Letter from AmeriKat I: Of Patents and Politics

Last week, as the AmeriKat dragged herself from the office late the other night, she was lucky enough to watch a fiery blossom of fireworks explode over Soho Square in celebration of Guy Fawkes Night. When the AmeriKat was a kitten she always felt a little bit disturbed when watching British classmates construct from straw life-like effigies of Guy Fawkes for the annual ceremonial burning. But despite this discord in the celebration, the heart of the holiday is to remind us of the fight for parliamentary democracy. Although we don’t burn effigies of the Red Coats, the celebration is not too dissimilar to the U.S.’s Fourth of July – both are reminders of the bloody fight for democratic rule (plus and excuse to look at some pretty fireworks).

No Parties for Kappos Yet As Critics Question Patent Reform Legislation

But as both countries know, democratic rule is not always so democratic. Democratically elected officials are in the business of appointing unelected individuals to senior policy roles. When these appointees come from big business backgrounds, critics begin to question their motives for policy reforms.

In the past month critics of the Obama administration’s position on patent reform have complained that David Kappos and Marc Berejka are over-influencing policies that directly benefit their former employers. This has especially raised questions, given President Obama’s previous Executive Order 13490 issued on his first day in office, prohibited appointees of his administration from working on any matter for two years that “directly and substantially related” to their former employers. David Kappos left his role as general counsel for intellectual property at IBM when he was appointed in August to head the USPTO. Marc Berejka was in various senior government affairs positions at Microsoft including spending eight years as a lobbyist for the company in D.C. before leaving to act as a senior policy adviser in the Commerce Department. Unlike Kappos, however, Berejka’s position did not require Senate confirmation.

According to this article in Politico, Representative Marcy Kaptur (D-Ohio) said that it was not apparent whether Kappos or Berejka had “sufficiently distanced themselves from their corporate roots to be objective on patent reform” (quote from the article). Kaptur stated that she thinks that “the president’s got a problem with his personnel office... By moving these people inside, to me, you jaundice the whole process."

Prior to his appointment to the USPTO in March, Kappos testified before a Senate Judiciary committee stating overwhelming support for patent reform in similar terms to the current proposed legislation. Specifically he praised that of a post-grant review procedure. Post-grant review of the patentability of patent claims currently occurs before the USPTO in the following four circumstances when:

(1) an applicant files an application to reissue a patent and requests correction of at least one error in the patent;
(2) an interference is declared between the patent and a pending application, and the applicant in the interference seeks judgment based on unpatentability of the patent;
(3) a patent owner or third-party requires re-examination of the patent and
(4) the Director initiates re-examination of a patent on his own initiative.

A third party can only challenge the patentability of a patent in the USPTO on grounds of prior art. Third parties cannot conduct discovery or introduce evidence necessary to challenge patentability. In effect this means that third parties are prevented from effectively challenging patents unless they threaten or issue a civil lawsuit.

As IPKat readers know, any form of patent litigation is liable to be prohibitively expensive for one if not both parties. Thus the purpose of new legislation on post-grant review would enable inter partes post-grant to review and give threatened parties an “alternative forum to challenge patent validity for less money... and time than by civil suit.” The inter partes review must occur within a year of filing and would occur before patent judges within the USTPO. According the USPTO website, “this will enhance the patent system as a whole by strengthening those patents that survive the review and eliminating those patents which contain unpatentable subject matter.” A sort of Darwinian survival of the fittest system, the AmeriKat thinks.

However, the concerns expressed by commentators are that in fact these post-grant review mechanisms would actually increase costs to patent holders by enabling a higher frequency of meritless and repeated challenges. A possible effect of retaining both ex parte and inter partes review may have the effect of minimizing the certainty of valid and enforceable patents so far as to render them near-worthless. Valueless patents, as any venture capitalist knows, are a no-go area for potential investments. Perhaps recognizing this concern in October, twelve Republican U.S. senators sent a letter to Senate leaders criticizing the proposed Patent Reform Bill stating that the legislation threatened to “diminish the value and enforceability of U.S. patent rights.”

The argument goes that the ability to withstand patent reviews would increase the potential validity of the patents, which in turn would result in increased investment in those patents. Increased investment in those patents would thus increase the industrial application and commercialization of the patents. Likewise, an inability to withstand patent reviews would decrease validity and enforceability, and thus the commercialization of the patent. It is argued by small companies and universities that only large companies would be able to benefit from this because they would not only be able to withstand the financial ramifications of repeated post-grant reviews but also initiate their own third-party reviews against competing patents.

However, as reported by the Wall Street Journal, Horacio Gutierrez, deputy general counsel of Microsoft, stated that the reforms and post-grant reviews are “essential to maintaining high-quality patents because it allows the validity of questionable patents to be tested.”

The AmeriKat finds that, politically, this whole issue is incredibly interesting. In the issue of patent reform we are seeing some Republican members aligning with academic institutions and small businesses, while the Democrat’s policy is seemingly supporting big business. Generally, it is the other way around.