Patent Reform Legislation Aims to End Massive Settlement Fees

If the patent reform bill passes, arbitrary metrics of damage such as the formula used to assess $1.5 billion in damages against Microsoft in an MP3 patent suit, could be rendered invalid in Yarowsky's view.

"A court, under this bill, will be ordered to make an evaluation that [measures] the kind of contribution that the invention makes to the overall product. Now...to just assume that the entire product, or the entire 'computer,' times how many computers are sold worldwide - which is exactly the formula that was used in the Microsoft / Alcatel case, unfortunately - is not really a precise way to measure the economic damage, if in fact you find a patent violation."

Yarowsky noted that the patent reform bill is one of the rare pieces of legislation ever introduced before Congress with both wide bipartisan and bicameral support - introduced simultaneously before the Senate and House this afternoon. But it's not without opposition - prior versions of the bill supported by Leahy, Republican Orrin Hatch, and others stalled in the previous Congress.

Steven Miller, vice president and general counsel for Procter & Gamble, issued a statement on behalf of the Coalition for 21st Century Patent Reform - despite its name, an opponent of previous legislation, including Leahy's prior efforts: "We are encouraged that the bills that [Senate Judiciary Committee] Chairman Leahy and [House Internet Subcommittee] Chairman Berman have introduced will allow the legislative process on needed reforms to advance. However, we are concerned the bills as introduced do not adequately address several critical reforms."

The 21st Century Coalition referred curious individuals to the 2004 National Academy of Sciences proposal, entitled "A Patent System for the 21st Century," which itemizes seven principal reforms its authors suggest for the current patent system.

Perhaps the only one of its suggestions the current bill doesn't appear to take into account concerns protection for non-commercial uses for patented innovations. Since the current legislation would have judges assess damages based on market impact, it might overlook situations where innovations may apply to systems where capitalism is not a motivating factor.

But that doesn't appear to be the 21st Coalition's current dispute - in fact, it's difficult to say what that dispute might be, and members of the Patent Fairness Coalition, when asked to comment on that dispute, couldn't do so because they didn't understand it yet.

Jon Yarowsky cautioned the press against painting a black-and-white picture of the dispute, in terms of what he called "tech vs. pharma." Technology companies, his coalition claims, have suffered in the wake of massive judgments; however, pharmaceutical companies such as Johnson & Johnson and Eli Lilly - represented by the 21st Coalition - are often perceived as among the most aggressive patent portfolio defenders.

"In Washington, those kinds of descriptions of a bill, where it's reduced to 'tech vs. pharma,' really don't tell the whole story," remarked Yarowsky. "Our goal - and they should be receptive to it - is not really to favor plaintiffs over defendants, because if you really look at the composition of [our] coalition, you'll see that these companies are every bit as much plaintiffs as they are defendants. That's just the nature of the patent system, especially if you're a productive, innovative company, and you don't just deal with one patent. So I don't think the things that we've supported and continue to support should be anathema to any group, because they could well find themselves on either side of the litigation aisle.

"I think the more these other groups will review what we think is a very balanced start to this bill," he continued, "once you get past the rhetoric and the positioning, I think it'll be appealing to them." Yarowsky's coalition gives the bill a better than 50% chance of passage through both houses of Congress this year.