Patent reform fight drives wedge through tech sector

The patent reform legislation gaining momentum on Capitol Hill is dividing the tech industry into warring camps.

Newer companies like Google, Facebook and Amazon are pushing lawmakers to apply a review process for patent infringement to software, arguing it could help them combat “trolls” who bring frivolous lawsuits.

But members of tech’s old guard such as Microsoft say the move is unnecessary and could have unintended consequences for the industry. 

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The review process is “the one issue that seems to blur the lines a little bit,” said Blair Jacobs, a patent lawyer at McDermott Will & Emery who represents Yahoo and Google in patent procurement matters.

Tech companies are united in calling on lawmakers to set up financial penalties for patent infringement lawsuits that are found to be frivolous. They say those penalties would serve as a deterrent to time-consuming, costly litigation.

But the companies are divided on what the role of the U.S. Patent and Trademark Office should be.

Under current law, a company sued for patent infringement can have the Patent Office reevaluate the validity of that patent — but only if it is for a business method related to a financial service.

Google, Facebook, Amazon, Yahoo and the trade associations that represent them say lawmakers should give the patent office oversight of all software infringement claims, and have made their case in multiple letters to Congress in recent months.

Challenging bad patents at the Patent Office would be a “more efficient and lower cost way” to avoid litigation, said Michael Beckerman, president of The Internet Association. 

Beckerman and the companies say the extra scrutiny from the Patent Office would only be a problem for people who are suing based on broad and vague patents that shouldn’t have been issued in the first place.

“If you’re confident enough to sue someone under the patent, you should be willing to have it reviewed,” Beckerman said.

“Aren’t we all better off with a patent system ... that recognizes when it makes mistakes?” said Jon Potter, president of the Application Developers Alliance, which includes Google, Yahoo and dozens of app developers.

On the other side of the issue are groups such as BSA-The Software Alliance, which represents software companies such as Apple and Microsoft that have massive patent portfolios.

They say the patent system already has ways to combat the broad patents that trolls use to secure legal settlements.

Microsoft deputy general counsel Horacio Gutierrez last week said there are already “opportunities to deal directly with that bad conduct and bad behavior.”

Emery Simon, a counselor to the BSA, said opening up the Patent Office review process to software patents would create “the opportunity to challenge a lot of patents that shouldn’t be challenged.” 

Patent Office reviews can take up to 18 months, which Simon said “is an eternity” in the tech world. 

Innovation Alliance Executive Director Brian Pomper said many patent infringement claims have merit and should be heard in court without delay. 

“There are plenty of times that defendants are resisting legitimate suits,” Pomper said. 

The Innovation Alliance opposes expanding the review process to software patents, and organized a letter to Congress last month making that position known. BSA, Microsoft and IBM signed the letter.

Both sides of the patent issue are optimistic they’ll prevail.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) introduced a patent reform bill earlier this month, and expressed optimism he will be able to work with Democrats to get a bill to President Obama’s desk. 

Groups opposed to expanded review say Goodlatte’s bill opens up too many patents to scrutiny. But others say the bill does not go far enough.

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) is expected to introduce companion patent legislation in the coming weeks. Leahy has committed to working with Sen. Charles Schumer (D-N.Y.), who introduced legislation earlier this year that would apply the patent review process to software patents.

The odds are “good” that Schumer’s review expansion bill will become a part of Leahy’s bill, according to Matt Levy, patent counsel at the Computer and Communications Industry Association.

Lawmakers are also facing pressure from the Obama administration to expand the review process. Patent Office Deputy Director Teresa Stanek Rea last week said the administration supports making the change for “a limited range of software-related patents.”

Beckerman of The Internet Association said he is confident lawmakers will be able to find language that allows a “limited” group of patent fights to wind up at the Patent Office. 

“It’s totally likely and feasible that we can work out a definition,” Beckerman said.

— This story was updated at 11:58 a.m.