Patent Reform Bill Introduced in House and Senate
Patent Reform Bill Introduced in House and Senate
Patent Reform Bill Introduced in House and Senate

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    Both houses of Congress introduced similar versions of a patent reform bill recently. The bill, called the Patent Reform Bill of 2007, introduces provisions likely to significantly improve the way current law deals with patent infringement liability. Other changes proposed by the bill are:

    • Replacing the first-to-invent system with a first-to-file system

    • Post-grant review of patents

    • Provision for third parties to file patent defeating documents before patents are issued

    • New rules as to where a suit can be instituted

    The Patent Reform Bill of 2007 would change the way damages due to a patent owner are calculated and require that they bear some relation to the value of the patent infringed. Under current law courts do not distinguish between the value of the patented technology and the larger goods containing it. Christopher Rugaber's article gives a good example of this: Microsoft paid $1.52 billion to Alcatel-Lucent SA in damages for including infringing MP3 technology in its Windows software. The damages were calculated based on worldwide sales of the Windows software, even though the infringing technology was only a small part of the software.

    The bill would also change the procedure courts adopt to arrive at the conclusion of willful infringement. If a court decides that infringement was willful, the infringer is required to pay punitive damages. The Court of Appeals for the Federal Circuit, which deals with patent cases, imposes an affirmative duty of care on competitors. This means that the party accused of infringement would have to prove that its infringement was not willful. The bill would change this scenario by requiring the patent holder to prove that the infringement was willful. The infringer's good faith belief that his product does not infringe might relieve him/her from having to pay punitive damages.

    Other provisions of the bill create new procedures designed to reduce litigation. Parties affected by issued patents would be allowed to file a post grant “cancellation petition”, within 12 months of the issue explaining why the patent or claims in the patent should not have been granted. If they succeed, the patent office would cancel the whole patent or the challenged claims.

    The bill would also permit third parties to file patent defeating documents with the patent office and explain why those documents show that the patent application should not be granted. This provision might improve the quality of issued patents. But the problem with the provision is that it requires the party filing the documents to pay a fee and this might discourage many third parties.