WASHINGTON: Microsoft Corp. and Intel Corp. have urged lawmakers to overhaul the U.S. patent system for more than five years. They may get their wish in 2007.
A record $1.52 billion verdict against Microsoft last month, the Democrats’ takeover of Congress and U.S. Supreme Court rulings are building momentum for the biggest changes in U.S. patent law since 1952. Proposals include legislation to make it easier for targets of infringement suits to challenge patents and limit damages if they lose.
“Things have happened that make this the season for patent reform,” said Emery Simon, counsel for the Business Software Alliance, a Washington lobbying group whose members include Microsoft, Intel and Apple Inc.
Pressure for change comes amid a surge in patent litigation as the U.S. moves to a knowledge-based economy from one reliant on manufacturing. Patent suits in the U.S. more than doubled to 2,706 new filings in 2005 from 1995, the U.S. Administrative Office of the Courts in Washington says.
U.S. intellectual property, dominated by patents, is valued at as much as $5.5 trillion, according to a 2005 study by USA for Innovation, a Washington group that advocates free trade. That’s more than 40 percent of U.S. gross domestic product.
Representative Howard Berman, a California Democrat who heads the House subcommittee on patent issues, said last month he was working with Senate Judiciary Chairman Patrick Leahy of Vermont and may offer a patent bill “within weeks.”
“All the key players in the House and Senate say they want to do something,” said David Simon, chief patent counsel for Santa Clara, California-based Intel, the world’s largest chipmaker.
Berman and Leahy will build on measures introduced last year by their Republican counterparts, Senator Orrin Hatch of Utah and Representative Lamar Smith of Texas. The proposals, designed to curb lawsuits and damages, had supporters in both parties. They stalled as lawmakers turned to campaigning for midterm elections.
The debate over patents pits the technology industry against drug and biotechnology companies including Pfizer Inc. and Amgen Inc. With Democrats controlling both houses of Congress for the first time since 1994, technology companies may have the upper hand.
The drug industry gave about two-thirds of its lobbying dollars in the past decade to Republicans, who ran Congress for most of the period, according to the Center for Responsive Politics in Washington. Technology companies split contributions evenly between the two parties.
‘Hold on Republicans’
The drug industry’s “hold on the Republican leadership” was one reason patent legislation had taken so long to craft, Representative Berman said in a speech at a Feb. 26 gathering called the Tech Policy Summit in San Jose, California. “They don’t have that same hold on the Democratic leadership.”
The drugmakers, usually the plaintiffs in infringement suits, want the strongest possible protection for their patents, which cover inventions that they may spend years and hundreds of millions of dollars on to develop.
Drug companies don’t oppose all proposed modifications but are “concerned changes to the current patent system could potentially reduce incentives for pharmaceutical companies to research and develop new life-saving medicines,” said Ken Johnson, senior vice president at the Pharmaceutical Research and Manufacturers of America, the drug industry trade group in Washington.
Computer companies say they are often the targets of suits filed by technology buffs who obtain patents they don’t intend to use to provide a product or service. The cost and complexity of their medicines make drug and biotechnology companies less vulnerable to those types of suits.
Redmond, Washington-based Microsoft, the world’s largest software company, is a defendant in more than 35 patent- infringement cases. The “vast majority” were filed by individuals and small companies whose main business is licensing patents, said David Kaefer, Microsoft’s general manager of intellectual property licensing.
“There is such uncertainty about patent quality and about patent litigation that it really rewards those willing to play the patent lottery,” Kaefer said.
Microsoft says the current system gives patent owners of any size excessive power to demand royalties. The software maker points to the Feb. 22 verdict by a San Diego jury that found Microsoft infringed two patents owned by Paris-based Alcatel- Lucent for MP3 digital-music technology and awarded $1.52 billion in damages, the biggest patent verdict in U.S. history.
The royalties were incorrectly based on global sales of computers costing an average of $1,150 rather than the $100 Windows software that was relevant, Microsoft says.
The Supreme Court has weighed in with rulings to curtail some of the power held by patent holders. In a decision last year, the high court made it more difficult for patent owners who don’t make products to get court orders blocking products that allegedly infringe the patent.
Legislative proposals include giving a patent to the first person to file, which would end costly battles over who invented a technology, and streamlining the application process to allow the U.S. Patent and Trademark Office in Alexandria, Virginia, not courts, to resolve most disputes.
“There are some critically important things that need to get done,” said patent agency Director Jon Dudas. “Those things that we have broad agreement on, let’s move on those.”