Sunday, September 09, 2007

Big companies win on US patent reform

This is a fight between the big companies and the small companies who make their living licensing patented inventions to larger firms or directly to the public.

Big companies in information technology depend on squashing small companies, buying intellectual property on the cheap from small companies, and buying pioneering companies on the cheap. They can easily do this when the small companies either don’t protect their intellectual property (a problem in many small software companies) or open source their technology in unwise ways.

Big companies are now trying to weaken the patent system before the small companies wake up to its value.

The House of Representatives on Friday passed 225 to 175 with strong bipartisan support, the most comprehensive patent reform in half a century. It delivered a victory for computer technology and financial services companies and leaving drug companies, small inventors, and the U.S. Patent and Trademark Office bracing for a bigger fight before the bill hits the Senate floor.

The legislation, would make patents harder to obtain and easier to challenge and is intended to curtail litigation by limiting where patent owners can file suit and how much they can collect in damages.

"This patent reform will help speed up patent decisions, clear up disputes and clarify the jurisprudence behind these lawsuits," said Jonathan Yarowsky, policy counsel for the Coalition for Patent Fairness, the powerful lobby group which represents technology companies such as Microsoft and Google as well as financial services companies, including Capital One. "This will streamline innovation."

Microsoft, Intel and Cisco Systems have been lobbying for changes for more than five years. They say they have been under siege from lawsuits seeking high royalties on small features.

These companies are subjected to “legalized extortion,” said one sponsor of the bill, Representative Lamar Smith, Republican of Texas. “Too many patents of questionable integrity have been approved, and owners of these patents have found a unique way to make money.

The creation of inventions and intellectual property is a vital element of the development of the US economy to become a global economic superpower.

Experts in the intellectual rights field argue that America’s economic future depends on creating and licensing intellectual property. Strong worldwide patent rights are the foundation for American economic survival in a fast changing globalised world.

One sticking point passed by the House is the new set of guidelines for calculating patent infringement damages.

Currently, damages can be awarded based on the entire value of a product that includes a component that infringes on a patent. Under this legislation, judges can instruct juries in certain cases to award damages only for the value of the component. If a computer contains a chip that is patented, for example, the chip patent's owner would be awarded damages based on the value of the chip rather than the computer.

The bill would also change the rules at the Patent and Trademark Office so patents would go to the first person to file an application, not necessarily the first inventor.

Intense lobbying has surrounded the patent issue, reflecting the importance of patents to the American economy. Intellectual property in the United States, dominated by patents, is valued at as much as $5.5 trillion, more than 40 percent of the nation’s gross domestic product, according to a 2005 study by USA for Innovation, a Washington group that advocates free trade.

The US has the best patent system in the world, and is the world’s leader in innovation. As the bill passes through the Senate, opponents of bill the are horrified against the implications of the bill. The consequences of the bill will become clearer after the dust settles down.

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