This week has seen a spate of technology companies queuing up to testify before a Senate Judiciary Committee to give their opinion about whether or not patent reform is required in the US. A couple of such companies are in our area, including InterDigital Communications and Cryptography Research. Both are now members of the Innovation Alliance, and both want to water down the changes that are being lined up for US law. Qualcomm has naturally joined in with this group, while an alternative pro-change group, the coalition for Patent Fairness including Cisco, Apple, Dell, HP, Microsoft, and Oracle want the changes to go ahead.
On the Patent Fairness web site a statement read, ‘Prior to 1990 there was only one patent damage award in history larger than $100 million; over the next ten years there were 13 judgments and settlements in that category, and in the next six years there were 21, including one award for $1.35 billion – the increasing number of huge cases is readily apparent.’
But it’s not the fact that companies like this have a genuine problem navigating with the highways and byways of US patent law that will make change hard for the US to digest, it is the fact that existing major stockholders in many other industries, have so much to lose.
While the legislation has much going for it to any man in the street, the lobbying isn’t coming from any old man in the street, but instead brings together the vested interests of any company that has relied on US patent law to protect its intellectual property for generations, and that includes a list of very powerful pharmaceutical and engineering firms that have 20 year hegemonies to protect.
The message from the Innovation Alliance seems to be, ‘fine change the law, but do it piecemeal and make sure that innovators don’t suffer,’ a sentiment that really would mean watering down the new changes to the point where nothing effectively will change.
The key changes that the Patent Reform Act is designed to bring include that the filing date, not the invention date will be the key to issuing patents; the right to challenge patents more easily and a one year grace period during which other inventors may respond and challenge an invention in front of a new Patent Trial and Appeal Board; that legal actions can’t be exported to patent friendly US states, but instead must be filed where either party resides, and that reasonable royalty rates remain the basis of damages calculation in settlements but this must relate to just the improvement patented, not all the technology that it relies upon and the value must be proved by showing existing patent royalties with other parties in the market.
The overwhelming sentiment in the US media seems to be that this legislation is doomed, and that vested interested will dilute the changes to the point where reform will be pointless. Which would be a crying shame.
Pretty much everyone that is lobbying are finding themselves in one or two camps ‘ for or against, and the against pool seems to have more of the larger business names, especially outside of high technology.
Most companies are arguing that black is white. So the changes are meant to reduce costs to challenge patents, and to large entrenched businesses that means it’s more expensive to apply for patents. One side sees that it is easier to challenge a patent that is wrongly issued, while the other feels that it is harder to rely on a patent once issued because it will need constant protection. Finally either people feel that they cannot be ambushed with huge jury calculated multi-million dollar settlements, far in excess of a reasonable royalty rate, while on the other side worries that non-US companies will be encouraged to abuse US innovation because the penalties are not so high.
The truth is also two sided here. The US is a declining global economic power, and it maintains much of that power by dint of being able to claim that many innovations are either invented in the US, or at least owned by US companies. Any deviation from that belief will see the US decline more rapidly. On the other hand countries like China have become royalty black spots because it sees that the US is claiming to have invented a whole lot of obvious inventions that China was capable of inventing. If royalties were lower China might worry less about adopting US built technology, instead of being determined to source it from Korea and Japan or build it itself.
The US Supreme Court has already indicated in recent rulings that it can see that some form of change is necessary but there are many steps on the way to pushing the reform through. Whatever form they take once pushed into law, if they make it at all, the rest of the world is likely to take a serious look at them and whether or not they form the basis for global reform and if most of the guts of the reforms are kept in, then it has a chance at becoming a global standard.