The Federal Trade Commission sued Intel today, accusing the company of using its dominant market position to stifle competition. The agency’s complaint alleges that Intel used a variety of anticompetitive tactics “to put the brakes on superior competitive products that threatened its monopoly….”

Specifically, the Commission claims that Intel used threats to coerce computer manufacturers into buying Intel chips instead of those of rival manufacturers, and to block the marketing of machines that contained non-Intel chips.

What has been the impact of Intel’s behavior? According to the Commission, the company’s actions over the last decade have damaged “competition, innovation, and, ultimately, the American consumer.”

Intel, of course, has been a vocal leader in the patent reform debate over recent years. The company is a member of the computer/software industry’s Coalition for Patent Fairness and has publicly called  for changes that would curb litigation it views as “abusive.” A Promote the Progress reader has even speculated that Intel was the invisible hand behind several letters offering support for the failed rules package that would have placed arbitrary limits on an applicant’s ability to file continuation applications.

The company’s policy blog assures us that its efforts to change the patent laws are aimed at encouraging innovation and helping consumers:

…we believe that good faith manufacturers should be able to innovate and develop new products for consumers without having to worry whether they are going to lose the “patent lottery”, where speculative companies that do not produce or sell anything are able to reap large rewards in court for small sums invested in buying up patents and suing on them.

Today’s lawsuit reveals an interesting dichotomy. On one hand, the company appears willing to use its own monopoly power to block competition and protect its position. On the other hand, as its patent reform efforts show us, the company objects when others assert against it the monopoly power provided by patents.

The first half of that dichotomy is illegal, which explains the Commission’s lawsuit against the company. The second half, however, is not. A patent owner, whether she be the original inventor, a speculator, or even the fabled patent troll, has an exclusive right to practice the claimed invention. And, yes, she can sue a company, even a “good faith manufacturer,” that she believes is infringing her patent. Perhaps this explains the company’s efforts to change the patent laws.

That dichotomy also leaves Intel in a difficult position. The company must now reconcile its assurances that it seeks patent reform in order to foster innovation and to protect consumers with its alleged anti-competitive tactics, which the FTC claims has had precisely the opposite effect.

Color me skeptical.

It goes without saying that the constant training of the Examining corps on the latest developments in patent law is a near impossible task.

Consider the following from a 1995 USPTO press release:

The U.S. Patent and Trademark Office is developing new guidelines that will govern the examination of patent applications on computer software inventions, the agency announced.

The guidelines are being developed in response to recent judicial decisions that suggest a trend toward increasing the eligibility of computer software-based innovations for protection under U.S. patent laws, while decreasing the availability of protection for certain aspects of computer programs under the copyright process, the PTO said. At the same time, the Office announced that it is reconsidering its position in a number of pending appeals concerning software-related cases, including In re Beauregard, which involves a computer program stored on a computer readable medium such as a floppy disk.

“The PTO must keep its practices consistent with judicial interpretations of the law. A failure to do so could jeopardize effective intellectual property protection for one of our nation’s most important industries,” said Nancy Linck, PTO’s solicitor.

Fast forward to last year and the Federal Circuit’s decision in In re Bilski…and you can appreciate the problem. In 1995, the Office had to prepare for caselaw developments that were increasing the patentability of software-based inventions. Now, just fifteen years later, the Office is preparing the corps to examine applications in the face of a sternly downward trend.

Like it or not, modern patent law is characterized by constant change. While we all struggle to stay current in this fast-paced area of law, we have to acknowledge that the Office has an additional challenge in its efforts to keep up with constant change: volume.

While we’re struggling to train ourselves and our teams, the Office is dealing with thousands of Examiners and hundreds of thousands of applications. It’s a grand scale faced by no other entity.

Why bring this up now? Simple….patent reform and patent quality.

The reform debate will be heating up again in coming months. With any luck, the patent community will pay attention to the patent quality issue and the need for reforms that support it. If we begin to acknowledge the predicament faced by the Office, maybe we can start helping it meet the challenge.

Looking at the recent decline in patent applications from US businesses, this CNNMoney article claims that innovation is the latest victim of the recession.

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.”

In a hearing yesterday before the Joint Economic Committee, Federal Reserve Chairman Ben Bernanke answered questions about the economic outlook of the United States. The majority of the hearing focused on the financial industry bailout, the credit crisis, and the forthcoming results of the “stress analysis” of the country’s largest banks.

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.

Google appears set to play a leading role in the latest push for passage of patent reform legislation. The company is a member of the Coalition for Patent Fairness, an IT-heavy patent reform lobbying group, and has publicly called for significant reform on company blogs. This comes as no surprise, of course – the IT industry has been calling for reform for several years and Google is certainly growing into its own as a leader in that industry, in several regards.

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.

Both the House (H.R. 1260) and Senate (S.515) versions of the Patent Reform Act of 2009 include a provision that would extend the jurisdiction of the Court of Appeals for the Federal Circuit to include claim construction orders issued by district courts. Under the Act, a litigant could initiate an interlocutory appeal to the Federal Circuit if the district court approves a request for the appeal within 10 days of the Markman ruling.

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.

As expected, Congressional patent reform efforts officially started yesterday with the introduction of the Patent Reform Act of 2009 in both chambers. [House bill here, Senate bill here]

I spent an hour or so reviewing the Senate bill and jotted down some quick thoughts. Here’s a from-the-hip analysis:

• As a whole, the bill is largely ho-hum. Same stuff, different session. The tone is similar to that of the 110th Congress – this bill is a starting point and is intended to get the discussion off the ground, again. Where it goes from here is anybody’s guess.
• That being said, I see the absence of the “second window” from the post-grant review procedures as a significant development. This bill comes from the IT camps that have defended the need for the “second window” through several legislative cycles. The omission of a second window is a concession for sure.
• The 102 preamble language is interesting. Some, I think, will say that the new language, which no longer refers to the  “person” who is “entitled to a patent” is symbolic of the reform effort as a whole in that they believe it’s a grand cut at inventor’s rights.
• Interesting provision – “Examination and search duties are sovereign functions which shall be performed within the United States by United States citizens who are employees of the United States Government.” Sounds like Marcy Kaptur’s hand to me (Representative Kaptur has made several spirited floor speeches against patent reform efforts over the years and has famously called for requirements that patent examination be hard-wired as a US job).
• The damages section is interesting. It really sets up a system that will encourage forum shopping, hometowning, etc.
• Strangest provision – in prescribing regulations for the operation of the post-grant review procedure, the Director “shall consider the effect on the economy, the integrity of the patent system, and the administration of the Office.” Ok.
• It strikes me as odd that post-grant review proceedings should be allowed to be settled by way of a private agreement between the challenger and the patent owner. The post-grant review process is frequently positioned as necessary to protect the public from the evil of ‘bad patents.’ Does a provision that allows private settlement of these actions, after a challenger has stepped up and paid the bounty required to challenge the patent, serve this end?
• Absence of fee diversion language is interesting, but the grant of fee setting authority to the Office, which is explicitly tied to “compensation for services performed,” might diminish the possibility for diversion over time.

Patent reform season is set to kick-off today as many expect to see new reform bills introduced in both the House and Senate. Not surprisingly, the blogosphere is heating up with commentary as the latest round in the great patent reform debate gets underway.

In an effort clearly orchestrated to coordinate with the introduction of the bills, Google published its renewed call for patent reform on the Google Public Policy Blog. In this post, Ms. Michelle Lee, Head of Patents and Patent Strategy, explains that Google supports patent reform efforts primarily because of the IT industry’s now familiar three-plank complaint about the current patent system:

1. too many patent infringement suits from non-practicing entities (the trolls of years past)
2. based on patents of suspect validity
3. that trigger awards for damages that aren’t proportional to the value of the invention at issue

The post reveals nothing new about Google’s position on the issue (or that of the entire IT industry, for that matter). It does, however, end with a bold and interesting tidbit:

“As members of the Coalition for Patent Fairness, we’re optimistic that patent reform faces better odds in 2009 than it has before — not least because President Obama has pledged his support. Passage of patent reform is long overdue”

It’s widely known, of course, that President Obama supports some degree of patent reform. You can read about it on the Technology page from the platform touted by the President during campaign season. What isn’t known, though, is exactly what the President means when he says “patent reform.”

Reading the Lee post, it appears Google would have you believe that he supports their vision for reform – the IT vision for patent reform. He has, after all, “pledged his support.”

The Google post fails to explain that “patent reform” is not now, nor has it ever been, an all-or-nothing proposition. The biotech and pharmaceutical industries, often viewed as “the other side” in the debate, openly support many of the reform measures that have appeared in various reform bills over the years. These industries have lent support to a move to a first-to-file system, a post-grant review system (sans the controversial “second window”), and putting a permanent end to fee diversion. Indeed, it is widely known that pharmaceuticall industry leaders were instrumental in garnering early support for patent reform legislation before the debate was recentered around a late-arriving injunctive relief provision.

So what does President Obama think about “patent reform?” Decide for yourself – here is the entirety of the official Obama views on patent reform, taken from the page linked above:

“Reform the Patent System: A system that produces timely, high-quality patents is essential for global competitiveness in the 21st century. By improving predictability and clarity in our patent system, we will help foster an environment that encourages innovation. Giving the Patent and Trademark Office (PTO) the resources to improve patent quality and opening up the patent process to citizen review will reduce the uncertainty and wasteful litigation that is currently a significant drag on innovation. As president, Barack Obama will ensure that our patent laws protect legitimate rights while not stifling innovation and collaboration.”

Extrapolating a current policy position from a four sentence blurb is difficult and risky, of course, but I think it needs to be done to counter the image of support conjured up by the Google post. To me, it appears the President believes that a reform that opens the “patent process” to citizen review will reduce the wasteful litigation of which Google complains. In that light, any reform effort that puts the litigation cart before the “patent process” horse might not be in line with the President’s original thoughts on the matter. At this point in time, I think that is all that can be said about the President’s views on the matter.

The President’s views on the issue might have changed, of course, and Google may very well know more than I do about his personal beliefs – after all, CEO Eric Schmidt was on the short list for Obama’s newly-created Chief Techology Officer position until he apparently removed himself from consideration. Based on the record before us, though, any suggestion that the President supports one particular vision for reform is premature and, indeed, irresponsible.

Is there anyone out there that still thinks patent law is boring, stuffy, and uneventful? If so, the next few weeks will likely change their viewpoint.

All eyes are on Congress this week as many believe both chambers will see introductions of new vintages of the now perennial patent reform bill. Bicameral introduction, with bipartisan original sponsors in each chamber, is expected and would be a new twist. Such an approach might be a sign that, somehow, this round is different. But don’t forget that, despite significant hearing activity and coverage in the media, patent reform legislation has seen very little movement in previous sessions. Only time will tell if the 111th is any different.

The coming excitement doesn’t end there, though. Remember that the Court of Appeals for the Federal Circuit is sitting on the Tafas v. Dudas case, and a decision could come anytime over the next several weeks. Depending on the outcome, the opinion could represent a posthumous victory for the Dudas administration or a final reminder of its failed attempts at aggressive administrative reform.

And don’t forget that we’re still waiting for President Obama to appoint a new Under Secretary of Commerce/Director of the Patent and Trademark Office. The confirmation hearings for the person tapped for this exciting and challenging post will, no doubt, receive a great deal of attention as many stakeholders wait to see if the Office will continue the policy initiatives of the Dudas era or if new leadership will bring new approaches to familiar problems.

Clear your schedules – there’s plenty of patent law excitement on the way.

Several reports suggest that a new patent reform bill will be introduced in Congress this week. Most early indications suggest very few surprises and it seems safe to assume that the new bill will look quite a bit like those of the past. This report from EE Times suggests that the main battle line will be drawn on a familiar sticking point of the past – apportionment of damages.

It’s possible that some progress has been made, though. The report does indicate that “the new bill will not create a controversial process proposed in the last session to let third parties challenge patents twice after they have issued.”

This refers to the controversial “second window” provision that has been a sticking point since the earliest days of post-grant review proposals (not just last session). While accepting the likelihood that post-grant review, which would allow third parties to mount an administrative challenge against issued patents, will be a reality someday, Pharma/Biotech has strenuously opposed the “second window” concept from the beginning. All post-grant review proposals have allowed for an initial challenge during a fixed time period after issuance (typically 9 to 12 months). Some proposals have also included a “second window,” which would allow for challenges mounted at any point in a patent’s term following some triggering event, such as upon receipt of a charge of infringement.

Pharma/Biotech has always viewed the existence of a “second window” as a perpetual cloud on the title of an issued patent. If the new bill omits the “second window,” can a deal on apportionment of damages be far behind?