Patent landscape changing rapidly as reform act moves to Senate floor

The SE Texas Record May 20, 2009, 2:53pm

Supporters of a push to enact federal legislative reform of patent rules in the United States hope the third time is the charm.

The Patent Reform Act of 2009, which was passed from the Senate Judiciary Committee by a 15-4 vote , according to a post on the American Intellectual Property Law Association Web site, will soon go to the Senate floor for a vote.

But as evidenced by the failures of the Patent Reform Act of 2007 and the Patent Reform Act of 2005 that preceded this latest version of the bill, passage into law is anything from certain.

Washington insiders who are keeping tabs on the process say the act will not undergo a process of backroom dealing between members of the Senate, which can twist and turn the bill into something altogether unrecognizable before if finally comes to the floor for a vote.

"If and when the bill gets to the Senate floor for consideration, it may not look like what the committee passed. The key is to get a bill that a majority of Senators can/will vote for," Washington, D.C. patent attorney Peter Strand said.

Just how much the bill retains any teeth to enact meaningful reform, remains to be seem, according to Theodore Frank, resident fellow at the American Enterprise Institute for Public Policy Research.

"You only get one shot at a bill like this and if you pass something that isn't strong enough it's going to almost impossible to regenerate the support for a tougher bill in the future," Frank said.

Compromises have already taken place in the committee just to get the initial vote to send the Act forward, especially regarding attempts to limit the amount of damages paid for patent royalties, according to the Patently-O blog that reports on patent news.

"The amendment will strike the contentious calculation of reasonable royalty damages provision," the Web site stated.

According to Strand, the Act instead would, "make the district judge a 'gatekeeper' who would instruct the jury regarding the methodologies and factors to use in calculating damages," he said.

This change was advocated by Sen. Patrick Leahy, D-Vermont, the initial sponsor of the bill, and Sen. Diane Feinstein, D-Calif., a key player in the negotiations within the committee. Both said intellectual property and industry organizations supported those changes, according to Strand, though some of the analysis after the committee vote didn't reflect that level of support.
Frank said patent reform efforts have already gotten a big boost from the courts themselves, regardless of the eventual fate of the Patent Reform Act.

"A lot has happened in the courts that have addressed some of the problems that this bill was supposed to address," he said.

The country's most active patent docket, the U.S. Eastern District of Texas, took a swing toward defendants when The United States Court of Appeals for the Federal Circuit issued a powerful writ of mandamus against the East Texas court for its lack of consideration for forum convenience.

The ruling, according to legal experts across the country, has already changed the pace of patent case filings in East Texas, a small legal outpost known for its expertise in patent legislation, but also known for its plaintiff-friendly juries and courts.

"The rocket docket engine has either slowed down or shut off completely," Strand said. The East Texas court was a famed "rocket docket" for the rapid pace that it processed cases, most favorably for plaintiffs.

"It's going to be harder to bring a case in East Texas now," Frank said.

Supporters of the Patent Reform Act point to East Texas as evidence the act is still needed, primarily to ensure that a so-called "rocket docket" doesn't take off in some other plaintiff-friendly jurisdiction.

Most patent professional interviews for this story don't believe that a single court is likely to assert the influence previously enjoyed by the East Texas court.

"Whether or not there are other jurisdictions out there and get the rapid discovery that benefits the patent holders over the defendants. and whether you can get the types of juries you could get in East Texas, I'm not sure," Frank said. "Also you had the judges not ruling on summary judgments it was a perfect storm of sorts.

"I don't think there will be a single jurisdiction that will have that pattern of events," Frank said.

Atlanta-based patent attorney Alan McDonald agrees with Frank.

"There will not be one new place," he said. "(The Writ of Mandamus) is making it clear that there is not going to be a new home for patent cases, unless the patent reform efforts in Congress set up a patent district court or two or three around the country. There has been some discussion on that topic, to give a couple of judges specialized training and filter cases toward them, but I don't think it will take place."

The Patent Reform Act of 2009, as presently written would establishing a pilot program to direct patent cases to interested district court judges to enhance patent litigation expertise, Strand said.

Many believe the highly complex patent courts require a level of interest and understand that few judges have the time to invest.

While Strand agrees that one court is unlikely to emerge as the next rocket docket, some courts do appeal more prominently than others to plaintiffs' attorneys.

"Delaware and New Jersey appear to be coming on as the 'venue du jour' for patent infringement cases," he said.

Frank agreed, saying, "Certainly there are courts that are going to have a rocket docket-like trend however."

Delaware has emerged in recent years as a very popular venue for plaintiffs' attorneys in a variety of civil cases, particularly since Democratic Attorney General Beau Biden took office.

A USA Today story in 2008 noted Biden worked for a large plaintiff firm before becoming attorney general. His father, now Vice President Joe Biden, has a long history of backing plaintiffs' rights to try their case, often working to kill tort reform legislation.

The Bidens' campaign accounts have both benefited from large donations by trial lawyers and their related political action committees. According to the Center for Responsive Politics, employees at three law firms that specialize in asbestos litigation were among Beau Biden's top 10 all-time contributors.

In addition to Delaware's loyal Democratic Party voting base and liberal courts, the state is attractive to plaintiffs' attorneys because of attractive corporation laws. Most major companies have an office in Delaware, which makes it almost impossible for defense attorneys to challenge the convenience of the venue, something far more important now in light of the Writ of Mandamas issued against the East District Court of Texas.

Understaffed, underpaid

With the recent changes both from substantial precedent-setting rulings and the ongoing attempts to pass reform legislation, neither, at least to date, have addressed the backlog of patents at the United States Patent and Trade Office, a source of consternation across the board among intellectual property professionals.

McDonald, who served on a committee that recommends rule changes for the patent office, said the entire office needs to be reworked and modernized to keep up with the growing demand of patents from high-tech and pharmaceuitical companies among others.

McDonald said the problems with USPTO date back the Clinton Administration.

"We stopped having patent officials that came up through the ranks we started getting Congressional staffers of outgoing retiring congressmen on the committee," he said. "They knew nothing about this, but they knew how to legislate so they tried to legislate through rule making."

The loss of expertise in a field of highly technical and complex methodology, McDonald said stalled the effectiveness of the patent office.

"The office is a complete mess because have been taking the position that everything is the fault of the applicant," McDonald said.

Further, as the growth of cutting-edge industries like technology and pharmaceutical grew, exponentially increasing the demand for patents, the patent office failed to grow with it, McDonald said.

"Things haven't changed since 1973," McDonald said. "I think cases have gotten a little more difficult since then. But they have X hours a case and that X has not changed since the 1960s or 70s."

Despite the problems, McDonald knows changing the patent office and shoring up the backlog on patents may be the hardest step of reform even if Congress passes reform, he said.

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