Apple, Microsoft, Intel Urge Patent Reform Act Passage, IBM Stays on the Fence

Tomorrow morning, the Senate Judiciary Committee will hold a new round of hearings continuing the debate over language in S. 1145, the Patent Reform Act of 2007. While outside support for the bill appears to be evenly balanced with opposition when you take the technology industry as a whole into account, computer and software firms largely favor the bill, with Texas Instruments one prominent exception.

But this morning, a coalition of firms ranging in stature from the Guymon, Oklahoma Chamber of Commerce to Apple, Cisco, Intel, and Microsoft urged Committee chairman Sen. Patrick Leahy (D - Vt.) to pass the bill and get the debate portion over with.

"The U.S. Supreme Court has taken a large number of patent cases in the past two terms to correct lower courts' interpretations of patent law," reads a joint letter to Sen. Leahy and other Committee members from the Coalition for Patent Fairness. "Each of the Supreme Court's decisions has been consistent with proponents of patent reform who have urged the court to safeguard patent owners while ensuring patent rights are not abused. In one key case, Justices described a then-existing legal standard on patents as 'gobbledygook' and 'worse than meaningless.'

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"Taking a comprehensive approach to patent reform is critical," the letter continues. "Under today's system, standards governing damage awards are unpredictable and the post-grant review process encourages litigation as a first step."

Supporters of the bill, including the Coalition, believe the current system pressures the Patent Office to grant applications that have been lingering in their in-boxes for years, without a substantive review of prior art that would otherwise disqualify them. Challenges to the reviewers' stance take place after the fact, they say, in the courtroom rather than during the review process.

Opponents of the bill, including Senate Republicans, worry that provisions that would limit damages awarded in patent infringement findings to the assessed value of the patent's innovation over the state of the art at the time of its being granted, would reduce damages awards to the point where companies defending their portfolios would barely break even after incurring court costs. They also oppose provisions that would enable so-called post-grant review, which they believe could enable some to sue, sue, and sue again year after year, challenging perfectly valid patents though maintaining open questions as to their integrity.

Such an infinite loop, in a sense, would create the opposite effect that supporters tout, extending the review process into the courtroom for indefinite lengths of time.

While the Coalition for 21st Century Patent Reform may have inspired many of the changes that are reflected in the bill's current language, its scaling back of treble-damages provisions to cases of severely malicious infringement has prompted that group to oppose the bill. Texas Instruments is among this group, along with 3M, Motorola, and a multitude of pharmaceutical and chemical companies including Eli Lilly and DuPont.

This leaves IBM as something of an island unto itself. Last month, IBM settled its suit against Amazon, in which it originally claimed the retailer willfully infringed upon IBM's patents on the very concept of online shopping. At the time, IBM sought triple damages - three times the assessed value of the market Amazon created, or umpteen billions times three. It's assumed money did change hands during the settlement, though the amount has not been disclosed.

Just one month earlier, IBM sounded the trumpets in favor of what it considers patent reform. While its vice president and assistant general counsel, David Kappos, published an article in BusinessWeek last month voicing IBM's support of patent reform in principle, it also seemed to separate itself from every other group by suggesting that Congress cannot possibly do enough to reform the patent system, whatever measures it finally decides to take.

"Small businesses also can play a role," Kappos wrote. "There is a sense that for them, especially, the system has become too complex and expensive." He went on to cite what he called "patent pawn shops" as preying upon small business owners, buying out their small patent portfolios and recouping their costs by defending them too vigorously in court, or licensing them for windfall fees.

"Consensus must underpin action," he closed. "For while the Supreme Court can adjudicate, Congress legislate, and the USPTO and private sector innovate, we won't have broad progress until all parties work with one another, with the right balance, moderation, and the greater good at heart."

Which may sound quite nice, but it also leaves open the question, "So, IBM, where do you stand on the Patent Reform Act?" Nonetheless, senators have at least one more chance to prove IBM right during its next round of markup hearings this week, beginning tomorrow morning.

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