The Patent Reform Act of 2006 - Senator Hatch sets a trail blaze in the waning days of the 109th Congress

After all this time, Senator Hatch finally spoke his mind on the reform issue when he introduced the Patent Reform Act of 2006 (S3818, .pdf available here) last week. Considering the fireworks in the House following introduction of Representative Smith’s Patent Act of 2005 (.pdf), the significant number of oversight hearings that followed (the Smith bill, officially, never moved an inch), and the Senate’s long period of silence (remember, we’ve only had rumblings from this side of the 109th Congress) on the issue, the mere introduction of the Hatch bill is a big deal.

Despite that, many Hill watchers are labelling the bill as Dead on Arrival and quickly dismissing it as unimportant. I agree the the bill is DOA. That part is easy - no legislative package that broadly addresses an issue as significant as patent reform has a chance of moving with only a few legislative weeks left in the session. This is especially true in the case of the patent reform issue, which has become very contentious.

That doesn’t mean that the bill is unimportant, though. Indeed, I think it’s quite significant.

Here’s why -

Who? The Patent Reform Act of 2006 is the best thing we’ve seen to date on Senator Hatch’s views on the nitty-gritty of patent reform. Sure, we’ve had sound-bytes and press clippings here and there, but, prior to introduction of the Act, we didn’t have a public indication of his views on the ugly details that underly the issue. Does he support apportionment of damages? What about post-grant review and the controversial ’second window’? Now we have an idea where he’s coming from…not that he’s tied to the details of the Act as introduced, but it shows us what he’s willing to put on the record as his starting point.

The Act shows us what Senator Hatch is willing to put on the record as his starting point on the reform issueWhat? So what does patent reform mean in the Senate? A lot of the details of the bill are not very surprising. For example, it includes a change to a first-to-file system and provisions allowing third parties to submit relevant art to the Patent and Trademark Office for pending applications. Many stakeholders support these reforms…no big surprises there.

If you dig a bit deeper, though, you find the interesting stuff. Perhaps most surprising is the bill’s approach to post-grant review and the controversial second-window (which deals with the timing of the initiation of a review proceeding in the Patent and Trademark Office). This issue has proven to be very controversial, and the opposing sides couldn’t be more divided. The pharmaceutical and biotechnology industries, along with individual inventors and other patent owner groups, have opposed the second window, viewing it as a provision that would create a cloud of uncertainty that will always ride with a patent, which would, of course, affect its value. In stark contrast, the software and computer industries see the second window as a necessary backup to the first window, which would run for 12 months following issuance of the patent (under the Hatch bill; 9 months under the Smith bill). These dramatically opposing views on this issue represent the diametrically opposed uses of patents by these two sectors of the economy (offensive v. defensive; high value v. marginal value of individual patents).

…the Act has no certainty with respect to timing of the second window…it merely creates a burden of proof under the control of the Patent and Trademark Office. Now that’s a cloud of uncertainty…The Patent Reform Act of 2006 includes a second window that is left wide open, even more so than the second window of the Smith bill. It offers no certainty with respect to timing of the second window. It allows for the filing of a petition for review within 12 months from issuance (first window) or by anyone “who establishes a substantial reason to believe that the continued existence of the challenged claim causes or is likely to cause the petitioner significant economic harm.”

No deadlines….just a burden of proof controlled by the Patent and Trademark Office. Now that’s a second window that creates a cloud of uncertainty.

Also surprising is the inclusion of an apportionment of damages section. This reform, advanced by the software and high-technology manufacturing sectors (along with the New Democrat Coalition), has been strongly opposed by the pharmaceutical and biotechnology industries in the House.

Where? (This could also be termed ‘Who, Part II’). So where is the Patent Reform Act of 2006 coming from? The apportionment of damages and second window provisions are clearly items on the software/computer/high technology reform agenda, and directly opposed to the pharmaceutical/biotech agenda. The language of these provisions is very favorable to the software/computer/high technology industries and cut square across the grain of the pharmaceutical/biotechnology/and individual inventor agendas. Do the math.

When? Even the timing of this bill is interesting. The bill will go nowhere in the 109th Congress, of course. It’s essentially a logistic impossibility for this massive bill to move anywhere in the waning days of this Congress. But, the bill does stand as a matching bookend to Representative Smith’s Patent Act of 2005, which was introduced relatively early in the 109th. In that sense, the Patent Reform Act of 2006 serves as a trail blaze, showing us the direction in which the battle has moved.

Clearly, the software and computer industries have flexed their muscle and are standing their ground in the fight. Indeed, the blaze set by Hatch’s bill suggests that these industries are tipping the scales in their favor…something that is surprising a lot of people.

Introducing the bill at this late stage also allows Senator Hatch to point to the issue as something he worked on in the 109th. Record-building like that is not insignificant, from both sides of the equation. Think about it.

So now what? Patent reform, in the broad sense, is dead in the 109th Congress, but we know that both the House and the Senate are set to tackle the issue in the 110th. Meanwhile, the Patent and Trademark Office continues to beat its reform drum….and it doesn’t have to pause for pesky elections.