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Indiana firms lash out against patent proposal

March 16, 2009
Four Indiana businesses have joined more than 100 major companies in an open letter to President Barack Obama, outlining what they believe are weaknesses of patent reform legislation now before Congress and voicing concern about its potential economic impact.

The Feb. 10 letter, signed by 135 businesses, was coordinated by the Manufacturing Alliance on Patent Policy, an ad hoc coalition of manufacturing companies that in January released an analysis claiming failed patent reform proposals of past years would have risked 298,000 manufacturing jobs and reduced research and development investment up to $66 billion.

Hoosier companies signing the letter were Columbus-based Cummins Inc.; Hill-Rom Holdings Inc. in Batesville; and DePuy Orthopedics and Zimmer Inc., both headquartered in Warsaw.

A similar letter was sent earlier, but the group wanted to make sure the new president understood the stakes.

Last year, a proposal called the Patent Reform Act passed the U.S. House of Representatives but died in the Senate. Proponents were primarily large information technology and financial firms that wanted to cut penalties for patent infringement.

The letter from the businesses says, "While we shared the desire to improve the patent system, we voiced concern that a number of provisions would have weakened rather than strengthened patent prosecution."

Justifications for the past legislation were flawed because patent litigation hasn't increased significantly, the businesses said. Lawsuits were filed in 1.48 percent of granted patents in 2007, about the same frequency as the 1.45 percent of contested patents in 1993. Likewise, a patent litigation study shows a median $3.9 million awarded in damages between 1995 and 2000 compared with $3.8 million from 2001 to 2007.

"The justifications made for the legislation ... do not withstand scrutiny," the letter says. "There is no explosion of patent litigation. There is no explosion in patent damages."

Aside from the patent-reform proposals, the business group points to U.S. Supreme and federal court decisions in the past two years that are reshaping patent law: Ebay v. MercExchange, which limited availability of injunctions by clarifying the applicability of a four-factor test; the Seagate decision in 2007, which limited treble damages; KSR v. Teleflex in 2007, which reinforced the non-obviousness standard; Microsoft v. AT&T 2007, which limited offshore infringement liability; and the Bilski decision from the U.S. Court of Appeals for the Federal Circuit. The 2008 decision clarified criteria for patenting "business methods."

"Time and again, the courts have made significant changes to patent law, the full effect of which is not yet known," the letter states. "Clearly these decisions will limit legal options for patent holders in many cases."

The group agrees that reforms are needed within the U.S. Patent and Trademark Office, where it notes that 700,000 patent applications are backlogged an average of more than 32 months. The U.S. Chamber of Commerce and many companies are already working toward structural and operational changes to improve that agency, the letter says.

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