Patent reform, supported by Microsoft, moves forward

'The Patent Reform Act of 2007 just passed the U.S. House Judiciary Committee. The bill is supported by Microsoft, Oracle, and others. The legislation would help prevent frivolous patents, reduce legal costs, and give more balance to the rights of patent defendants.

CNet News.com has extensive coverage on the bill, the background issues, opposition from Venture Capitalists, the competing bill in the US Senate, and the issue of "patent trolls". Hats off to the CNet staff for dedicating lots of time to this issue.

The Patent Reform Act still must be approved by the full House. The US Senate has its own version of patent reform in process. Once both bills pass they must then go to a joint Senate/House committee to agree on one common law for the president to sign.

Major provisions of the Patent Reform Act of 2007

• Limit patent suit damages to the value added over existing technology. Patent damage awards have been way out of line with the actual value of the specific patent in relation to the overall product in question. This bill would require the courts to look at the "free market" value of the patent if it were licensed in an "arms length" transaction.
• Patent review/mediation process managed by the US Patent Office. A special review board would allow parties to challenge issued patents and present prior art, and mediate disputes outside the courts. Patent suits are very expensive and time consuming. Microsoft spends more than $100 million a year defending patent suits. IBM, Oracle, Google and others spend similar amounts.

Another recent development is the Patent Peer Review Process at PeertoPatent.org This process allows anyone to submit "prior art" for consideration by the US Patent Office. Users vote on the most relevant and compelling prior art examples. The top ten submissions get forwarded to the USPTO for consideration before granting the patent. This is a pilot project being tested on 250 patent applications. If successful, the project could be applied to broader patent areas.

Should software patents be abolished? Lots of smart people have suggested software patents should be abolished because software is already protected by copyright law. It is a complicated issue. Here are a few questions to consider.

• If software patents were abolished who would benefit? Small companies or big companies?
• Do software patents protect innovation or restrict innovation? What are some examples of each?
• Should startups bother with patents? Can they afford the time and legal expense to get a patent? Can they afford to defend a patent?

What do you think?

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Comments

[Andy Freeman]

Suppose that I invent a mechanism that makes an x86 processor run 10% faster.

What is the "fair market value"?

One way to determine the answer is to sell two processors, one with said mechanism and the other without and look at the difference in revenue.

That's an expensive decision procedure. However, there's a cheap approximation. If Intel (for example), doesn't want to pay me what I think that said mechanism is worth, they can simply continue to make processors that don't use said mechanism.

Unfortunately, that's exactly the sort of thing that "patent reform" is meant to stop.

[Don Dodge]

One reader had trouble posting a comment here, but sent it to me via email. Here it is;

My main gripe with software patents is that they fail to disclose the invention in a meaningful way. I remember being floored when a chemical engineer told me she regularly read patents in her field to keep up on what she could and couldn't do.

I asked about the liability for knowing infringement, and she said that they could understand the patent, decide if they could invent around, or license.

I think a lot of the issues with software patents stem from no one really knowing what they cover until you've spent millions in court.

++++++++

I agree. Lawyers write patent descriptions so that they are broad, anticipate all possible future uses, and are left open to wide interpretation. Most of the software patents I have read have left me baffled as to what it actually does.

[Don Dodge]

Andy, In most cases you could license the technology to competitors to get an idea of what it is worth.

If an inventor patents something that is only applicable to one proprietary product...it makes it pretty hard to get a market value.

Even in this case the inventor could create a list of ALL the features of the product, assign a percentage of the sales price to each feature, and come up with a theoretical license value. This is what the courts should do with patent damage estimates.

[Andy Freeman]

I picked my example because there's only one feature - 10% faster AND that the value of that feature is open to considerable debate. Heck, whether the mechanism actually delivers 10% is open to debate.

Under "reform", I get to sue intel and negotiate value. Under the current system, I get to tell intel "pay my price or do without". Clearly the latter is better for me.

The "reform" argument is that the current system lets patents on pieces scuttle entire products. Except that that's not necessarily true. It isn't in this case - Intel has "done without" for 20 years so it's absurd to argue that continuing to do so is burdensome.

Note that this is the sort of case that the reformers are using to advocate for reform. Oops.

[Ogan Gurel]

I have written about - including in the Wall Street Journal - the implications of patent reform for medical technology focusing in particular, on the growing area of convergent medical technologies. Basically, this new patent reform bill will be more in favor of such combinatorial innovation. For a more detailed review of this, please see the article:

"Patent Reform Act of 2007: Innovation, Implications and the American Inventor" which you can find at:

http://blog.aesisgroup.com/2007/07/19/patent-reform-act-of-2007-innovation-implications-and-the-american-inventor.aspx

Thanks again for posting on this important topic.