House Advances Patent Reform Legislation

The House on Sept. 7 passed the most sweeping overhaul of the nation's patent system in half a century, overcoming opposition by many Republican members, manufacturers, and the pharmaceutical and biotechnology industries.

Sponsors of the bill (H.R. 1908), approved by a vote of 220-175, contend the measure will improve the quality of patents issued by the U.S. Patent & Trademark Office, curb frivolous and expensive lawsuits, and harmonize U.S. patent law with that of most other industrialized countries.

But the White House and many industry groups have a very different view. They argue that provisions in the legislation that would change how damages against patent infringers are calculated will make patent infringement less costly for transgressors.

Under current law, multi-million-dollar jury awards for patent infringement have become increasingly common. They are often based on the total market value of the entire product, rather than the value of the individual patents that underlie the product. The new bill apportions damages according to a patent's specific contribution to a product.

"Making this change to a reasonably well-functioning patent legal system is unwarranted and risks reducing the rewards from innovation, a result that would undercut the other useful reforms in this bill," the White House Office of Management & Budget said in a policy statement. The OMB objection raises the possibility that President George W. Bush will veto the legislation unless adjustments are made when the Senate considers the measure later this fall.

The Coalition for 21st Century Patent Reform, which represents Dow, DuPont, Eli Lilly & Co., Pfizer, and a variety of other manufacturers, says the House-passed bill fails to protect and encourage the investments and research needed to bring new products to market. "Unfortunately, the House-passed bill favors infringers over inventors," the coalition charges. By reducing compensation for infringement, "we are sending an international message that patented American technology may now be copied with little or no consequence."

James C. Greenwood, president of the 1,100-member Biotechnology Industry Organization, warns that the legislation would do more harm than good to the nation's patent system, which has not been substantially amended by Congress since 1952. He asserts that the change in the way damages against patent infringers are calculated would devalue the contribution of many biotechnology patents.

"The right to fair compensation for infringement and the right to fairly stop infringers from future infringing acts are of paramount importance to the biotechnology industry," Greenwood states. Without strong protections for patented materials, he says, the financial community will shy away from investing in biotech companies, "potentially depriving the world of the next great breakthrough."

Among the bill's supporters are large software and computer companies, which hope it will deter lawsuits they say have questionable merit and motive. "The current patent system has become bogged down by delays, prolonged disputes, and confusing jurisprudence," says Jonathan Yarowsky, policy counsel for the Coalition for Patent Fairness, whose members include Microsoft, Apple, and Dell.