Congress Discusses Sales Bans on Products Infringing Industry-Standards Patents
July 13, 2012 - Following the eBay v. MercExchange ruling in 2006, courts have rarely issued permanent injunctions on products that infringe patents that are key in their respective industries. Instead, judges award damages. However, the strong precedent set by the eBay case is apparently not sufficient for lawmakers: The Senate Judiciary Committee held a hearing to discuss the antitrust implications of sales bans, and other departments of the federal government weighed in as well.
Prompted in part by the current requests before the International Trade Commission to ban imports of Apple's iPhone and Microsoft's Xbox 360 game console, Judiciary Committee Chairman Senator Patrick Leahy (D-Vt.) announced that the hearing would "further explore the competitive impact of ITC exclusion orders and whether more needs to be done to ensure consumers are not the victims of the tech patent wars."
The ITC cannot award damages, but it can ban imports of products that are found to infringe patents. That's why Motorola Mobility turned to the ITC to file its patent infringement complaints against the iPhone and Xbox.
Senator Leahy voiced his concern that since companies depend on the availability of licenses for industry-standard patents under fair, reasonable, and non-discriminatory terms (FRAND), it would be potentially devastating to develop a new product and then be refused such a license - and worse, to have that product banned.
"When inventors and developers are willing to license their technologies to one another at reasonable rates, the cross-fertilization of ideas benefits us all," Leahy explained. "But I am concerned that the recent trend of seeking exclusion orders from the International Trade Commission, rather than negotiating and seeking license fees, may have the opposite effect."
However, when a company's patent is accepted as part of an industry standard, the patent-holder is obligated to license it under FRAND terms - even to competitors. And the ITC can consider such FRAND commitments in deciding whether to ban the import of a product.
FTC Commissioner Edith Ramirez commented that although there are sometimes circumstances in which an injunction makes sense, "We do think in most cases an exclusion order (in FRAND cases) would be inappropriate."
For its part, the Department of Justice is concerned about the impact that a ban on a widely-used product like the iPhone would have on millions of consumers.
"Blocking a particular cell phone application could cause consumer harm across millions and millions of people," said DOJ Acting Assistant Attorney General Joseph Wayland. "It's the type of the practice we're concerned about, and not just the volume [of patent litigation]."
Though it was off-topic for the hearing, Sen. Leahy also took the opportunity to complain about "patent trolls" and pondered whether lawmakers could do anything to stop them.
"People who invent should be compensated," Leahy said. "I don't have a lot of sympathy for people who buy patents."
Critics Call America Invents Act Unconstitutional; Obama Administration Supports the Legislation
June 16, 2011 - The America Invents Act, H.R. 1249, seems to be making its way to a floor vote. Along the way, the bill collected many supporters and critics.
Opponents of H.R. 1249
More groups have opposed the bill than can fit in this space, but two recent letters are noteworthy.
First, there was the letter that Carl Gulbrandsen, Managing Director of the Wisconsin Alumni Research Foundation (WARF) and a technology transfer expert, wrote to his colleagues in the Association of University Technology Managers (AUTM). AUTM supports the America Invents Act, but Gulbrandsen argues that the legislation would be detrimental to innovators because it would make patents weaker and easier to invalidate. He also writes that expanding prior user rights is unconstitutional and further erodes patent rights.
Regarding the very controversial first-to-file provision, Gulbrandsen comments, "Operating effectively in a first to file system requires financial and staffing resources that are generally not available to universities or other small entities. Most universities today need a licensee willing and able to pay the patent cost before an application is filed. Under a first to file system, that will often mean the university loses the race." The full text of Gulbrandsen's letter is here.
Another missive opposing the America Invents Act was sent to Speaker of the House John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) on June 10 by the U.S. Business and Industry Council (USBIC), a 2,000-member group of small manufacturers and small-entity inventors. The USBIC's open letter requests that H.R. 1249 not be brought to the floor of the House of Representatives for a vote; House Speaker John Boehner allowed the vote to be postponed.
"It would be wrong for the House leadership and the White House to try to arrange a backroom deal to address all the serious constitutional deficiencies," said USBIC president Kevin Kearns. "More input from small businesses, universities, venture capitalists, and other stakeholders is necessary." The USBIC letter is excerpted here.
Glenn Beck Comments on H.R. 1249
Radio host and Fox News commentator Glenn Beck also weighs in on the America Invents Act in this video.
Obama Administration Supports
U.S. Commerce Secretary Gary Locke sent a letter to House Judiciary Committee Chairman Lamar Smith on May 31, officially giving the America Invents Act the Obama Administration's stamp of approval. Just as President Obama supported the Senate version of the bill (S. 23), his administration also supports H.R. 1249. In the eight-page letter (.pdf), Locke commented on several of the bill's provisions, a few of which are excerpted below:
First to file: "We strongly support the proposed transition of the United States to a first-inventor-to file system," Locke wrote. "It is an essential feature of any final bill that will simplify the process of acquiring rights while protecting innovators."
Locke goes on to say that this transition, being consistent with "our economic competitors," would "benefit U.S. businesses by providing a more transparent and cost-effective process that puts them on a level playing field with the rest of the world."
Post-grant review: "The Administration supports establishing a new post-grant review proceeding and retooling the existing post-grant inter partes reexamination procedure. These proceedings will serve to minimize costs and increase certainty by offering efficient and timely alternatives to litigation as a means of reviewing questions of patent validity."
Fee-setting authority and funding: "We would like to work with the Committee to provide technical changes to the legislation needed to ensure that the USPTO can make interim fee adjustments so it can best use this new authority on day one, as it transitions to a thoughtful and transparent process to adjust its fees."
The Obama Administration's willingness to "work with the Committee" on changes that would allow the USPTO to adjust its fees as soon as the bill is passed is good news for those who would like to see the agency able to set and keep its own fees. However, some Republicans are raising the cry that the section on fee-setting and funding is unconstitutional.
The House was expected to vote on the America Invents Act this week (June 13-17). However, as of June 14, it appeared that the House Appropriations Committee would first need proof that the provisions to put an end to fee diversion and allow the USPTO fee-setting authority do not run contra to the Constitution's Separation of Powers clause.
America Invents Act Released from House Judiciary Committee; Faces Opposition from Many Groups
May 18, 2011 - The House of Representatives began discussion on H.R 1249 − their version of the America Invents Act − on March 30, and by April 14 the House Judiciary Committee had voted 32-3 to send an amended version of the bill to the House floor for further debate and a vote. The vote is expected to come this month or next.
Efforts to remove the "first to file" provision failed, but Rep. Jim Sensenbrenner (R-WI) vowed to try again to strike it from the bill before the vote.
The reaction to the House version of the America Invents Act has been somewhat more negative than the response to the Senate's version of the bill, which passed the Senate in March.
Some of the organizations and trade associations that have publicly disagreed with various provisions of H.R. 1249 include:
● The Generic Pharmaceutical Association (GPhA), which urges its members to oppose the bill because the "supplemental examination" provision allows patent application filers to intentionally falsify information on a patent application as originally filed, and then retroactively correct the filing with no repercussions arising from the false information. GPhA says this provision "will hurt consumer access to affordable medicines and undermine the integrity of the patent system."
● The AFL-CIO, which sent a letter to House Judiciary Committee Chairman Lamar Smith and Ranking Member John Conyers. The union claims that the amended House bill "puts at risk a real opportunity to enact a law that would improve the operation of the U.S. patent system" because it "weakens important safeguards concerning time limits and standards for initiating administrative proceedings to review a granted patent." The letter continues, "Patent holders should be supported by a system that gives them confidence in the validity of their patents and guards against serial challenges."
● BIO (the Biotechnology Industry Organization), which agrees with provisions such as the switch to a "first to file" system and ending fee diversion, but opposes H.R. 1249 because of Rep. Goodlatte's amendment to the supplemental examination provision. BIO says the provision as amended "creates disincentives for patent owners to use the new procedure by having the U.S. Patent and Trademark Office...act as a quasi-investigative body."
● The National Small Business Alliance (NSBA), which disagrees with H.R. 1249 because it "would critically harm innovative small businesses − the segment of the U.S. economy responsible for job creation and breakthrough technology − for the benefit of large multinational corporations and foreign firms."
● American Innovators for Patent Reform (AIPR) continues to oppose the America Invents Act for the reasons set forth in the open letter they and eight other organizations (including the NSBA) sent to the House Judiciary Committee in March.
AIPR's What You Can Do page gives visitors various options to take action against the America Invents Act, as well as a web form that allows visitors to sign AIPR's letter explaining why House members should vote against H.R. 1249.
As Patent Reform Legislation Moves to House, Several Groups Voice Opposition in Open Letter
March 30, 2011 - Nine organizations - representing "America’s small businesses, start-up entrepreneurs, independent inventors, and technical professionals employed by companies of all sizes" - have sent an open letter to all members of the House of Representatives expressing their collective objections to the House version of the America Invents Act (S. 23, the Senate bill which passed on March 8). A PDF of the letter is here on the website of American Innovators for Patent Reform, one of the organizations that signed the letter.
Besides AIPR, signers of the letter included CONNECT, IEEE-USA, IPAdvocate.org, National Association of Patent Practitioners (NAPP), National Congress of Inventor Organizations, National Small Business Association (NSBA), Professional Inventors Alliance USA (PIAUSA.org), and the U.S. Business and Industry Council.
Patent Reform Act Passes in Senate, May Face Uphill Battle in House
March 24, 2011 - As our March Wealth of Ideas feature article explains, Senate bill S. 23, the Patent Reform Act of 2011, was easily passed by the Senate in a vote of 95-5 on March 8, 2011. The House of Representatives is now preparing its own version of patent reform legislation.
Critics of the Senate bill have noted, with some optimism, that the House Judiciary Committee might be preparing a competing bill − not just a carbon copy of the Senate bill. That speculation is based in part on the fact that the House Subcommittee on Intellectual Property, Competition, and the Internet has heard testimony from a different sort of witnesses than those who testified before the Senate.
Whereas the Senate heard from larger corporations and few (or no) independent inventors, the House has already heard from at least three prolific inventors. One of those inventors, Scott Smith, Ph.D − a professor of Mechanical Engineering at UNC Charlotte, and named inventor on 15 applications − detailed the mistake that a switch to a first-to-file patent system would be:
"Small inventors do not have the resources to engage in a race to the patent office for every potentially patentable idea," Prof. Smith explained.
"Indeed, 'first to file' might simultaneously result in a large number of poorly prepared patent applications (increasing the backlog), and a financial barrier further excluding small and very small inventors. While 'first to file' provides some measure of clarity, it does not support innovation broadly."
However, any optimism about the nature of the as-yet-unrevealed House patent reform bill must be tempered by the fact that House Judiciary Committee Chairman Lamar Smith (R-Texas) issued a statement praising the passage of the Senate bill − in particular, those portions of the bill that are most likely to harm small businesses and innovation.
Rep. Smith was enthused about the change to a first-inventor-to-file system, the post-grant review provision, and allowing third-party submission of prior art during the examination of patent applications.
"The Senate bill makes several important changes to our patent system," Rep. Smith said. "The House will introduce similar legislation this month that will help turn the ideas of American innovators into companies and jobs."
The Senate's America Invents Act contained some helpful provisions for inventors, but it's worth noting that they were not the ones named in Lamar Smith's statement. General Patent Corporation, American Innovators for Patent Reform (AIPR) and many other IP industry and small business groups will be asking their members and supporters to put pressure on Congress to get rid of patent reform provisions that only benefit larger corporations.