Tech industry splinters over patent reform proposal

New patent-reform legislation is dividing the technology industry, with biotech, tech giants and small companies all taking different stances.

The Coalition for Patent Fairness, which represents tech giants such as Intel, Google, Apple, Symantec and Oracle, has come out aggressively against the proposal from Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee.

They argue Leahy’s proposal, offered as a manager’s amendment to the Patent Reform Bill he introduced in April, does not do enough to rein in damages awarded in patent infringement cases.

Patent damages have been the major roadblock to getting a patent-reform bill through Congress. High-tech firms say the damages awarded by courts are out of control and should be limited. The pharmaceutical industry, however, has argued against imposing such limits.

“If a company uses someone else’s idea, then there should be appropriate compensation,” said Mark Isakowitz of the Coalition for Patent Fairness. “But it’s created a litigation lottery mentality.

“We feel like the new proposals really move the ball backward and made things worse,” he said.

Meanwhile, the Innovation Alliance, which represents smaller companies including Qualcomm and Dolby Laboratories, isn’t opposing the proposal.

“This is not the bill we would have written, but everyone should understand that is the nature of compromise,” the Alliance’s Brian Pomper said. “It’s come a very long way from when it was first introduced.”

The biotechnology industry has always been fairly supportive of the bill since its introduction last year, and applauded the latest changes.

“The latest amendment makes several important and well-crafted improvements to the overall bill,” said Biotechnology Industry Organization CEO Jim Greenwood in a statement.
 
Leahy’s amendment includes measures to move to a first-inventor-to-file system, allow third parties to comment on pending patent applications and allow the Patent and Trademark Office to set fees to address its backlog problem, among others.

Leahy is pushing Senate leaders to schedule floor time for the bill. He reached the agreement with Sens. Orrin Hatch (R-Utah), Jeff Sessions (R-Ala.), Charles Schumer (D-N.Y.), Jon Kyl (R-Ariz.) and Ted Kaufman (D-Del.).

“This compromise may not be everything that everyone wants, but it makes important reforms to the outdated patent system,” Leahy said Thursday.

The Coalition for 21st Century Patent Reform, another coalition that includes high-tech firms SanDisk Corp. and Texas Instruments, also has come out in support of Leahy’s amendment, calling the changes “balanced and thoughtful.” The coalition also represents members of the pharmaceutical industry, such as Eli Lilly, Wyeth and GlaxoSmithKline.

These companies, along with firms in the Innovation Alliance such as Qualcomm, rely heavily on licensing patented technology — as do major research universities such as the Massachusetts Institute of Technology. As a result, they do not have as strong a position on the issues of damage limits and willful infringement standards as big firms like Google and Apple.

Even some members of the high-tech group — the Coalition for Patent Fairness — are splintering.

Microsoft, while part of the coalition, has not come out against the bill.

In response to Leahy’s amendment, Microsoft deputy general counsel for intellectual property Horacio Gutierrez said “this legislation will help modernize the patent system.”

“While the Senate consensus measure may not address all the wishes of all of the parties involved, including those of Microsoft, it embodies a balanced approach that improves our nation’s patent law and promotes patent quality,” he said in a statement. “We are pleased to support it.”

Intel and Dell may also take muted stances on the bill, even though they are members of the Coalition for Patent Fairness, according to lobbyists.

IBM, which is not part of any coalition but has a large presence in Leahy’s home state of Vermont, has endorsed the bill. IBM has been the largest patent recipient for the past 17 years.

Robert Weber, IBM General Counsel, said the bill "represents real progress on patent reform."

Many tech trade groups and individual companies have been reluctant to comment publicly on the patent reform proposal in hopes that modifications can be made by the House, according to K Street sources.

California Democrats Zoe Lofgren and Howard Berman, as well as House Judiciary Committee Chairman John Conyers Jr. (D-Mich.) and ranking member Lamar Smith (R-Texas), are the key targets of lobbying efforts trying to make changes to the proposal.

Tech corporations and trade groups were surprised by the proposal, especially since Leahy is also a longtime friend of the high-tech community.

“Patent counsels for companies looked at this new compromise and really feel like it did not accomplish the goals and made things worse,” Isakowitz said.