Baltimore Business Journal -- The first major overhaul of the U.S. patent system in over half a century will have to wait a little bit longer — and patent reform differences between information technology and bioscience companies will be left to play themselves out for a time.The Patent Reform Act of 2007 — a bill intended to reduce abuses of the patent system and offer challenges to weak patents — came to a sudden halt in the Senate in May.
The bill, a reincarnation of the unsuccessful Patent Reform Act of 2005, would have shifted the country from a first-to-invent to a first-to-file system. Both bills were based on recommendations made in a 2003 report by the Federal Trade Commission and a 2004 report by the National Academy of Sciences.
A similar version of the current bill was approved by the House of Representatives in September 2007.
Analysts don’t expect movement on the bill before next year.
Jeffrey D. Hsi, chairman of the intellectual property department at Edwards Angell Palmer and Dodge LLP in Boston, said the bill failed in the Senate because the IT and biotech industries, two major players in the patent reform saga, could not reconcile on the two most contentious issues — damages and post-grant reviews.
The bill would set damages for infringement to a patent’s economic value over prior art — that which was known before the claimed invention.
Hsi said limited damages might create an uptick in the number of companies who disregard patents.
“If you limit the scope of the damages, you arguably could encourage others to infringe,” he said.
The Biotechnology Industry Organization cited the “apportionment of damages” as one of the “serious concerns” the national trade group had to the patent reform measure.
“The potential negative impact of a poorly crafted bill on the U.S. economy and our global competitiveness is too great to proceed with a vote before ensuring that the legislation will truly enhance our nation’s patent reform system across all industries,” BIO CEO Jim Greenwood said in a statement in the spring.
That provision of the bill is also a major issue for Robert Coughlin, president of the Massachusetts Biotechnology Council. Coughlin said that for biotech and pharmaceutical companies — unlike software and IT — the patent is the product, making it an “all or nothing” ordeal.
“It is important that the statute does not weaken intellectual property, because in many cases that intellectual property is what small biotech firms would like to license to strategic partners,” Coughlin said.
Maryland is home to hundreds of biotechnology companies — about 360, according to MdBio, a trade group, with 23 percent of those located in Greater Baltimore. And the majority of them — 34 percent — employ fewer than 10 people.
State and local economic development officials are devoting resources to making the region a bioscience hotbed.
Michael Siekman, a shareholder and litigator at Boston law firm Wolf Greenfield and Sacks PC, said biotech could also struggle with the “second window” of post-grant review proceedings.
Under this window, Siekman said, a petitioner arguing economic harm caused by a patent can challenge its validity at any point in the patent’s life. The “first window” would let a petitioner challenge a patent’s validity within a year of the patent being granted and with a lower burden of proof.
“There is concern it is a cloud hanging over the patent,” he said. “Most people are fine with a single window.”
Siekman said the inability of different industries to find common ground on these issues, combined with intense lobbying efforts from all sides, brought the bill to a standstill.
The biotech industry, despite its opposition to this bill, is not opposed to patent reform, leaders say. What’s important is that it is done in a way that will not stifle innovation.
Hsi said patent reform has been gaining momentum since the early 2000s, through outlets beyond Congress like the courts or the U.S. Patent Office.
“I think the more it is stalled, the more some of these other avenues may be used,” he said.
David J. Dykeman, a Boston-based patent attorney and shareholder at Greenberg Traurig LLP, which has an office in Washington, D.C., said patent reform is inevitable — but “legislators are undoubtedly receiving mixed signals,” he said. “It is causing Congress to tread carefully.”
