Leahy, Hatch Introduce Sweeping Patent Reform Bill

…Bipartisan Legislation Overhauls U.S. Patent Code,
Administrative Review Process

WASHINGTON (Friday, August 4) – The U.S. Senate’s two leaders on intellectual property issues have joined together to introduce comprehensive patent reform legislation that would address the urgent need for revision and renewal in the complicated, cumbersome but vital U.S. patent process.

Senator Patrick Leahy (D-Vt.), the ranking member of the Senate Judiciary Committee and the leading Democratic member of its Intellectual Property Subcommittee, teamed up with Senator Orrin Hatch (R-Utah), the chairman of the IP Subcommittee, on a bill that would overhaul the U.S. patent system by implementing new, streamlined international standards, updating the existing patent code, and bringing clarity to the complicated administrative review process. 

“This legislation is not an option, but a necessity,” said Leahy.  “If you’re staying put in the fast-moving fields of technology and intellectual property, then you’re falling behind.  To preserve and build on our position as the global leader in intellectual property and technology, we need to be looking ahead and moving forward, and this bill is our first step.”  Leahy and Hatch have organized several hearings examining the patent system over the last two years, before the Judiciary panel and its Intellectual Property Subcommittee.

“It is not the bill I would have written if I were the sole author, but it reflects a remarkable achievement, and a substantial step toward real reform,” Leahy said.

Senator Leahy’s statement on the bill is below.   A summary of the bill’s key provisions follows. 

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  Statement Of Sen. Patrick Leahy,
Ranking Member, Judiciary Committee,
On Introduction Of Patent Reform Bill
August 3, 2006

The Senate is about to adjourn for its August recess -- four weeks when we get to reconnect with our constituents, catch up on the concerns of our home states, and study our legislative plans with a depth and attention that we cannot devote during the hectic days we are in session.  Some of us may even spend a little time with our families and friends.  As I have done in years past, I will be in Vermont.  The choice between spending August in Washington, D.C. or Middlesex, Vermont has always been an easy one for me.

When the Senate is in session, our obligations are many and varied, as important as they are diverse.  We hold hearings, and then we pursue follow-up questions.  We try to engage in oversight, though that has not been a particularly fruitful exercise with this current Administration.  We investigate issues, and then we endeavor to craft solutions.  We vote, and we caucus, and we deliberate. 

It is not always a process that yields results, but today I can report it has.  I am pleased to join with the Chairman of the Intellectual Property Subcommittee today in introducing a bipartisan bill on patent reform.  The bill is the result of almost two years of hard work on hard issues.  We held several hearings, had innumerable meetings with a universe of interested participants in the patent system, and received input from a number of voices in debate about patent reform.  We delved deeply into the myriad problems plaguing our patent system, especially those that hinder the issuance of high quality patents. 

In introducing this bill together, we take a productive step toward updating the most outdated aspects of the patent code and attempt to bolster the Patent and Trademark Office in its administrative review of patents throughout the process.  We are striving to place incentives on the parties with the most information to assist the PTO by sharing that information.  We place our patent system in line with much of the rest of the world, by moving from a “first-to-invent” system to a “first-to-file.”

Congress needs to address the urgent needs for revision and renewal in our patent system, and we must harness the impressive intellectual power and varied experiences of all the players in the patent community as we finalize our new laws.  I believe that, while introducing this bill today is not the end of the process – and indeed, in many respects, it is truly the beginning – it is a significant accomplishment that we have come together to set down a comprehensive approach to overhauling our patent system.  If the United States is to preserve its position at the forefront of innovation, as the global leader in intellectual property and technology, then we need to move forward, and this bill is our first step.  We must improve and enhance the quality of our patent system and the patents it produces. 

This legislation is not an option, but a necessity.  Senator Hatch and I have made genuine progress on this complex issue.  We agreed on many salutary changes, but it can be no surprise that we differed on some aspects of the effort, as well.  Recognizing the critical importance of compromise, of offering a bill to the interested public to study and improve, and of taking a clear first step down the path to genuine reform, we both made concessions.   This is not the bill I would have introduced if I were the sole author, and I expect Senator Hatch would say the same.  I appreciate the concessions that Senator Hatch made.   I have tried to be both reasonable and accommodating in honoring my commitment to him – a commitment that he requested specifically – to introduce a bill before the August recess.   

In particular, I am concerned about how some of the changes proposed would affect the generic pharmaceutical industry, especially the provision that would limit the “inequitable conduct” defense to only those cases in which a patentee’s willful deception of the PTO results in an invalid patent claim.  While I think we should expect the highest caliber of behavior by those who are seeking patents – which are, after all, often highly profitable government monopolies – surely we can at least insist on an absence of affirmative deceit.  I hope and expect that we can continue the discussion on this issue as the year progresses. 

I also want to ensure the delicate balance we have struck in the post-grant review process, and make certain that the procedure is both efficient and effective at thwarting some strategic behavior in patent litigation, and at promoting a healthier body of existing patents.  Fee-shifting, even in a limited set of cases, likewise raises concerns that should have a more public airing. 

I respect the necessity for considering and balancing a number of different concerns as we draft comprehensive and complicated legislation.  I will never sacrifice the quality of the laws we produce to expediency, but I recognize the utility of such compromises when, as with this bill, introduction is a first step in a larger and longer discussion. 

I am extremely pleased that Senator Hatch and I have come together to tackle these important and urgent issues.  Many hours of hard work were spent by both of our offices to develop legislative language so that we can, today, jointly introduce a bill to move the debate forward.  The bill is a remarkable achievement, and a substantial step towards real reform.  I look forward to continuing to work with Senator Hatch, other members of the Senate Judiciary Committee, and the affected parties on these matters.

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Summary of Hatch-Leahy Patent Reform Bill

• The bill streamlines the United States patent process with international standards by shifting from a “first-to-invent” system to a “first-to-file” one.  This creates a simple, unambiguous and user-friendly system for patent seekers, holders and others by removing the contentiousness about who invented something first.

• The bill sets out a clear and objective set of standards for damages by declaring a statutory approach to “apportionment of damages.”  Under the bipartisan measure, a judge would consider three factors in determining damages: (1) the relevant value of the infringed thing; (2) any history of non-exclusive marketplace licensing, and (3) “any other relevant legal factors.”

• The bill creates a balanced “post-grant review procedure” that allows a second opportunity for objective reviews of those claims that demonstrate real economic harm.   To take advantage of this second window, the complainant must make its showing by the usual “preponderance of the evidence” standard, and will be barred from raising the claims again in another proceeding.

• The bill permits a greater role for third parties in the patent application process by allowing outsiders who have knowledge relating to a pending application to submit relevant information to the Patent and Trademark Office (PTO).  This way, the PTO examiners are able to collect more comprehensive input from varied “players” in the field, who have every incentive to ensure that only the new and innovative inventions are patented.

• The bill limits “willfulness” determinations to truly egregious and intentional behavior.  Previously, if someone looked at a patent, any infringement of that patent was necessarily “willful” and hence subjected the person looking at it to three times the damages they would have incurred had they simply never investigated in the first place.  Thus, it created an incentive for inventors not to review patents at all, which is directly contradictory to the patent system’s core goal of promoting the broad dissemination and understanding of new inventions.

• Following the language of the Equal Access to Justice Act, the bill requires a court to award attorneys’ fees and costs to a prevailing party unless the court determines that the complaining party “was substantially justified or that special circumstances make an award unjust.”

• The bill limits the “inequitable conduct” defense to infringement to circumstances in which at least one claim of the patent is invalid.  A patent applicant commits “inequitable conduct” by making affirmative misrepresentation, or failing to disclose material facts to the PTO, with the intent to deceive the PTO.  Sometimes such “inequitable conduct” results in a flawed patent; sometimes the patent is fine; in either case, the patent system suffers, and the patent is awarded, at least in part, through fraud.   The strong and appropriate disincentive to “inequitable conduct” is the possible penalty in later litigation over the patent -- having the patent declared unenforceable as a result of that conduct.  Thus, in the situation in which a branded drug company sues a generic for infringement, and the generic can show both that the branded company deceived the PTO to get the patent in question, and that the patent itself is flawed, the patent may be held unenforceable by the court, and the generic may manufacture that drug.

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