As if a global economic meltdown were not enough for newly-President Obama, more than 130 non-pharma manufacturing companies signed a joint letter to the President detailing their concerns about the economic impact of adopting apportionment of damages legislation.

Last month, the Manufacturing Alliance on Patent Policy (MAPP) released an economic analysis that showed how adopting apportionment of damages legislation would could put at risk 298,000 manufacturing jobs and reduce R&D investment by up to $66 billion.

MAPP members are advocating for non-controversial patent reform proposals that have broad support.

Excerpts from the letter:

Recent Patent Reform Proposals

In the 110th Congress, legislation was introduced to make fundamental changes to the U.S. patent system.  Proponents of the legislation were primarily large information technology and financial services companies.  The legislation passed the House of Representatives in September 2007, but did not pass the Senate.

While we shared the desire to improve the patent system, we voiced concern that a number of provisions would have weakened rather than strengthened patent protection.  In our view, those provisions could have harmed the competitiveness, investment and employment of our sector.

We feel strongly that the prosperity of a few companies within two industries should not come at the expense of a larger group of stakeholders.  Therefore, we applauded the decision of Senate leaders to delay action on the legislation until consensus was developed.  Now, as the proponents of the legislation introduced in the 110th Congress begin to lobby again for their proposals, we feel it is important to discuss again our concerns.

Flawed Justifications

At the outset, it is important to note that the justifications offered for the legislation are faulty.  For example, there is no explosion in patent litigation.  In 1993, lawsuits were 1.45% of patents granted.  In 2007, lawsuits were 1.48% of patents granted.  The number fluctuates from year to year, but it has never indicated a system out of control. (Source:  USPTO Annual Reports, Federal Judicial Statistics)

Moreover, there is no explosion in patent damage awards.  Adjusting for inflation, the median annual patent damages award has actually dropped slightly over the last 13 years. In constant dollars, the median was $3.9 million from 1995 through 2000, and $3.8 million from 2001 through 2007. (Source: 2008 Patent Litigation Study, PriceWaterhouseCoopers.)

One claim certainly is true – that the number of patent applications has increased significantly in recent years.  We view increased patent applications as a good thing, representing increased innovation that is crucial for American prosperity.  It would be a terrible mistake to allow the increase in patent applications to become an excuse to undermine patent protections.  Rather, Congress should take advantage of Americans’ growing desire to invent by ensuring that the U.S. Patent and Trademark Office (“USPTO”) has the resources and management to handle the increased number of applications in a thorough and timely manner.

Reducing Penalties for Patent Infringement – The Top Goal of the Proponents of Legislation Introduced in the 110th Congress

The top goal of those proposing the legislation introduced in the 110th Congress was to reduce penalties for patent infringement by changing the law of damages.  This change would have elevated the importance of one of the fifteen Georgia-Pacific factors now considered in calculating patent damages.  By giving this one factor – apportionment – a preeminent position in damage calculations, proponents could achieve the goal of reducing damage awards.

It is crucial to remember that patent damages are imposed only after patent validity and infringement are determined on the merits.  In other words, those paying damages have been found to have unlawfully used intellectual property belonging to someone else.

 See the entire MAPP Letter here.

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