Many people are optimistic that 2007 will be the year of patent reform. And the prospects do look favorable, with identical bills being introduced into the House (H.R. 1908) and Senate (S.1145) and associated bipartisan support.
Core to the growth and (in some cases) survival of the domestic technology industry, especially with the continued emergence of low-cost jurisdictions in the Far East, is the protection and leverage of intellectual property (IP). China, in particular, has nascent IP laws and enforcement, and it's important for the West to lead by example. However, if the United States and European patent systems are perceived to be in disarray, it will be extremely difficult to inject a discipline of respecting IP rights and IP owners into these regions. Without IP protection and leverage, what sustainable competitive advantage does the domestic technology industry have? Labor? Cost? Domestic market size and growth? Indeed, it will make increasing economic sense for the domestic industry to move virtually all design and manufacturing offshore. Cases like Microsoft v. AT&T, which threatened the very viability of the U.S. domestic software industry prior to being decided in Microsoft's favor, highlight this quagmire.
While injunction relief is off the table, current legislative reform efforts seek to improve the overall quality of patents, provide an efficient and effective option to challenge patent validity and ensure that patent damages reflect the economic value of the patent. Key tenets of the current legislative proposal that will benefit the tech sector include post-grant review, submission of prior art by third parties and damages limitation. Under current law, anyone seeking to challenge patent validity and enforceability has two potential recourses. The first is to request a reexamination of the patent by the PTO, which is cumbersome and inefficient. The second is litigation, which is expensive and resource consuming. The proposed reform legislation provides a post-grant review procedure for any interested party (patent owner aside) to file a "petition for cancellation" within 12 months of the patent's issue or reissue (known as the "first window") if there is substantial reason to believe that continued existence of the challenged claim is likely to cause the petitioner significant economic harm, the petitioner has received notice of alleged infringement or the patent owner consents in writing (known as the "second window"). To limit abuses of this new provision, the draft legislation prevents successive petitions in either the first or second window, and prohibits the party from reasserting claims in court that were raised during post-grant review. Overall, post-grant review should help improve patent quality by providing additional recourse and scrutiny to challenge patent validity, which should encourage all companies to be more diligent in their filings. The result will be fewer poor-quality patents, fewer nuisance cases and a more level playing field for all.
Another component of the proposed legislation aimed at addressing poor patent quality is the submission of prior art by third parties. This idea essentially makes it possible for third parties knowledgeable in the subject matter of a claimed invention to submit relevant information regarding prior art to the U.S. PTO. This would enable technology companies to support one another when a particular troll is targeting them.