Patent ReformJune 7, 2007Federal Issues CommitteeThe following is for study only and has NOT been approved by the Board of Directors.Issue: Should C.A.R., in conjunction with NAR ,support greater transparency in the patent application process including (1) a mechanism to allow practitioners with the expertise and knowledge to review and comment on the appropriateness of a patent application prior to the issuance of the patent and (2) create a streamlined and more effective process for challenging a patent outsideof the judicial system.
Action: Action is requested at this time to due to pending legislation
Not Real Estate Related
Status/Summary: When the Democrats took over the Congress, they made it clear that their top intellectual propertyconcern for the 110th Congress was going to be patent reform. In the House, H.R. 1908, the Patent Reform Act of 2007, was introduced by Rep. Berman (D-CA). H.R. 1908 has 17 cosponsors and on May 16th was passed by a voice vote out of the House Judiciary Committee’s Courts, the Internet, and Intellectual Property Subcommittee. Rep. Berman has acknowledged that there needs to be some changes to the bill before it leaves the House, but he wants to get the bill to the committee and to the House floor in an attempt to have a final bill pass the House by the end of summer. Rep. Berman is already preparing amendments for the full House Judiciary Committee andhopes to have quick hearings and a quick markup and vote.The Senate has also introduced a bill, S. 1145, the Patent Reform Act of 2007, introduced by Senator Leahy (D-VT). S. 1145 currently has five cosponsors and is in the Senate Judiciary Committee. Senator Leahy has also announced that this issue will be his top intellectual property concern during the 110th Congress. However, as the Senate traditionally moves slower than the House, there has yet to be a large push to have S. 1145 out of the Senate before the end of summer.Background: H.R. 1098 and S. 1145 would be the first major reforms and overhauls of federal patent laws in more than 50 years. Being so, there are a lot of questions concerning the reforms and division of attitudes on the needs for reform. There are seven major areas of reform that are being proposed in H.R. 1098 and S. 1145. These seven areas are:
Switches patent application to “first-to-file” system.
Includes limits on post-grant opposition challenges.
Narrows the willful infringement standard to require the patent owner to show infringement after a warning in writing, intentional copying of a patented invention, or infringement after a court finding of infringement.
Limits infringement damages to the patent’s“specific contribution over the prior art,” not the value of the entire product in which the patent is used.
Drops provisions allowing for application of damages to foreign sales.
Attorney’s fees would be paid by each party
Limits jurisdiction and venue to avoid forum shopping.
Of greater concern to REALTORS® are provisions concerning post-grant opposition challenges, the willful infringement standard, limiting infringement damages, and venue shopping.Limits on post-grant opposition challengesSome estimates say that a patent examiner only spends 17 hours determining whether a patent should hold issue. This is a short amount of time considering the rights associated with holding a patent. Once a patent is issued, there are currently only two circumstances where a permit can be challenged: (1) requesting the United States Patent and Trademark Office (USPTO) re-examine their decision and (2) a lawsuit. These are very limited challenges and the lawsuit can prove to be an extremely extensive route.H.R. 1098 and S. 1145 would create a new procedure within the USPTO to handle more extensive reviews and challenges by third party challengers. A “cancellation petition” could be filed with the USPTO within 12 months of the issuance of the patent,if the patent holder notifies the party of its alleged infringement, if the paten owner consents to the proceeding, or at anytime if the third party demonstrates that continued availability of the patent would cause or is likely to cause “significant economic harm”. The third party filing the petition would shoulder the burden of showing why the patent should be cancelled.Narrowing the willful infringement standardUnder current law a court is allowed to award damages up to three times the amount of actual damages if it finds that the infringer’s actions were willful. H.R. 1098 and S. 1145 would require that before this be allowed a patent owner must show clear and convincingevidence that (1) the infringer performed an act of infringement after receiving written notice from the patent holder, (2) the infringer intentionally copied the patent invention with knowledge that it was patented, or (3) that after being found by a court to have infringed on a patent, the infringer engaged in conduct that again infringed on the same patent.Limiting infringement damagesCurrent law allows for very large damages to be assessed on copyright infringement. While some believe that these large penalties are deterrents, other feel that they are excessive in situations where there is often a limited violation. Under current law, damages can be assessed and royalties ordered based off of the economicgain of the product associated with the patent infringement. H.R. 1098 and S. 1145 would revise this rule to instead have the court assess royalties based on the value of the “specific contribution over prior art” that the patent holds. This would mean that the value of the patent itself would have to be determined to assign royalties instead of assigning the royalties based on the value of the product that the patent is associated with.VenueshoppingThis is where a litigant tries to have the case heard in an area that has judges that tend to rule more in their favor. Often this is in an area where neither litigant lives or works. This can addcosts to any case and is seen as unfair since it is not in the jurisdiction of either the residence or where the claimed infraction took place. H.R. 1098 and S. 1145 would eliminate venue shopping.Pro: Atthis time, many people feel that patent reform and infringements are not a large part of their life or business. Nonetheless, with the expansion of information technology into real estate, the reality is that the issue of patents may become more prevalent. Information technology systems that include uses of MLS and mapping systems are proprietary technology and traditionally patented. The uses of these technologies in business practices will becomemore common and mistakes can become costly. Patent litigation cases average $4.5 million dollars through trail. Often these costs are so excessive, that people who feel they have done no wrong will settle due to thefinancial burden.It is likely that Congress would be unaware that C.A.R. and NAR may have a vested interest in the outcome of patent reform. Using the size and known strength of C.A.R. and NAR on this issue could help tip the balance on some of the issues. If we feel this is a concern that needs to be addressed, now would be the time to adopt policy as patent reform is not oft-occurring legislation.Con: The concept behind patent protection is to create a large negative impact if these patents are violated. These reforms will reduce the punishments for those who violate patent protections and could lead to less innovation if the creators do not feel that there is enough proper protection against the use of the product that cost them hefty amounts of time, money, thought, and effort. Additionally, there are concerns that these reforms could adversely affect the technology transfers that we see between academia and the private sector.There are times where patents are issued that do not necessarily qualify as enough of an improvement of an innovation to be granted these strict protections. However, reforming the entire system to weed these patents out may also have a negative effect on the substantial patents that are granted. Everybody loves the major advances that have been made in science and technology. Advances in medicine and information technology have improved quality of life and created new markets and revolutionized how people conduct business and live their lives. However, these technological advancements came from huge efforts that took vast amounts of investment and intellectual input. The payoff for these investments is the protection that comes with a patent and the knowledge that you advancement cannot be used without your permission and decision on how much gain you will receive. If these protections are lost, what will be the incentive to continue with these improvements and advancements?
Impact on REALTORS®: There is a chance that the patent reform would have an impact on only a limited number of REALTORS®. REALTORS® and their offices do not intentionally attempt to violate patent laws. Nonetheless,there are times that using information technology available on some MLSs and other features on real estate sites can violate a patent protection. As REALTORS® move to using new and expanding information technology features available to them, patent issues can begin to increase.There is a pending case (REAL v. Sarkisian) where a REALTOR® was sued concerning her use of a computer mapping technology that allowed her users to search online for properties. A MLS that the REALTOR® was a subscriber to offered a similar mapping system, which they had patented.As REALTORS® move towards further integration of digital and information technology(especially on the Internet) there becomes greater risk that those involved in the buying and selling of real estate may be subject to licensing fee demands based on the alleged use of an obscure software patent. NAR Policy: At the May 2007 Mid-Year Meetings, NAR took the following policy: “That NAR support greater transparency in the patent application process including (1) a mechanism to allow practitioners with the expertise and knowledge to review and comment on the appropriateness of a patent application prior to the issuance of the patent and (2) create a streamlined and more effective process for challenging a patent outside of the judicial system.”
C.A.R. Policy: C.A.R. currently has no policy on patent reform.Should C.A.R., in conjunction with NAR,support greater transparency in the patent application process including (1) a mechanism to allow practitionerswith the expertise and knowledge to review and comment on the appropriateness of a pent application prior to the issuance of the patent and (2) create a streamlined and more effective process for challenging a patent outside of the judicial system.