BUSH EXPECTED TO SIGN PATENT COLLABORATION BILL

S-2192 by Senate Judiciary Committee Chmn. Hatch (R-Utah) passed by voice vote without objection Fri. -- as an identical bill, HR-2391 by House Judiciary Courts, Internet & Intellectual Property Subcommittee Chmn. Smith (R-Tex.), did in March. The legislation had bipartisan and bicameral support. Meanwhile, Smith held a hearing last week on how to improve the system for challenging patents.

The Cooperative Research and Technology Enhancement (CREATE) Act is designed to enable more patents to arise from collaborative research. Crafted over several years, the bill was called “unique” during the House floor debate by Rep. Berman (D- Cal.), the bill’s chief co-sponsor, as a “truly noncontroversial patent bill.” Smith said the bill would allow researchers to “share information without losing the ability to file for a patent” on an innovation that arises from that research.

Congress is responding to a 1997 decision by the U.S. Appeals Court, Federal Circuit, in Odds-On Products v. Just Toys that invalidated a patent involving shared research. House Judiciary Committee Chmn. Sensenbrenner (R-Wis.) said that decision chilled collaborative research -- a problem because “more often than not, the innovations [intellectual property industries] develop are not done wholly by researchers in-house.” The bill creates a safe harbor for universities and nonprofits to collaborate with businesses without hindering future patent filings, he said. Rep. Lofgren (D-Cal.) said “many technology startups in my home area rely on university collaborations,” and the Odds-On decision “created an environment where an otherwise patented invention could be rendered non-patentable.” While calling the bill “a sleeper,” Lofgren said during the House floor debate that “passage of this bill will be quite important to the U.S. economy.”

The bill when enacted into law will apply only to patents issued after that date. Also, the bill makes clear that the new law wouldn’t affect parties before the U.S. Patent and Trademark Office or a court on a pending patent-related case.

Smith last week held a hearing to determine how to reduce the cost of such cases, particularly challenges to patents. Several witnesses recommended a post-grant opposition system be established to give those wishing to challenge patents recourse other than lawsuits. “Litigation is very expensive,” said American Intellectual Property Law Exec. Dir. Michael Kirk at the June 24 hearing. He estimated the average cost of patent litigation to range from $500,000 to almost $4 million per party. “In view of the absence of an effective and inexpensive means to challenge patents,” Kirk said, the AIPLA has called for a post- grant opposition process, which he said also has been called for by PTO, the FTC and the National Academy of Sciences, as well as the Intellectual Property Law Section of the American Bar Assn.

“In a perfect world, one would desire a post-grant opposition system in which every issue relevant to patentability could be raised and resolved quickly and inexpensively,” Kirk said. “In the real world in which we live, however,” he said, “this is not possible.” Thus, he proposed limits on the process: (1) Parties would have 9 months to challenge a patent. (2) A requester would have to “front-load” evidence when filing to expedite the process, and would have the burden of proof. (3) Patent owners could respond with their own evidence and amend their claims at least once. (4) Discovery would be limited. (5) The process would be limited to one year, but extendible to 18 months in certain cases. He said any system adopted would need funding, however. Kirk said the European Patent Office has a system that saw 4.4% of patents -- 2,634 -- challenged in 2003. That percentage in the U.S. would be more than 8,000 challenges, he said.

Google Patent Counsel Karl Sun also endorsed a post-grant opposition system. He said challengers should be able to file “on any patentability grounds, not merely lack of novelty and obviousness as is the case with the current inter partes reexamination process.” He called for a one-year limit to file a challenge, after which patent holders “may be entitled to some certainty that their patent cannot be opposed, except by third parties whom they themselves notify and threaten with infringement.” He also said a “presumption of validity” should be given only to patents that have gone through the post-grant opposition process. Sun said the average patent examiner spends no more than 25 hours on a patent. “Patents which are issued by an overburdened PTO without inter partes safeguards as to quality should not be accorded a presumption of validity by the courts,” he said.

Google is being sued by online search rival Overture -- now owned by Yahoo! -- for patent infringement, with Overture claiming to have a patent on the ad-placement tools Google uses on its site. The revenues from that ad placement have made Google’s upcoming initial public offering (IPO) of interest to many investors. Google insists there is no merit to Overture’s patent infringement suit. But the company warned investors in connection with its IPO that regarding an “intellectual property rights claim, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense.”