News

Microsoft Tells Congress To Reform U.S. Patent Laws

• By Kurt Mackie
• 02/02/2011

Microsoft wants Congress to reform the U.S. patent laws by focusing on five issues that intellectual property stakeholders most want, according to the company's legal counsel.

The reform concept was floated today in a blog post by Brad Smith, Microsoft's senior vice president and general counsel, and Horatio Gutierrez, Microsoft's corporate vice president and deputy general counsel. They contended that the courts have been handling controversial legal details associated with patents and that the Congress should not get distracted by seeking reform in those areas.

According to the blog, those controversial areas include "when a jury may find that the defendant willfully infringed a patent, the standard for finding a patent holder engaged in inequitable conduct, and how to calculate a reasonable royalty for damages, among others."

Instead, Smith and Gutierrez said that IP stakeholders want five patent reforms, including ensuring that the U.S. Patent and Trademark Office (USPTO) gets proper funding, establishing a "first inventor to file" patent-claims basis, "weeding out bad patents," "allowing third parties to submit prior art" in patent review cases and ending litigation concerning false patent marking on products.

The United States actually follows a "first to invent" rule in patent cases, which is different than "first inventor to file" concept, according to Andrew Updegrove, an attorney with Boston-based Gesmer Updegrove LLP. However, Updegrove, best known for his work on standards law and open source software issues, noted that he's not a patent attorney. The idea behind the first-to-invent concept is that materials may prove that someone created an invention first, even though they didn't file with the USPTO first. That approach is thought to be more fair to inventors, but it adds complexity to the patenting and legal processes, Updegrove noted.

The USPTO has a review process in place before issuing any patent. However, the issue becomes somewhat complex and subjective in the case of software, according to Updegrove, because the software invention has to be considered "novel," "useful" and "nonobvious to one skilled in the trade" to get a patent. In addition, the invention can't be inferred from "two or three previously patented inventions that could be combined into a new invention," he explained.

"Put all that together, add it to the fact that examiners have a 'budget' of time per patent and that Congress tipped the balance towards awarding, rather than denying, patents, and it's easy to see that patents, and especially patents for 'black box' technology like software, can easily issue that are either non-novel or non-obvious -- or both," Updegrove stated in an e-mail reply to questions.

Updegrove indicated that the industry widely agrees that software patents are issued too readily by the USPTO. They are too expensive to contest, so "for many defendants, it's easier to roll over and pay a low royalty."

Microsoft's attorneys claim in the blog that patent legal reforms are needed to address abuses that can "chill innovation, job creation and growth." However, they likely would not go so far as eliminating software patents altogether -- a view held by the Free Software Foundation in the Bilski v. Kappos case, as well as by Updegrove.

"There are many (and I incline to this view) that believe that software shouldn't be patentable at all," Updegrove stated. "Copyright and trade secrets law provide very significant protection already; it's very difficult to assess software patent applications well, and it blocks innovation. In my view, software patents stifle more innovation than they promote."

Updegrove traced the rise in software patents to venture capitalist funding during the dot-com economic bubble of the late 1990s, when just about any Internet startup company could quickly get an inflated stock market valuation.

"Indeed, until VC rounds grew during the Internet bubble years, most startups didn't bother to patent software at all," Updegrove stated.

Microsoft recently announced an outreach to open source software communities in terms of interoperability, but the company -- known for protecting its proprietary software and intellectual property in the courts -- surely won't be joining the Free Software Foundation soon. Microsoft has been largely successful in getting companies to settle in intellectual property cases even before going to court, but the company has experienced some legal hits over the years that have drawn blood. It plans to contest lower court rulings against it in the i4i case before the Supreme Court sometime this spring, a case it has lost on various appeals.

The issue up for consideration at the Supreme Court will be "the standard of judicial deference regarding prior art that was never put before the PTO," according to Microsoft's blog regarding the i4i case. In other words, Microsoft feels that the legal standard of evidence for disproving patents is too high. Microsoft is also contesting damages for infringement in intellectual property legal battles with Alcatel-Lucent and Uniloc.

Microsoft's blog praised the efforts of some Congress members in initiating patent reform efforts, without mentioning the bills involved. However, there are two complementary bills currently pending in the Senate (S.23, PDF download) and House of Representatives (H.R. 243, PDF download), both going by the name of the "Patent Reform Act of 2011." The latter House bill is purely focused on reducing damages in false marking cases. False marking occurs when a company falsely indicates "patented" or "patent pending" on a product.