The article examines several peripheral issues related to the decline in filings, including the application backlog at the Patent and Trademark Office. Calling it a “vicious cycle,” the article notes that the backlog operates to “further discourage patent filers.”

Pointing to the pending patent reform legislation, USPTO Director David Kappos offers a fix:

“If we’re able to get patent reform through, we absolutely can take processing times way down and get innovations through to the marketplace.” (emphasis mine)

The article even notes the Director Kappos thinks the legislation could “help reduce the average wait time to as little as one year.”

Somewhat suprisingly, there was an interesting patent-related exchange between Congressman Elijah Cummings (D-Maryland) and Chairman Bernanke. Congressman Cummings asked

“Is there anything you see that the Obama Administration might be able to do, or that we might be able to do, to encourage innovation….?”

In response, Chairman Bernanke offered several policy-related ideas, including detailed thoughts on the “controversial” idea of encouraging immigration of highly skilled scientists and engineers to the United States.

He also mentioned patent reform, albeit with measured indifference:

“There are reviews and thinking about the patent laws and those sorts of things to make those more effective.”

That quote is the entirety of Chairman Bernanke’s patent-related response to the innovation question posed by Congressman Cummings. There’s not much that can be read into this brief statement, other than the fact that Chairman Bernanke is aware of the patent reform issue and its relationship to the policy issue of “encouraging innovation.” Chairman Bernanke is obviously a highly-skilled Congressional witness and was visibly careful in his choice of words on this issue. Nothing relating to a position of the Federal Reserve, the Obama Administration, or Chairman Bernanke can be inferred from this brief remark.

You can view Chairman Bernanke’s response to “the innovation question” in the CNBC video below – it starts at about the 10 minute mark.

Hat tip to a Twitter friend @TechLaw_Elman for pointing me to Chairman Bernanke’s comments.

But something that happened the day before the editorial hit the press is very surprising, perhaps even to Google.

On Tuesday, the Patent and Trademark Office granted US Patent No. 7,525,207 to the company for a Water-Based Data Center.

Big deal, right?

That’s what I thought, until a Twitter friend (@elosf) had me looking at claim 1 of the ‘207 patent:

1. A system, comprising:

a computer data center proximate to a body of water comprising a plurality of computing units;

a sea-based electrical generator in electrical connection with the plurality of computing units; and

one or more sea-water cooling units for providing cooling to the plurality of computing units.

Whoa.

Now I’m interested. As a geek in every sense of the word, the subject matter intrigued me. But, as a patent attorney, the breadth of the claim left an impression.

My curiosity led me to Public PAIR, where I learned the following about the ‘207 patent:

• the patent issued in 26 months (certainly not break-neck speed, but quick nonetheless)
• the Office allowed the application in the first substantive action (along with a restriction requirement, which was addressed solely by Examiner’s Amendment in the same paper)
• the applicant made no substantive prosecution comments;
• the Notice of Allowance includes the following reasons for allowance: “There are inventions in the field that provide similar functionality and/or have similar features, as prior art of record shows. Applicant(s) invention differs from the prior art of record by the combination of its functional features, which include water motion generator, cooling arrangement and computer data center, which in combination are performing as disclosed and claimed, and which the examiner search failed to find.” (emphasis added)

(you can download a .pdf of the patent here, and a .pdf of the entire prosecution history here).

I’m not familiar with either the data center art or the “sea-based electrical generator” art, so I don’t know if that claim is patentable or not. But, in the post-KSR world, it’s incomprehensible that the Office would allow such a claim in a first action on the merits. Basing the allowance on grounds that the claim differs from the prior art by “a combination of…functional features” that, individually, are known in the art only confounds the problem.

Besides the obvious indefiniteness problem (the specification doesn’t mention the claim term “proximate,” making me wonder if land-based data centers with pipes reaching to the sea are covered), a simple Google book search reveals a 1997 publication stating that “the Unisys UYK-43 is the standard US Navy shipboard mainframe” that weighs 1795 lbs “when water-cooled.”

Surely the Office, in applying KSR and the broadest reasonable interpretation of the claim language, should have addressed these issues during examination. But, it didn’t and now Google is the proud owner of this incredibly broad patent.

For Google, the timing of this embarrassment of riches couldn’t be worse. The issuance of the ‘207 patent presents a troubling irony – the company was granted a very dubious patent claim the day before it stepped into the pulpit and lectured about “dubious infringement claims” and the need for reform.

It also highlights a fundamental problem with the narrow focus of the company’s (and industry’s) call for patent reform:

By focusing on the “expenses” and “problems” associated with so-called “bad patents,” reformers are abandoning the broader issue of patent quality – which, just a few short years ago, was the driving force behind the current patent reform movement.

Intentional or not, this is a sad development. While the Googles of the world call for patent reforms that devalue all patents in an effort to address the dubious ones in the herd, the Patent Office has been reduced to what Professor Mark Lemley recently termed “an assembly line type of operation.” That the outputs of such an operation are sometimes troubling – as exemplified by the ‘207 patent – should come as no surprise.

Patent reform efforts that continue to focus narrowly on the outputs, such as those called for by Google, will only make the overall system weaker. Patent quality is the basal problem that simply must be addressed.

It’s time we built a Patent Office and a patent examination system that makes everyone – Examiners, attorneys and agents, companies, and even the Office itself – proud. A fully funded Office capable of efficiently and thoroughly examining patent applications would go a long way, I think, to addressing the so-called “bad patents” problem that has Google and others concerned. I suspect the same Office would do a better job of promoting innovation and creating the “jobs” of which Google speaks.

So now what?  Where do we go from here?

Turns out, we’re not going anywhere…for now. All eyes will remain fixed on the Senate Judiciary Committee in the foreseeable future for two reasons:

1. Will the Judiciary Committee issue a written report to accompany the bill?

First, we’re looking for a Committee Report. Reports are an important part of the legislative process as they serve to inform the public and other members of Congress about the purpose of the proposed legislation and its impact on current law and life. Committee reports often explain the perceived need for the legislation and may present dissenting views. Reports can also include the views of executive agencies that stand to be impacted by the bill, and are required to include cost estimates and regulatory impact statements.

In contrast to the rules of the House, Senate committees are not required to submit a written report when approving a bill and passing it to the entire chamber. Indeed, as noted on its web site, the Judiciary Committee “sometimes publishes reports to accompany legislation that [it has] reported to the Senate Floor.” (emphasis added)

If the Committee publishes a report, potential interesting content includes the dissenting views of Senator Kyl, who has introduced a competing patent reform bill (S.610 [.pdf]) and represents the most visible opposition to S.515, and Senator Hatch, who voted against the bill he originally sponsored because it fails to address his concerns over inequitable conduct. If included, any input from the Patent and Trademark Office would also make interesting reading, particularly in light of the first-to-file and post-grant review provisions that stand to significantly change the operations of the Office.

2. When will the Judiciary Committee consider a nomination for Director of the Patent and Trademark Office?

With the confirmation of Gary Locke as the Commerce Secretary, we’re now waiting for President Obama to nominate a Director of the Patent and Trademark Office (Under Secretary, Intellectual Property). Once he does, the nomination goes to the Judiciary Committee for hearings.

With respect to any report it may decide to publish, the Committee has a chicken-and-egg issue of sorts.  Does it wait to publish a report until after it acts on a forthcoming Director nomination? Or does patent reform have sufficient inertia in light of the agreement on damages that the Committee (read Leahy, Specter, Feinstein) chooses to push the bill even in the absence of a Director nomination? On this question, a comment made by Senator Feinstein during markup might prove telling: “We have substantial meeting of the minds…We’ve got what we need to move the bill.”

Certainly quick passage by the Senate is possible, particularly if the Committee elects not to publish a report. Considering the importance and controversial nature of the bill, though, this seems highly unlikely.

The relative timing of any report that might issue and the Director nomination will be interesting to watch.

But, for now, we’re not going anywhere.

You can view/download a .pdf of the reported version of the bill here.

A .pdf redline version of the bill, as amended and passed by the Committee, is available here.

The significance of the agreement between the camps cannot be understated. Insider Hal Wegner has called it “historic” and sees the resulting changes as producing a “margin of support…so great that it appears, at least at present, as though the difficult cloture obstacle will be surmounted.” (emphasis Hal’s).

Senator Hatch offered resistance based primarily on the inquitable conduct provision – “I’m sick and tired of non-innovators who use the inequitable conduct provision and then walk away as infringers.”

Senator Kyl, who has proposed an alternative patent reform bill, offered resistance in the form of a proposed amendment to the post-grant review provision of the bill. He sought to add a prima facie requirement that would “protect the patent office from having to accept 90% of requested challenges.” The committee did not adopt his proposed amendment, but Chairman Leahy did indicate that, at the request of Senator Kyl, he will discuss the post-grant review procedure and the proposed amendment with USPTO officials over recess.

Senator Coburn offered an amendment that would prevent diversion of USPTO fees for a period of five years. Senator Leahy expressed support for the idea, but led a vote to table the proposed amendment as one that is better considered by the whole Senate. As an appropriations issue, he expressed concern that the amendment might infringe on the jurisdiction of another committee.

Several comments of Senator Feinsten on the adopted amendment provide insight into the status of the compromise that appears to have been reached by the relevant groups:

“I think this amendment to the patent reform act of 2009 gives all parties 90% of what they want, not 50%.”

“We have substantial meeting of the minds…We’ve got what we need to move the bill.”

While the Committee successfully moved the bill to the full Senate, today’s hearing makes it clear that many more proposed amendments loom. Senate debate will likely be very intense.

One proposed amendment [.pdf] includes changes to both the damages provision and the interlocutory appeals section, the current version of which stands to create a whole new patent backlog. Interestingly, the amendment also incorporates Representative Issa’s patent expert judge bill into the Patent Reform Act of 2009. Representative Issa has introduced his bill in several sessions now and it has generally been well-received. It is noteworthy, though, that Chief Judge Michel, speaking at the recent University of Akron Sughrue Symposium, noted that the bill is not needed to accomplish the stated purpose.

Lest you think that no sense of practicality remains in the reform debate, consider this proposed amendment [.pdf] which would amend the statute to allow marking of patented articles by reference to a website. I’ve wondered about this issue for years and would guess that a clear indication that virtual marking is acceptable would offer everyone in the debate a practical solution to an administrative and technical headache – maintaining patent marking information and updating products and/or literature.

Google is a special case, though, and its call for patent reform deserves heightened scrutiny for at least two reasons.

First, Google the company has existed for only ten years

The #1 result for a Google search on “when was Google started” points us to the company’s ‘Milestones‘ page, and the answer: September, 1998. So, at the time of writing this post, the company has been operating for about 10.5 years – a period of time that is significantly shorter than the term of a single United States Patent.

This lack of a lengthy history should not force the company to the sidelines in the reform debate, of course. Indeed, a company new to the game is uniquely positioned to provide valuable insight on the system and its impact on growth and development.

But, the company’s decade-long lifespan should always serve to provide a bit of perspective on any time-based rationales it offers in support of reform. “Trends” and “developments” advanced by the company as indications of a need for reform, such as those mentioned by Michelle Lee, the company’s Head of Patents and Patent Strategy, in her call for reform on the company’s Public Policy Blog, should always be considered against a backdrop of the company’s position on the patent system timeline.

Consider this practical effect of the company’s youth – In contrast to many companies operating in “older” industries, Google has never had to wait for a blocking patent to expire before launching a new product or service – a practice that often results in design around efforts that produce new and valuable innovations.

The company’s title for its call for reform – “Patent reform needed more than ever” – is quite bold in this regard.

Second, Google has prima facie monopoly power for online search in the United States

According to Hitwise, Google “accounted for 71.97 percent of all U.S. searches conducted in the four weeks ending Nov. 29, 2008.” This 72% share represents a 14% year-over-year increase and, more importantly, exceeds the benchmark for having sufficient market power to raise prices unilaterally. The #1 result for a Google book search on ‘antitrust 70% market share’ tells us that “[a] market share in excess of 70% generally establishes a prima facie case of monopoly power.” (citing Spirit Airlines v. Northwest Airlines, 421 F.3d 917, 935-936 (6th Cir. 2005)).

Considering this ‘acceptance rate’ of the Google search engine and brand, it comes as no surprise that the company seeks to weaken the power of individual patents. With prima facie monopoly power, patents provide no potential upside to the company. What can strong patent protection offer to Google, as a patent owner? Nothing more than spikes on the end of a giant club it already owns.

Strong individual patents provide an enormous potential downside for Google, though. An individual inventor or small company wielding a powerful patent on a better mousetrap carries significant risk for the company – an upstart search engine that provides better results might start to chip away at that 70% share; strong patent protection could block any efforts by Google to adopt the new technology that searchers have embraced. Furthermore, as a patent owner, strong patent protection on top of it’s 70% market share – the spikes on the end of the club – might be viewed as unsavory facts should Google’s monopoly power ever be questioned.

While the patent reform debate will continue to benefit from the inclusion of all patent system stakeholders, we should always consider Google’s brief history and market position when assigning weight to the company’s calls for reform.

While not the most controversial, this has to be one of the Act’s most extreme provisions. The substance of the proposal is quite drastic – it effectively takes the Federal Circuit’s current discretion over such interlocutory appeals and hands it to the district courts.

The potential effect of such a change is equally as drastic. Claim construction is a linchpin issue in all patent infringement suits that, by definition, always impacts the infringement analysis. As such, litigants would likely be ready and willing to use the Act to seek interlocutory appeals of claim construction rulings, and district court judges would likely be willing to grant the required permission to file such appeals. The entire litigation process would be halted – likely for a year or more – while the litigants, judge, and the public await the results of the Markman appeal. Other substantive issues, only appealable after entry of a final judgment, would likely still be presented to the Federal Circuit in a second appeal.

The end result would be a whole new patent backlog. The Federal Circuit would be buried in claim construction appeals, effectively blocked from handling other worthy patent issues in an efficient manner. It’s hard to imagine this “reform” as helping our patent laws. The creation of a short circuit claim construction appeal would cause other areas of the law to suffer as the new patent backlog grows and robs the court of precious time. Absent a concurrent expansion of the court or even the creation of a specialist “claim construction division,” this reform measure must fail simply on grounds that it hinders the very judicial efficiency its supporters purport to be serving.

While some might argue that this new backlog is a just dessert for the messy claim construction environment the court has developed, it’s clearly a short-sighted, duct-tape solution that shows a lack of concern for the patent law as a whole. The “problem” of claim construction, and the patent law as a whole, would be better served by legislatively requiring a degree of deference to district court judges during normal appellate review of claim construction issues.