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"Patent Reform Act of 2007" Feedback

The following feedback reflects the opinions of the U.S.-based members of the IEEE-USA Intellectual Property Policy Committee (IPC) and not the membership of IEEE as a whole. The IPC has reviewed the language of the proposed patent reform bill – as introduced on April 18, 2007 – and submits the following input on the sections listed:

Sec. 5. Right of the inventor to obtain damages.

While we applaud efforts to reduce the costs of litigation, IEEE-USA has reservations about this change in calculating patent infringement damages. A new approach to calculating damages for patent infringement will likely reduce the risk for established, large entities, giving them the advantage of increased bargaining power over weaker competitors and start-up companies.

To promote the progress of science and useful arts, inventors deserve to be compensated according to the value of their inventions in an infringing product. In some areas of technology, modern products are composed of literally thousands of inventions. It will be difficult to consistently and fairly attribute value to patents based on improvements over the prior art, and apportionment of damages might not fully value a patented contribution. A single improvement/addition to a small component of a device might completely elevate the operation of the entire device to "star status." Patent holders and potential infringers may thus disagree on apportionment when calculating the damages valuation. Consider this situation: "How do you fairly attribute the value of a hypothetical fuel filter for an automobile that doubles fuel efficiency of an automobile and costs only $3.00?" The cost of the fuel filter seems de-minimus in relation to the cost of the automobile, but the benefit is tremendous.

While it would be easier to apportion damages based on the total number of inventions involved, the courts must be allowed the flexibility to direct damage awards based on the true value of the infringing invention. "Who is in a position to fairly determine this value?"

Sec. 6. Post-grant procedures and other quality enhancements.

IEEE-USA IPC has strong reservations about creating post-grant procedures. Pre-grant improvements to patent procurement are favored over the proposed post-grant procedures. For example, the USPTO process should be improved by allowing more examination time and hiring and retaining superior employees.

Patent infringement lawsuits are filed primarily to rectify theft of innovations. The proposed post-grant procedures could be used by large entities as a tactical litigation delay (of up to 1.5 years) which would give them an unnecessary competitive advantage. It will also cloud the validity of issued patents which will reduce the value of patents held by start-up companies and universities (particularly, from the view of venture capitalists). It is not only industry-leading companies that provide innovations to the market. History has shown us that the innovators employed at industry-leading companies frequently leave to start new companies. For example, Andy Grove, Robert Noyce and Gordon Moore left Fairchild Semiconductor to start Intel.

We suggest that Congress explore improvements to the pre-grant process rather than making changes to post-grant procedures, and consider raising fees if necessary. However, should fees be raised, the funds should be earmarked towards improvements to the pre-grant process.

Sec. 9. Submissions by third parties and other quality enhancements.

IEEE-USA IPC has strong reservations about pre-issue submissions. Pre-issue submissions could be used disproportionately by large corporations to block smaller entities attempting to protect innovations. Large corporations have the resources to research and follow the patent applications of start-up companies that could prove to be potential competitors in the future. On the other hand, start-up companies have minimal resources to operate their fledgling endeavors, and likely do not have the time and resources to follow and submit prior art against the patent applications of large corporations. Accordingly, there will not be an equal level of scrutiny and prior art submission for all patent applications which will create a varying presumption of validity for patents.

A safeguard needs to be implemented to ensure equal scrutiny during prosecution of patent applications. If one patent application receives heightened scrutiny due to pre-grant submissions, other patent applications (that do not receive pre-grant submissions) should receive additional scrutiny via the USPTO process in order to be fair.

Sec. 10. Venue and jurisdiction.

The IEEE-USA IPC is in favor of the venue restrictions. This will discourage forum shopping, a tactic often used by law firm-backed patent litigation entities that have no intention of developing or commercializing the patented technologies which they assert against commercial entities.

Sec. 11. Regulatory authority.

IEEE-USA IPC has strong reservations about the regulatory authority granted to the Director in this section. The last clause provides,

"…the Director may promulgate such rules, regulations, and orders that the Director determines appropriate to carry out the provisions of this title …or that the Director determines necessary to govern the operation and organization of the Office."

This language grants the Director with authority to limit every patent application to a single legal claim, thereby completely eliminating continuation practice solely for the reason that the backlog at the USPTO necessitates it.

IEEE-USA IPC believes that the director's authority should be restricted to promulgating only rules, regulations, and orders that the Director determines necessary to carry out provisions of this legislation. This would give the Director the authority to adjust the agencies operations to carry out the new mandate without giving the position unlimited rule-making authority.