May 2, 2008 | By Emily Berger

Patent Reform Act Stalls in the Senate

Coauthored by EFF Activist Richard Esguerra

The progress Congress was making on the Patent Reform Act (S. 1145) has stalled and Senate Majority Leader Harry Reid has pulled the bill from the floor schedule.

The lack of progress is disappointing. Despite its flaws, the proposed legislation would make important and necessary changes to the patent law. In particular, the bill would limit damages for infringement so that they bear some relationship to the actual value of the damage to the patent owner.

S. 1145 would also have clearly defined situations in which defendants would be liable for willful infringement, which can result in treble damages for the losing party. Until the recent Federal Circuit Court of Appeals decision in In re Seagate Technology, the law allowed defendants to be found liable for willful infringement if they merely knew of the existence of the patent. As a result of that case, enhanced damages are now only available for willful patent infringement that is at least "objectively reckless."

One of the basic goals of the patent system is to get inventors to reveal the secrets of their technology — in published patent applications — so that others could build on it. The low threshold for a finding of willfulness, coupled with the threat of treble damages, chilled innovation by discouraging competitors from even reading each other's patents. In addition, many companies, especially small businesses, preferred to license patents of questionable validity rather than risk litigation.

The Wall Street Journal reported that negotiations between Senate Judiciary Committee members stalled over changes in the way damage awards would be made in patent infringement suits. Intellectual Property Watch also suggests that a political fight over the confirmation of federal judges may have played a role in the postponement.

At least the troubling portion of the draft committee report on post-grant review and third-party reexamination — the process by which the EFF Patent Busting Project fights bogus patents — is now off the table. Third-party reexamination allows organizations like EFF to protect the public interest, so we actively sought, with the community's help, to retain the procedures that provided for reexamination practice.

There's no schedule for when the bill will return. Most sources are reporting that the bill is not dead, but it appears that the committee members will have to resolve their differences before patent reform is to continue. Encouragingly, the committee chairman, Senator Leahy, expressed a strong interest in following through, saying in a statement: "Thousands of hours have been spent in negotiations to address the concerns of 100 Senators, hundreds of Representatives, and dozens of stakeholders. [...] I have said repeatedly that the time for patent reform is now. Unfortunately, some have yet to fully grasp this fact, and have stalled meaningful reform."

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