Yesterday we talked about how the 2007 legislation would
have helped deal with growing patent damage awards. We’re focusing on the 2007
legislation now as it had stronger provisions to deal with some of the worst
problems.
The House bill also would have made apportionment of damages
a major aspect of the new damage regime; a methodology that would work to limit
the extent of damages available to patent holders. Under apportionment, a patent holder would only be awarded
damages for the specific contribution which the patented innovation adds over
the existing technology. The debate has often been likened to the question of
whether a patent holder should be awarded damages based on their contribution to
the windshield wiper versus the value of the whole car.
As the legislative history of the bill noted, such a system
would prevent overcompensating patentees and avoid unreasonable royalty rates
on producers. Such changes would
refocus the law on patent damages to fairly awarding patentees for the actual
value of their patented invention and not extraneous factors. However, the use of apportionment to
limit damages was far from a universally accepted proposal. A number of
Representatives voiced their criticism that it was nothing more than an
untested theory. Others argued
that the apportionment standard was unnecessary in light of the fact that
courts today already take into account the economic contributions made by
inventions.
This proposal would not necessarily preclude awarding
patentees for making breakthroughs in innovations, as a separate provision of
the reform legislation would have continued the viability of the entire market
value rule. Under this particular
doctrine, damages could also be calculated on the ‘market value’ of the
patented invention where that particular innovation forms the predominant basis
for market demand. So patent
holders could be properly compensated if their specific invention was
sufficiently significant to drive the public’s demand for that invention.
Such a difference in calculation has tremendous
implications, as it would provide for a patent holder to recover damages on both patented and non-patented features
of the invention. Language similar
to that found in the House bill should appear in any future reform proposals,
as it would fairly award patentees whose inventions form the backbone and
foundation of particular technological fields.
The 2007 House bill was not perfect. For example, language
codifying the factors traditionally relevant in determining a reasonable
royalty rate is an unnecessary proposal.
Since 1970, the federal district court opinion in Georgia
Pacific Georgia Pacific test.
In his introductory remarks accompanying the Senate bill, S.
1145 , Senator Patrick Leahy (D-VT) noted that patent reforms were necessary
in order to promote “fair and equitable remedies” that current “litigation has
not reliably produced.” For the
most part, the Senate bill’s provisions were substantively similar to those in
the counterpart House bill. For
example, proposals to make judges gatekeepers of evidence in damages
calculations, the adoption of the entire market value rule, and the use of an
apportionment standard were all present in the Senate bill. However, there was criticism as to
whether the Senate’s proposals would resolve uncertainty with damages, as well
as pressure from anti-reform interests.
Ultimately, this criticism and conflict over other provisions stalled
any action before the conclusion of the 110th Congress.
111th
Congress
With the Senate’s prior failure to pass substantive patent
reform, the current session of Congress has picked up where the last session
left off, with the introduction of three separate new patent reform
proposals. The House version of
the Patent Reform Act of 2009 was introduced in March of last year (H.R.
1260 ), while two separate proposals (S.
515 and S.
610 ) were introduced in the Senate.
Unfortunately for the patent system and their proponents seeking to see
some legislative solutions to the problems plaguing the system, not much has
been accomplished this session.
The House bill has been with the Judiciary Committee since its
introduction. There was a
committee hearing in April 2009 the most recent action on the matter. S. 515 has fared slightly better, as
this version, sponsored by Senator Leahy has been the subject of a written
report expressing additional, minority, and supplementary views regarding its
provisions. S. 610, sponsored by
Senator Jon Kyl (R-AZ), was referred to the Senate Judiciary Committee after
its introduction, with no action since then.
As evident by the recent patent reforms proposals, Congress
has sought to focus on certainty; certainty in terms of providing parties with
predictable damages awards using reliable, non-speculative damage
methodologies. The success of any
future patent reform legislation must continue to make this a key focal point. In each of the proposals introduced by
the current session of Congress, the bills’ authors have to a certain extent
repeated the concepts raised in previous provisions related to damages. For instance, all three bills included
language that would permit judges to serve as evidentiary gatekeepers for the
jury. As mentioned above, such a
role would aid with more predictable damage awards, by preventing juries from
considering speculative damage calculation methods not supported by sufficient
legal evidence.
By ensuring that certainty is at the forefront of the
movement for damage reform, Congress can best limit the ability of patent
trolls to exploit the patent system.
The patent troll business
model of “being infringed” is based on the threat of litigation and the
unpredictable costs and damages that are associated with patent cases. By eliminating much of the uncertainty
in this process, the leverage of patent trolls may be limited.
