TLJ News from February 26-28, 2011

Senate Begins Consideration of Patent Reform Bill

2/28. The Senate began consideration of S 23 [LOC | WW], the "Patent Reform Act", on February 28, 2011.

Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee (SJC), and lead sponsor of the bill, stated in the Senate on February 28 that "We should be able to complete action on this bill this week and I would hope by Wednesday night."

He stated that this bill "will help create jobs, energize the economy, and promote innovation. The Patent Reform Act, which has also come to be called the America Invents Act, is a key part of any jobs agenda."

Sen. Patrick LeahySen. Leahy (at right), said that "We can help unleash innovation and promote American invention, all without adding a penny to the deficit." The U.S. Patent and Trademark Office (USPTO) is funded by user fees. The version of the bill under consideration would give the USPTO authority to both set and retain all fees.

Sen. Leahy, who has been working on patent reform legislation since 2005, said that "This is commonsense and bipartisan legislation. During the next few days, the Senate can come together to pass this needed legislation, and do so in a bipartisan manner. It represents the finest traditions of the Senate."

The SJC approved this bill without opposition on February 3, 2011. Although, some members of the SJC stated then that they would seek changes during full Senate consideration. See, story titled "Senate Judiciary Committee Approves Patent Bill" in TLJ Daily E-Mail Alert No. 2,196, February 7, 2011.

The bill would also convert the U.S. to a first inventor to file system.

It would also allow third parties to submit prior art related to a pending application, and provide a post grant administrative process at the USPTO for challenging the validity of patents

It would prevent patents from being issued on claims for tax strategies. It also seeks to limit forum shopping, and increase incentives for government laboratories to commercialize inventions. It also addresses the best mode disclosure requirement, and false marking claims.

Sen. Leahy said that this bill "will accomplish three important goals, which have been at the center of the patent reform debate from the beginning: It will improve and harmonize operations at the Patent and Trademark Office; it will improve the quality of patents that are issued; and it will provide more certainty in litigation."

Sen. Orrin Hatch (R-UT) stated that "This is a particularly important bill. It is only the first step, once we bring it up and hopefully pass it, and then the House will bring up their bill. There are likely to be differences between the two, and we will have to get together in conference to resolve those differences. So those who might have some angst about this particular bill, give it time."

Gary Locke, the Secretary of Commerce, stated at a news conference on Tuesday morning, March 1, 2011, that there is good communication between Sen. Leahy and Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee (HJC). Locke added that there is "mutual commitment".

Sen. Charles Grassley (R-IA), the ranking Republican on the SJC, praised the bill, and stated that "the bill would improve patent quality by establishing the opportunity for third parties to submit prior art and other information related to a pending application for consideration by a patent examiner."

Sen. Charles GrassleySen. Grassley also stated that the bill would "create a ``first window´´ post-grant opposition proceeding open for 9 months after the grant of a patent", that would enable the USPTO "to weed out patents that should not have been issued in the first place."

He continued that this post grant review process "would enable early challenges to patents, but also protect the rights of inventors and patent owners against endless litigation. The reason we want to ensure that the Patent and Trademark Office issues high quality patents is to incentivize investment in truly innovative technological advances and provide more certainty for investors in these inventions."

Also, he said that "the bill would improve the current inter partes administrative process for challenging the validity of a patent. It would establish an adversarial inter partes review, with a higher threshold for initiating a proceeding and procedural safeguards to prevent a challenger from using the process to harass patent owners. It also would include a strengthened estoppel standard to prevent petitioners from raising in a subsequent challenge the same patent issues that were raised or reasonably could have been raised in a prior challenge. The bill would significantly reduce the ability to use post-grant procedures for abusive serial challenges to patents. These new procedures would also provide faster, less costly alternatives to civil litigation to challenge patents."

Obama Administration Backs Patent Reform Bill

2/28. The Executive Office of the President's (EOP) Office of Management and Budget (OMB) released a document titled "Statement of Administration Policy" (SAP) which states that the Obama administration "supports Senate passage of S. 23".

This SAP praises the bill's first to file provisions.

It also praises its grant of authority to the U.S. Patent and Trademark Office (USPTO) to set fees. The SAP is silent on retention of fees.

Gary LockeHowever, Gary Locke, the Secretary of Commerce, stated at a news conference on Tuesday morning, March 1, 2011, that both setting and keeping fees are important. He elaborated that if patent fees were diverted, "this does not help us reform patent processes". To the contrary, with diversion, "we could actually be going backwards".

The SAP adds that "the Administration understands that several stakeholders have suggested that the provisions on damages and venue are no longer needed in the legislation in light of recent court decisions in these areas. The Administration would not object to removal of these provisions from the final version of the legislation."

Locke and David Kappos, the head of the U.S. Patent and Trademark Office (USPTO), held a joint news conference on March 1, 2011, at which they expressed support for the Senate patent reform legislation. They also discussed the USPTO, and the importance of the patent system to the economy.

Secretary Locke said that "passage of this legislation is essential", and that "patent reform is critical to the well being of our patent system" and economy.

Kappos said that the fee setting provision would provide the USPTO with "a larger resource base".

CCIA Opposes Patent Reform Bill

2/28. Ed Black, head of the Computer & Communications Industry Association (CCIA), sent a letter [2 pages in PDF] to Senators in which he expressed opposition to S 23 [LOC | WW], the "Patent Reform Act".

He wrote that "Since much in S.23 remains unchanged from S.515 as amended last year, it is no less controversial and remains a source of disappointment to the tech sector. It is ironic that it was the concerns of our sector that drove the beginnings of the reform effort six years ago, and yet from our perspective S.23 would leave our industries worse off than before."

One of the concerns of the CCIA is business method patents. Black wrote that "In the course of the mark-up session for S.23, several senators spoke critically of business method patents. We applaud the committee's willingness to speak so bluntly against a broad swath of abstract patents that constrains competition, creates uncertainty, and departed so radically from the traditional technology roots of the patent system."

He continued that "by prospectively singling out a particular sub-type of legal compliance patents, the bill invites the courts to conclude that Congress is thus endorsing all other legal compliance patents, including all tax planning patents issued to date. In fact, the provision could be read as an implicit endorsement of all patents on ``business methods´´ as that term is broadly understood."

The CCIA is also concerned with the first to invent provisions. Black wrote that "Even the move to first-to-file which appears to make eminent sense in the interests of global harmonization poses a real danger since S.23 lacks the prior user rights that commonly mitigate the race to the patent office under first-to-file. The opportunity to use trivial patents for hold up will cause applications to swell, just as the need to file first will spur a rush of half-baked applications. The result will not only add greatly to the overpatenting that already exists in our sector, but it will add immeasurably the backlog that already burdens the USPTO."

David Kappos, the head of the U.S. Patent and Trademark Office (USPTO), responded to a question about this letter at a news conference on Tuesday, March 1, 2011. Kappos said that this bill is "compromise legislation", and that "it is not perfect from anybody's point of view".

People and Appointments

2/28. The Senate confirmed Amy Totenberg and Steve Jones to be Judges of the U.S. District Court (NDGa). See, Congressional Record, February 28, 2011, at Page S1022.

More News

2/28. The House passed HR 394 [LOC | WW], the "Federal Courts and Venue Clarification Act of 2011", by a vote of 402-0. See, Roll Call No. 148. The Senate has not yet passed this bill. This bill addresses diversity of citizenship, removal to a U.S. District Court, and venue in civil actions.

2/28. The House passed HR 368 [LOC | WW], the "Removal Clarification Act of 2011", by a vote of 396-4. See, Roll Call No. 150. The Senate has not yet passed this bill. This bill addresses removal of actions against federal officers and agencies to a U.S. District Court. 28 U.S.C. § 1442 already provides that actions may be removed. This bill clarifies that this removal procedure also applies to pre-suit discovery.

2/28. Paul Devine pled guilty in U.S. District Court (NDCal) to wire fraud, conspiracy and money laundering in connection with a scheme to defraud Apple. The Department of Justice (DOJ) stated in a release that "the fraudulent scheme involved Devine transmitting Apple's confidential information, such as product forecasts, roadmaps, pricing targets, product specifications, and data obtained from Apple's business partners, to suppliers and manufacturers of Apple parts. In return, the suppliers and manufacturers paid Devine kickbacks, including payments determined as a percentage of the business they did with Apple. The scheme enabled the suppliers and manufacturers to, among other things, negotiate more favorable contracts with Apple than they would have been able to obtain without the confidential information." This case is U.S. v. Paul Devine, U.S. District Court for the Northern District of California, San Jose Division, D.C. No. CR 10-00603 JW.

2/28. The U.S. District Court (NDCal) sentenced Ming Shao to probation and home detention following her plea of guilty to one count of unauthorized access to a protected computer system, in violation of 18 U.S.C. §§ 1030(a)(2)(C) and (c)(2)(B)(iii). The Department of Justice (DOJ) stated in a release that she accessed the e-mail system of her former employer, cloud computing company Panterra Networks. This case is U.S. v. Ming Shao, U.S. District Court for the Northern District of California, D.C. No. CR 10-748.

2/28. The Federal Communications Commission published a notice in the Federal Register that sets comment deadlines for a Notice of Proposed Rulemaking (NPRM) [71 pages in PDF] regarding changes to the Form 477 data program. Initial comments are due by March 30, 2011. Reply comments are due by April 14, 2011. The FCC adopted and released this NPRM on February 8, 2011. It is FCC 11-14 in WC Docket Nos. 07-38, 09-190, 10-132, 11-10. See, Federal Register, February 28, 2011, Vol. 76, No. 39, at Pages 10827-10852.

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