If you're a seasoned or aspiring inventor, you should be concerned about the
current attack that large patent-intensive corporations are making on our venerable
patent system, which has effectively protected the intellectual property of
inventors for more than two centuries. Indeed, the so-called Patent Reform Act
proposes major changes to the law governing how patents are obtained and enforced.
Ironically, these changes are being promoted by the most powerful and prosperous
high-tech corporations, which came to power based on the patent system as it
now stands.
In mounting their full-scale invasion of the territory protected by U.S. patent
laws, the patent Goliaths continue to amass political support that, if not effectively
challenged, will lead to an unwarranted degradation of the legendary patent
system established by the U.S. Constitution.
WHAT'S WRONG WITH THE ACT?
Perhaps the most egregious legislation proposed by the act is the mandating
of apportionment in all situations. More specifically, the court is required
to calculate what is "the economic value properly attributable to the prior
art, and other features or improvements, whether or not patented, that contribute
economic value to the infringing product or process."
In addition to the complete impracticality of implementing
this approach as noted by Chief Judge Paul R. Michel in his letters to the Judiciary Subcommittee, the result is a clear reduction in the reasonable royalty to the disadvantage of the patent
owner and a great advantage to the licensee, who has already
been found by the court to be infringing a valid patent.
Indeed, the irony of this result is distressing. It is basically compulsory
licensing. Under the proposed legislation, in the absence of an injunction,
the court-determined infringer now gets the court to force the patent owner
to license it on terms that are unacceptable to the patent owner.
REASONABLE ROYALTIES
Under current law, a patent owner who has won on patent infringement and validity
is entitled to damages and in no event less than a reasonable royalty. Well-established
case law determines reasonable royalty by considering what an infringer would
pay to a willing licensor in a hypothetical market-based business negotiation,
which assumes the patent is valid and infringed.
The case law has identified 15 practical business factors (aka
Georgia Pacific factors) that are considered in determining an
appropriate reasonable royalty. The courts look at all the factors
and consider which are relevant for the particular fact situation
and what weight the factor(s) should be given to reach a fair market-based business result in the hypothetical negotiation.
Even the lethargic U.S. Department of Commerce (DOC) has
vigorously opposed most of the sweeping changes proposed by
the act as the DOC explained in its recent 11-page letter to
House Judiciary Subcommittee Chairman Howard Berman, a
lead sponsor of this misguided legislative effort.
"While the appropriateness of damages awards in a number of patent cases may
be subject to debate, DOC does not believe that a sufficient case has been made
for a legislative provision to codify or emphasize any one of more factors that
a court must apply when determining reasonable royalty rates," the letter says.
TIME TO TAKE A STAND
If enacted, the Patent Reform Act will dramatically weaken the patent system,
sound the death knell to the current venture capital system, and trigger a dramatic
decline in the ability of the U.S. to compete around the world. Indeed, this
legislation will strip the U.S. of its richest source of innovation, namely
the individual inventor. It will also further embolden the Goliaths, whose next
attack will be on the anti-trust laws, which then would be the only remaining
limitation on their exercise of their monopoly powers.
Having successfully influenced legislators on both sides of
the aisle in both chambers of the legislature to vote to weaken
our patent system, the Goliaths now cynically describe the act
as "bipartisan" and "bicameral." The only way this juggernaut
can be checked is by every entrepreneurial company encouraging its people and investors to call and write to their legislators
to register their shock and dismay at what is being proposed.
Our legendary patent system is fair and continues to work well.
It may need some fine tuning to improve patent quality, for example, but it does not need the major changes that the Goliaths are
seeking to impose. Indeed, the U.S. Patent Office is a treasure
and key strength of the patent system, which should be the focus
of continuous improvement. The Goliaths should not be allowed
to manipulate the system to entrench their dominance over entrepreneurial companies and individual inventors.