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FOR IMMEDIATE RELEASE Contact: Al Rickard, 703-402-9713 or arickard@associationvision.com Intellectual Property Industry Executives Testify on Federal Patent Reform Bill Technology and Biotech Sectors Offer Differing Views On Legislation; LES Comments on Hearings WASHINGTON, DC, April 30, 2007 - Two different views of proposed patent reform legislation were evident in an April 27 hearing before the House Judiciary Committee, where key executives from the intellectual property licensing industry testified on the recently proposed Patent Reform Act of 2007 (H.R. 1908). The bill is sponsored by Senate Judiciary Committee Chairman Patrick Leahy (D-VT); Senator Orrin Hatch (R-UT), a senior member of the committee; Representative Howard Berman (D-CA), chairman of the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property; and Representative Lamar Smith (R-TX), ranking member of the House Judiciary Committee. The legislation proposes that the United States convert to a "first to file" system for granting patents, replacing the current practice of granting patents to the first inventor of a new invention, which is often difficult to determine. "The United States stands alone among nations that grant patents in giving priority for a patent to the first inventor, as opposed to the first to file a patent application for a claimed invention," the bill states. "The result is a lack of international consistency, and a complex and costly system in the United States to determine inventors' rights. . . . By contrast, a first-to-file system injects needed clarity and certainty into the system." The Patent Reform Act of 2007 also proposes changes to the process of assessing damages based on patent infringement, which the bill's authors charge "has not reliably produced damages awards in infringement cases that correspond to the value of the infringed patent." The bill would require that courts "conduct an analysis to ensure that when a 'reasonable royalty' is the award, it reflects only the economic value of the patent's 'specific contribution over the prior art,' i.e., the truly new 'thing' that the patent reflects." Other provisions of the bill set stricter definitions for "willful infringement" of a patent, the opportunity for post-grant patent opposition, and other issues related to patents. Anthony Peterman, Director, Patent Counsel, for Dell, Inc., testified that "the patent system is clearly under duress. Warning flares have been going off for the past decade." He described the "buckling of the foundations of the patent system as we know it - from a beleaguered Patent & Trademark Office (PTO) where patent quality has suffered from the shear volume and complexity of scientific advances, to the ever-increasing disputes over patent quality that have spilled over into an explosion of lawsuits in the courts, to the rare phenomenon of watching the Supreme Court increasingly taking over the role of 'substantive arbiter' of legal doctrines fundamentally misconstrued at the appellate level." Peterman said the Patent Reform Bill "addresses three major areas where we believe reform is now needed: (1) improving the quality of patents issued by the PTO; (2) re-establishing fairness and evenhandedness for all parties in how patent disputes are handled and enforced by the courts; and (3) clarifying certain areas of substantive law and patent law doctrine that have fallen away from fundamental precepts rooted in fairness and equity." As a company that holds more than 1,400 patents and files several hundred new patent applications each year, Dell has a strong interest in reforming an overburdened patent system. Kevin Sharer, CEO and Chairman of the Board of Amgen, Inc., a biotechnology company, urged a more cautious approach to many of the changes proposed in the legislation.
"Biotechnology is revolutionizing the war against disease and boosting the American economy - but this revolution depends upon strong and reliable patent protection," Sharer said. "Innovation in biotechnology, more than any other industry, depends upon strong patent protection.
"Amgen urges the Congress to carefully consider the impact each proposed patent reform change would have on the current patent system before altering what is widely considered to be the most effective patent system in the world. . . . "We recognize that the software, financial services industries and others have identified legitimate problems with the way the system impacts business activities in those sectors." He expressed concern that the proposed establishment of a "so-called post-grant opposition procedure that provides an additional administrative procedure in the PTO through which patents can be challenged throughout the life of a patent," which Amgen believes "could become a vehicle to harass legitimate patent owners and make it difficult for them to enforce their patents." William T. Tucker, Ph.D., MBA, Executive Director, Research Administration and Technology Transfer at the University of California, echoed some of the concerns of Amgen. "The University of California supports many of the patent reform proposals in H.R. 1908," Tucker said, "but is also concerned with changes to the U.S. patent system which could weaken the ability of patent holders to protect the rights to their inventions, or which could harm university technology transfer efforts." The Licensing Executives Society (LES), which represents intellectual property licensing professionals, praised the efforts of Congress to address the critical issue of patent reform, while recognizing that sectors of its membership view the legislation differently. "The U.S. patent system has allowed many of the world's great inventions to flourish in the marketplace, but it is a system in need of adjustment," said LES President Allen Baum. "It takes years for patent applications to wind their way through the backlog at the understaffed U.S. Patent & Trademark Office, and many inventions in high technology and other fields are obsolete by the time patents are awarded. It is stifling innovation and hurting American consumers by limiting useful new products that might otherwise be available." He added that "change is definitely in the air" based on recent U.S. Supreme Court cases dealing with patent and licensing issues in addition to pending legislation and significant Patent Office Rule changes. "Now is the time to address patent reform, because businesses demands more certainty in patent rights. In areas such as pharmaceuticals and biotechnology, it is important for companies investing in the expensive process of bringing new drugs to market to have certainty in the award of exclusive rights. Unfortunately, recent court rulings are leaving unanswered questions that must be resolved if American businesses are going to focus on innovation instead of litigation." For example, in January 2007 the Supreme Court ruled that biotech company MedImmune can challenge a patent owned by Genentech, a competitor, even though MedImmune continues to pay royalties to Genentech. "This decision will alter the structure of future deals," said Allen Baum, President of the Licensing Executives Society, USA & Canada (LES). "It changes the rules of engagement. Under the right circumstances, this decision gives licensees the ability to take a license under a patent and later challenge coverage, validity, and enforceability with impunity." LES filed a neutral "friend of the court" brief in that case, asking for clarity on various issues the Supreme Court did not address but that are important in intellectual property licensing. "Any legislation that brings clarity and efficiency to the overly complex area of patents and licensing is worth a close examination," Baum said. "The challenge will be in making sure that new laws protect the interests of patent holders in a way to encourages innovation and product development in all sectors of our economy. The pace of development and the systems of licensing vary among different sectors, and their needs must be considered." # # # Editors: Interviews with Allen Baum are available. Please contact Al Rickard at 703-402-9713 or arickard@associationvision.com. The Licensing Executives Society (U.S.A. and Canada), Inc. (LES) is a professional society comprised of over 6,000 members engaged in the transfer, use, development, manufacture and marketing of intellectual property. The LES membership includes a wide range of professionals, including business executives, lawyers, licensing consultants, engineers, academicians, scientists and government officials. Many large corporations, professional firms, and universities are represented within the Society's membership. LES (U.S.A. and Canada), Inc. is a member society of the Licensing Executives Society International, which has a worldwide membership of over 13,000 members. LES serves as an independent, professional organization that facilitates global intellectual property commerce through education, networking, standards development and certification.
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