Medical Device Daily Washington Editor

WASHINGTON — The announcement of new patent reform legislation was made with a little fanfare here yesterday, but that announcement, which preceded publication of the latest legislation by minutes, was greeted with jeers from industries that believe that the provisions of the new bill that deal with apportionment of damages will be harmful to their viability.

The seemingly insignificant differences between the latest patent reform legislation and its predecessors have drawn in the same set of combatants as previous bills, with medical device makers among those expressing concern that proposed changes to how damages are awarded will reap the bitter reward of unintended consequences. Still, representatives of industry acknowledged on a conference call immediately following the congressional press conference that their concerns might be allayed if judges were more in the habit of giving juries something more detailed than a generic set of instructions on how to determine damages for infringement.

Sen. Pat Leahy (D-Vermont), chairman of the Senate Judiciary Committee, opened the congressional press conference by stating, "This is the year in which bipartisan patent reform should be enacted." Remarking that innovation is "not a Democratic or Republican objective," he said reform "is about jobs and consumers," and that "all benefit under an efficient patent system."

"One provision we have not changed ... the most controversial provision in the bill," Leahy said, is apportionment. He said the decision to leave apportionment untouched is "not because we assume it's the final language in the bill," but to serve as a starting point. He noted that the Senate Judiciary Committee will commence with hearings on March 10.

Sen. Orrin Hatch (R-Utah), said the Patent Reform Act of 2009 "signals what is the third and I hope the final round" of long-standing efforts at reform. He said the process "has been long and tedious," adding that reform "is long overdue and integral to maintaining America's competitive edge."

"I'm pleased at the manner in which this bill has been put together," Hatch said, although he remarked that "we all agree that more work remains to be done on damages and inequitable conduct" provisions.

Rep. John Conyers (D-Michigan), who chairs the House Judiciary Committee, said, "We've all learned a lot from our last endeavor," a striking comment given that the apportionment language remains in the latest legislation and the fact that the House bill passed last year, but the Senate bill died on the floor because of the apportionment provision.

"The two biggest stumbling blocks are ... damages and inequitable conduct," Conyers acknowledged, but he also noted that there are several ways that the apportionment problem could be handled. "That's what the hearings are about," he said, stating further that "the whole bill is open for consideration."

Following the congressional press conference, an industry group known as the Innovation Alliance (Washington) held a conference call to discuss the bill. Stan Fendly, director of legislative and regulatory policy at Corning (Corning, New York), said, "one thing that is obvious to us about this bill is that the most controversial element is unchanged" from the Patent Reform Act of 2007. He called for "a new approach that does not disadvantage" a number of industries to the benefit of industries that support apportionment.

"If we can't be protected, we can't invest," Fendley said.

His remarks echoed those of attendees at a briefing in Washington last week held by the National Venture Capital Association (NVCA; Arlington, Virginia) and the Medical Device Manufacturers Association (MDMA; Washington), during which a venture capitalist said that innovators in the device industry face a "perfect storm" of developments that threaten to quash investment and, consequently, innovation" (Medical Device Daily, March 2, 2009).

Michael Biber, executive director of intellectual property and licensing for Dolby Labs (San Francisco), described apportionment as "a solution in search of a problem." He made the case that a recent review of patent litigation showed that the rate of patent suits "has stayed relatively stable" and that a more needed reform is giving the U.S. Patent and Trademark Office sufficient resources to deal with a patent backlog, which is pegged by many sources at more than 700,000 applications.

One of the speakers was heard during the conference call to say that one of the problems with damages under current law is that judges sometimes give juries fairly generic instructions on how to determine damages rather than give juries a clearer understanding of a reasonable assessment of damages in the case at hand.

In a March 3 statement, Stephen Ubl, president of the Advanced Medical Technology Association (AdvaMed; Washington), said the association's "paramount concern remains the apportionment of damages provision." He said legislation "should not provide significant advantages to one business model at the expense of others" and that "a reduction in damages to the injured company serves to cheapen medical technology intellectual property and could have the perverse consequence of encouraging infringement."

Brian Pomper, executive director of the Innovation Alliance (Washington), said in a March 3 statement that the new patent reform bill is "basically the same divisive bill that was opposed by a broad range of American industries, innovators, universities and labor unions when it stalled in the last Congress."

Pomper also stated that the provisions of the bill that deal with venue shopping fails "to take into account recent case law" and "is simply out of date." However, he warned that the "green technology sector" could also be damaged by apportionment.

The bill already has opposition lined up in the House of Representatives. Don Manzullo (R-Illinois) and Mike Michaud (D-Maine) published a joint statement dated March 3 arguing that the new "version of the so-called patent reform bill again weakens America's strong patent system, making it easier for foreign companies to take our ideas and our jobs."

The congressmen, who are said to have led a coalition of 64 members of the House and Senate against patent reform in the 110th Congress, also state that the effect of the apportionment language in the bill "would encourage intellectual property theft by foreign competitors, putting 298,000 American manufacturing jobs at risk ... at a time when our people are in desperate need of jobs."

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