Patent reform bill meets opposition during hearing

An inventor and an executive at a small technology company testify against patent overhaul legislation

Efforts in the U.S. Congress to overhaul the nation's patent system are again running into objections from inventors, pharmaceutical companies and small technology companies, which say that current legislation could destroy the value of patents.

Current efforts to reform the patent system are equivalent to a homeowner flooding his house to put out a small fire in a wastebasket, inventor Dean Kamen told the U.S. House Judiciary Committee Thursday. Instead of a far-reaching overhaul that would make it more difficult for patent holders to get large damage awards, Congress should focus on improving the quality of patents by giving more money to the U.S. Patent and Trademark Office (USPTO), said Kamen, inventor of the Segway scooter, an insulin pump and other products.

In some cases, it can take five years for USPTO to approve a patent application, Kamen said. "Whatever you do, make sure the Patent Office has the resources to respond quickly," he said. "You couldn't build houses if you needed five years to get your title to your deed, or after your deed, you had a post-deed review."

Kamen and representatives of Tessera, a semiconductor packaging vendor, and Johnson and Johnson, the health-care products vendor, told lawmakers they are opposed to parts of the Patent Reform Act, introduced in March by members of the House Judiciary Committee. The House version of the bill would expand post-grant challenges to patents, limit the judicial jurisdictions where a patent lawsuit can be filed and limit how judges can determine the value of a patented invention as part of a larger product.

The U.S. Senate Judiciary Committee has approved a similar bill, and is waiting for action on the Senate floor. The House passed a similar bill in September 2007, but the Senate failed to act on it before a new Congress was elected in November 2008.

The House bill's provisions for post-grant review of patents are unnecessary because of several recent court cases that have "significantly tilted the balance in favor of patent users, rather than patent holders," said Bernard Cassidy, Tessera's senior vice president and general counsel.

Current patent re-examination procedure has already become "an instrument of abuse and patent nullification," with specialist law firms advertising that they can create uncertainty about patents, he added.

But representatives of Intel and Cisco Systems argued that a larger overhaul is needed. It's too easy for patent holders who have no intention of making products or actively licensing their patents to win huge damage awards from tech companies with products that may contain dozens of patents, many large tech companies have argued.

Tech companies are being forced by courts to pay damages far beyond the value of a small piece of a product, said Mark Chandler, senior vice president at Cisco. Patent lawsuits drain resources away from research and development, he added.

Total patent litigation costs paid by tech companies have doubled in the past four years, to an estimated US$4.6 billion, Chandler said. "The imbalance in patent litigation rules has triggered the creation of well-funded litigation syndicates that purchase patents not to develop innovative products, but rather to obtain licensing payments from companies that have brought innovative products to market," he said. "Fully 88 percent of the patent claims against technology companies are asserted by folks who don't make any products."

Kamen, however, noted that his company, DEKA Research and Development, doesn't manufacture products, but makes money by licensing its inventions to other companies. "I've spent many tens of millions of dollars, and in the end, all I ever end up with is a patent," he said. "The only thing I show up with when I sit across the table from some big company is a patent."

Several lawmakers called for broad patent reform, saying the U.S. patent system is putting the nation at a competitive disadvantage. "Patent law changes are necessary to bolster the U.S. economy and our nation's global competitiveness and to improve the quality of living for all Americans," said Representative Lamar Smith, a Texas Republican and cosponsor of the Patent Reform Act.

But others on the committee voiced concern that the bill would hurt entrepreneurs.

Witnesses on both sides of the issue seemed to raise valid points, said Representative Zoe Lofgren, a California Democrat. "The frustrating thing for all of us is that all the witnesses said true things that were actually in conflict with each other," she said. "How do we get to a point that really works for the American economy?"

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