the very real potential to undermine the stimulatory affects of not only our patent system but those abroad. As many of you know, I have been the strongest and longest advocate for reforming our patent system. We desperately need to streamline the process to spur growth in American innovation and keep our competitive edge. But, I cannot support a bill that I know does not improve the status quo.

Now, the way only Congress can punt on tough issues, the bill requires judges hearing patent infringement cases to play a “gatekeeper” role — sought by Senators Feinstein and Specter — to just figure out in some Kreskin-like way the appropriate damages by deciding if a patent that was infringed is crucial to the final product or bit player in the final scheme.

Other changes would tighten interlocutory appeals by requiring district courts to certify that specific standards have been met, and would create a pilot program to hire law clerks devoted to working on patent cases and provide funding for training in patent law. The agreement calls for the pilot program to run in at least six district courts from at least three different federal circuits.

Unfortunately, it may leave lots of people unsatisfied:

Feingold: Great strides toward a bill I can support have been made. Although it is difficult to tell how well drafted the new damages provision is since experts have not had much time to review and analyze it, the intent seems positive. I am pleased that the much more sweeping and untested damages provision from last year’s bill was abandoned. The modest changes in this bill are much less likely to severely undercompensate patent holders who prove their patents have been infringed, thus devaluing their intellectual property. Similarly, I am pleased that the venue provisions were modified to simply codify a recent Federal Circuit opinion that makes forum shopping more difficult while not preventing patent holders from having an infringement action heard in their own jurisdictions.

It is in the area of post-grant review that I remain deeply concerned about the impact of this bill. Simply put, even as amended, S. 515 still threatens to reduce the value and enforceability of U.S. patents. The reduction in value will most likely be felt by individual inventors, start-ups and small businesses, and research universities. These are the entities that don’t have the resources to mount a continual defense of their patents against repeated requests for inter partes reexamination that the bill allows. I hope that further work on these provisions can be done because as it stands the bill makes it too easy for would-be infringers to attack a patent, or make it too expensive to defend.

I was unable to pay attention for every minute of the Committee webcast [4] but, if you really want a blow-by-blow account, see additional coverage at IP Watchdog [5].

Amendment to Damages Section:

(a) IN GENERAL.

(1) COMPENSATORY DAMAGES AUTHORIZED. Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

(2) USE OF EXPERTS PERMITTED. The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

(b) PROCEDURE FOR DETERMINING DAMAGES.

(1) IN GENERAL. The court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.

(2) DISCLOSURE OF CLAIMS. By no later than the entry of the final pretrial order, unless otherwise ordered by the court, the parties shall state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages under this section, specifying the relevant underlying legal and factual bases for their assertions.

(3) SUFFICIENCY OF EVIDENCE. Prior to the introduction of any evidence concerning the determination of damages, upon motion of either party or sua sponte, the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis. After providing a nonmovant the opportunity to be heard, and after any further proffer of evidence, briefing, or argument that the court may deem appropriate, the court shall identify on the record those methodologies and factors as to which there is a legally sufficient evidentiary basis, and the court or jury shall consider only those methodologies and factors in making the determination of damages under this section. The court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.