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Patent Reform Bill Stalls in Senate as Foes Object to Damages Apportionment

Proposed patent reform legislation passed by the US House of Representatives late last year has stalled in the Senate due to a contentious section of the bill that would change the way damages are assessed in patent infringement lawsuits.
According to some experts, the setback makes it unlikely that the Senate will vote on the bill before the next legislative recess at the end of May, which could ultimately derail it until at least after the November elections.
However, some members of the biotechnology and academic tech-transfer communities, who have opposed the bill since its inception, are worried that the Senate could still vote on the bill in the current legislative session, underscoring the importance of continuing to work with Congress to sculpt legislation that is fair to all stakeholders.
The bi-cameral bill, also known as the Leahy-Hatch Patent Reform Act of 2007, was primarily sponsored in the House last year by Congressman Howard Berman (D-Calif.), and narrowly passed in a September House vote (see BTW 9/10/2007).
The Senate’s version of the bill, S.1145, was co-sponsored in the Senate by Patrick Leahy (D-Vt.), chairman of the Senate judiciary committee, and Orrin Hatch (R-Utah), but had yet to make it to the floor for a vote as various industry sectors in the US lobbied for their interests.
Namely, the bill, which would propose sweeping changes to the US patent system, has been viewed favorably within the IT and high-tech industries and unfavorably within the pharmaceutical, biotech, academic, and small-business sectors.
In particular, the most contentious elements of the legislation included the possible establishment of a “first-to-file” system over the current “first-to-invent” system; an open-ended, post-grant opposition system; and provisions dealing with apportionment of damages in IP-infringement lawsuits.
Now it appears that concerns raised last week by Senator Arlen Specter (R-Pa.) over the apportionment to damages section will delay a Senate vote even further.
“The Chairman and I differ on a number of aspects of the proposed patent reform legislation,” Specter said in a statement. “The principal sticking point is the issue of how to assess damages in patent infringement lawsuits. We thought we had reached an agreement on this matter, but the language continued to shift, so we do not yet have a deal on the package.
“I am hopeful that we can reach an agreement, but more work has to be done to get it right,” Specter added.
This week, a Senate judiciary committee aide told BTW that a window had presented itself in early April to put the bill up for vote in the Senate. However, due to Specter’s objections to the bill, “we have lost that window on the floor and are unclear whether another opportunity will present itself in this work period,” the aide said. The current work period ends on May 24, with Congress reconvening on June 2.
In a statement, Leahy said that he is “disappointed that just a handful of words have stalled the Senate’s debate on this patent legislation. Thousands of hours have been spent in negotiations to address the concerns of 100 Senators, hundreds of Representatives, and dozens of stakeholders. This was a missed opportunity.
“I have said repeatedly that the time for patent reform is now,” Leahy added. “Unfortunately, some have yet to fully grasp this fact, and have stalled meaningful reform.”
According to Gene Quinn, a partner at Bethesda, Md.-based IP law firm White & Quinn, Specter’s objections may have sounded the death knell for the bill in its current form.
“He’s a key [Senator] in that on issues that are not highly partisan, he tends to be toward the middle,” White said. “If you lose him, you lose a lot of hope for something like this going through.”

“There has always been time to do a consensus patent reform bill – but does the other side want to stick to its guns and get 100 percent of everything they wanted? In that case, I think it could be dead.”

Quinn, who is also a professor of law at the Practising Law Institute and founder of, which has been closely following the legislation, said that Specter’s actions may have triggered a number of other Senators to walk away from the bill, although he didn’t specify which ones; and that the legislation will likely take a back seat to more pressing issues and to the election cycle.
“The later it goes, the less likely it is” to pass, Quinn said. “Once the Senate comes back from recess, senators that need to start running are running, because there is an election in the fall. And the same is pretty much true in the House. If you have any kind of opponent and you’re not running by the beginning of April, then you’re seriously behind.”
Others disagree that Specter’s objections have stalled debate on the bill indefinitely. Last week, the Biotechnology Industry Organization commended Specter for “standing firm on patent legislation,” but warned that the debate is far from over and that all sides must come together to ensure that if and when the bill comes up for vote, it takes into account the concerns of all parties.
“Our view is that [we disagree with] those who are saying this is dead, or there is no time to do it now and that they missed that window,” Tom DiLenge, vice president and general counsel for BIO, told BTW this week. “There has always been time to do a consensus patent reform bill – but does the other side want to stick to its guns and get 100 percent of everything they wanted? In that case, I think it could be dead.
“Or, are they willing to compromise and get a bill that has about 98 percent of what they wanted, and is acceptable to the rest of the patent-holding community?” DiLenge added. “There have always been areas for compromise and consensus on this bill. Hopefully the other side will now reconsider [its] strategy, and come together and let us pass a bi-partisan patent reform bill that will be good for the entire patent system.”
DiLenge also said that Specter’s actions were important because they championed the view of those who are not willing to compromise specifically on the apportionment of damages language in the bill in exchange for other, less meaningful compromises.
“The idea that Senator Specter, or BIO, or anyone would accept really harmful damages language just because some other part of the bill is the way that they want it, is just not accurate,” DiLenge said. “The other side in this debate needs to recognize that they’re not going to be able to get the kind of harmful damages language that they were seeking. Once they recognize that and admit it, we can come to the table and get this bill done fairly quickly.”
Following news of Specter’s opposition last week, the Coalition for Patent Fairness, a group comprising companies primarily from the financial services, IT, and media industries, issued a statement of continued support for the Leahy-Hatch bill.
“We are disappointed that the critics of the bill refuse to budge an inch when the bill’s sponsors and supporters have made a tremendous number of compromises to address their concerns,” CPF said. “The [CPF] fully supports Chairman Leahy’s decision to stand firm on the issue of damages. We will continue to work with the bill’s sponsors to bring the bill forward for a floor vote.”
Most members of the biopharma, academic, and small business communities feel that the apportionment of damages proposal would cause an increase in the number and brazenness of patent infringers, and would burden judges and juries with massive additional amounts of data, thereby increasing the length of patent-infringement cases.
Under current patent law, courts have the discretion to award damages based on a wide range of factors that affect the patent’s market value. This method generally requires guilty parties to pay IP owners monetary damages based on profits lost due to the infringement or, at a minimum, a reasonable royalty for the use of the invention.
Under the proposed changes, however, courts would be directed to ensure that a reasonable royalty is applied only to the economic value attributable to the patentee’s specific contribution over prior art, and not the invention as a whole.
According to a study released in February by BIO (see BTW 2/20/2008), such changes “could have less detrimental effects in software and other areas of IT, where innovations are incremental and relatively simple. But it would be very difficult and potentially damaging in biomedical areas, for instance, where the contribution of a particular patented element is highly complicated and its significance apart from the whole is not often well understood.”
Jon Soderstrom, managing director of the Office of Cooperative Research at Yale University, told BTW in a recent interview that next to a provision in the bill that would significantly widen the post-grant patent opposition window, apportionment of damages was of the most concern of the academic community.
“That one concerns me because I don’t even understand why the law has to even address it,” Soderstrom said. The [current] rules [have] actually worked pretty well. But it’s an area where some companies have had some considerable concern, and have been pushing it.
“On the university side, we’re comfortable with the status quo. We’re afraid of anything that would be perceived as weakening that particular area,” he added.

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