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PATENT REFORM

Now that the US House of Representatives has passed US President Barack Obama’s controversial healthcare legislation, attention will turn again to patent reform. WIPR looks at the key proposals.

Te Patent Reform Bill 2010 is the latest incarnation of an initiative that has been in the pipeline for several years. In 2005, 2007 and 2008, senators tried to pass reform bills, but they petered out in the face of opposition or ran out of time in the congressional session. Te April 2010 Managers’ Amendment is an amended version of the 2009 iteration, proposed by Republican and Democrat senators. Given that US patent laws have not been significantly reformed in more than 50 years, most agree that some updating is necessary, if only to take account of the changes to the IP landscape that have taken place in the interim. Tere are also concerns over the seemingly limitless lawsuits surrounding patents and the sense that damage awards have spiralled out of control.

To this end, the proposed bill outlines significant changes. Some are relatively uncontroversial. Te bill will change the current ‘first to invent’ system to a ‘first to file’ system, bringing the US in line with most of the rest of the world. Tis has several advantages, the most notable being that the majority of companies that want patent protection worldwide are already obliged to work on a first to file basis in other jurisdictions, so it makes sense to have a uniform approach—about half of US patents have foreign priority anyway. Additionally, it is far easier to demonstrate that someone filed a patent for a technology first than it is to demonstrate that they invented it first. In reality, the new provision won’t make a difference to more than a handful of cases, but it provides important certainty to users of the patent system.

More contentiously, the bill also proposes changes to the calculation of damages in patent litigation. Te 2010 bill has backed off earlier proposals, which would have seen damages calculated with reference to the specific contribution of a patent over the prior art. It proposes that a judge “identify the methodologies and factors that are relevant to the determination of damages,

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and the court or jury, shall consider only those methodologies and factors relevant to making such determination”. Tis so-called ‘gatekeeper’ provision is designed to ensure that juries in particular only decide damages based on facts that are strictly relevant to the case, and should mean that extravagant and unjustified damages awards are a thing of the past.

While the new provision will be welcome, like the first to file change, it should have a relatively limited impact. In theory at least, juries are already only supposed to consider relevant information when deciding damages. Te main change may be in providing more grounds for appeal, as parties challenge the definition of relevant information as well as any damages awarded.

More significant from a litigation standpoint are the proposed changes to how courts look at ‘wilful infringement’ and ‘inequitable conduct’. If the court finds wilful infringement, it is able to triple any damages award. But the new bill raises the threshold for demonstrating that someone has wilfully infringed a patent. If the bill becomes law, those alleging wilful infringement will have to demonstrate that there was ‘objective recklessness’ in the infringer’s conduct. Mere knowledge of the patent will not be sufficient to find wilfulness, nor even will failure to consult counsel necessarily result in a finding.

On inequitable conduct, the new bill allows for a patent holder to request a supplemental examination, prior to any litigation, to examine any additional information relevant to the patent. If the US Patent and Trademarks Office (USPTO) issues a revised certificate, then the patent cannot be held unenforceable because of any additional information missing from the initial application. However, the new provision does not remove the possibility of punishment for criminal or deceptive conduct, and a supplemental examination will not be possible aſter litigation has begun.

World Intellectual Property Review March/April 2010

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