IP and Emerging Regulation, by Mark Costello, James F. Hurst, and Gail Levine
The Obama campaign pledged to infuse our patent system with more “predictability and clarity” and “reduce uncertainty and wasteful litigation that is currently a significant drag on innovation,” but the Obama administration’s hands have been tied fixing the broken economy. In the second panel from the 21st Annual GCC, IP and Emerging Regulation, Mark Costello, James F. Hurst, and Gail Levine discussed the backdrop for the Patent Reform Act of 2009 and offered solutions for in-house counsel dealing with IP issues in the current landscape.
The panelists shared a survey titled “Components of S&P 500 Market Value” by Winston & Straw LLP, which cites that in the last thirty years intangible assets rose from 16.8% to 79.7% of total holdings in the top companies. Not surprising, the number of patent suits filed from 1980to 2006 also rose from under 1,000 to over 3,000 with a healthy rise around the time of the Internet boom of the late 1990’s. The panelists noted that some courts have even capitalized on this trend, becoming patent suit havens through establishing broad standards, which conferring jurisdiction over the litigants if the product is used by anyone in their district.
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Determining how much the owner of the patent gets from any suit presents a challenge due to the complexity of the patent system. Looking at the big picture, is it the whole invention that comes under scrutiny or just an incremental step from prior art? Panelist Gail Levine is of the opinion that it is unreasonable for a patent owner to command more in a law suit than he could capture in the market through a reasonable royalty award. She suggests determining how much the litigation is really worth when deciding whether to pursue or settle. According to panelist Mark Costello, such decisions are further hampered by the problem of the “squeaky cog” shutting down the machine since each part of an invention is also patentable. This presents a never-ending loop for counsel since it is in the client’s best interest to protect all parts of the invention with granular patent writing, which can have owners chasing after more patent suits but conflicts with the idea of passing legislation to limit such activity. Panelist James F. Hurst added that broad patent writing, however, encourages unlimited and unreasonable damages, making consistency in judgment very difficult to reach. In his opinion, legislation is the vehicle to solve this problem.
Costello then presented a potential solution for patent owners, which included lower cost methods to challenge patents, such as pre-issuance submission of prior art. The European model for patent challenges follows this approach and helps whittle down claims, but any such change would be a major shift for the US.
Despite any sweeping reform, the issue remains that a patent battle can be won overseas, but you still have to fight it domestically under tougher standards, like in Texas. In addition to this, major patent rulings over the last few years have made it more difficult to protect your patent: ebay Inc. v. MercExchange (permanent injunctions on patent are harder to obtain), MedImmune v. Genentech (licensee challenge validity of licenced patents), KSR Int’l Co. v. Teleflex Inc. (easier to invalidate patents through obviousness standard), In re Bilski (business method patents | see our Bilski poll on Martindale Hubbell Connected), and In re Seagate Tech LLC (making treble damages hard to obtain).
The trouble with this scheme, according to Levine is that patents should promote innovation and not competition. We do not want to see silos of portfolios emerge because people cannot put their inventions to market for fear of being unable to protect the IP. Ultimately, the big question for in-house counsel will be what to do with patents that were issued before KSR and the other cases cited above?
Best Practice: a thorough portfolio review is vital to the success of any patent operation, especially after KSR. Know what you have and how to protect it by visiting the Corporate and Professional IP solutions page on LexisNexis.com