Diagnostics & Imaging Week Washington Editor

The news wires have been abuzz with reports of the passage of the House version of the Patent Reform Act of 2007 (H.R. 1908), with a flurry of analyses of the bill making the rounds among industries reliant on intellectual property.

But at least one member of an industry association hinted that we shouldn’t hold our breath for quick passage since Harry Reid (D-Nevada, Senate majority leader, has patent reform on his “wish list” rather than on a roster of pressing business items for the upper chamber.

The final vote in the House had at best a marginally bipartisan look to it, with most of the support coming from Democrats in both absolute and percentage terms.

Democrats voted 160-58 for the bill, a margin of support of 73%, while only 60 Republicans voted in favor versus the 117 who voted no, giving the bill only 34% of the GOP vote.

Opposition to H.R. 1908 was significant among party leaders as well as the rank and file, with John Boehner (R-Ohio) and Roy Blunt (R-Missouri) authoring an Aug. 30 letter to House Speaker Nancy Pelosi (D-California), urging her to delay a final vote until a few issues are more fully fleshed out. The letter states that “it is rare to find an issue that unites groups from the AFL-CIO (Washington) to the Eagle Forum (Alton, Illinois) in opposition to a bill” that is seen by some as economically damaging.

Among the issues that Boehner and Blunt see as problematic are the provisions dealing with “damages, rulemaking authority for the Patent & Trademark Office, inequitable conduct and others.”

In a Sept. 7 statement, Christopher White, the general counsel for the Advanced Medical Technology Association (AdvaMed; Washington), said that the narrow margin of victory (220-175) “demonstrates the significant bipartisan opposition to the patent reform plan as currently written.” White said that the House bill would make patents “easier to challenge and cheaper to infringe at a time when America’s innovators, manufacturers and workers need stronger patent protections to compete internationally.”

Makers of biologic products expressed a similar line of concerns.

Jim Greenwood, president/CEO of the Biotechnology Industry Organization (BIO; Washington), issued a statement immediately after the Sept. 7 vote, expressing appreciation for “the continued efforts by the House to improve the Patent Reform Act,” but adding that the association “unfortunately cannot support the legislation passed today as it threatens continued biotechnological innovation.” In the view of BIO, the bipartisan opposition “demonstrates the serious concern of varied stakeholders — across many industries, research institutions and other interests — with the bill, and the need for a more consensus-oriented approach to patent law reform.”

One of the more contentious elements of patent reform has to do with regulatory reviews of patents after the PTO has granted the patent, also known as post-grant review.

The current system allows third parties to request a review of a new patent with or without that third party’s participation. When the requesting party participates, it must raise any and all issues it sees as relevant or give up the right to raise those issues should the matter end up in court.

Absent the participation of the requester, there is no formal loss of the right to raise an issue in court, but most observers feel that a regulatory review weakens the potential for a plaintiff’s infringement lawsuit.

The initial iteration of the new law provided a 12-month window for challenge of a patent on any grounds and a second window, again of 12 months, after a third party has either established the potential for commercial harm due to the granting of the new patent, or after that third party has received notice of potential infringement from the new patentee. In either case, the third party participates in the review but is barred from raising any issues before the PTO in any subsequent lawsuit.

The House removed the second window altogether and thus allows a third party to raise as a legal issue any points of contention that it did not address in its regulatory appeal. The current Senate version, S. 1145, requires both the establishment of a risk of economic harm and notification of potential infringement before the second window can be invoked.

As for damages, current law gives little more guidance than a calculation of damages that is “adequate to compensate for ... infringement, but in no event less than a reasonable royalty,” a passage found in subsection 284 of Title 35 of the U.S. Code.

Both of the current bills would have courts assign a damage award that reflects only “economic value properly attributable to the patent’s specific contribution of the prior art.” However, the Senate bill modifies this to the extent that damages cannot include a calculation for lost profit. The House bill is apparently mum on the matter of lost profits.

Amy Jensen Cuniffe, senior VP for governmental affairs for AdvaMed, told Diagnostics & Imaging Week that S. 1145 “did pass out of the committee, and Senator Reid has indicated [that] it’s on his wish list for before the Columbus Day recess.” She said that the rules for debate in the House provide for only a one-hour debate, but the “rules are much more open in the Senate” and so she expects “it will take quite a bit of floor time to debate.”

Cuniffe added that “it’s unclear whether they will address this” by year’s end.

Cuniffe also said that AdvaMed members are of the opinion that the second window for contesting a patent would lead to a greater period of vulnerability. The consequent “ability to game the system leads to tremendous concern and significant liability costs to protect your patent,” she said.

AdvaMed members also feel that the damages provisions favor infringers, but not because infringers would avoid a determination of infringement, Cuniffe said. Because a new patent can sometimes be had for minor changes to an existing patent, a determination of damages based on such a marginal assessment of economic harm as is embodied in the current legislation constitutes little disincentive to infringe.