Bert Caldwell: Current patent reform much needed, but shortsighted

If intellectual property is the central economic asset of the 21st century, the United States is on the threshold of signing away the deed, Spokane patent attorney Keith Grzelak says.

Grzelak, who practices at Wells St. John, has become an influential critic of a patent reform effort he says will severely weaken protections so fundamental they were enshrined in the U.S. Constitution.

An electrical engineer by training, Grzelak has been immersed in the reform debate for years as a member of the policy committee of the Institute of Electrical and Electronics Engineers’ U.S. affiliate. He is the current chairman, and as such finds himself among those leading the charge against legislation opposed by an unlikely coalition that includes the AFL-CIO, the National Association of Manufacturers, many of the nation’s leading research universities, and corporate behemoths like Exxon Mobil and Procter & Gamble.

The biotechnology industry has been most concerned because of its long, expensive product-development cycle

Support for reform comes mainly from the Coalition for Patent Fairness. Members include high-tech giants like Microsoft and Intel, who argue that the patent system has been badly abused by “trolls” and others who obtain patents on the flimsiest nuances of existing technology, then go looking for a court or jury willing to award them million of dollars in damages for alleged infringements.

Both sides of the debate, which has been largely bipartisan, say they want strengthened patents, and a strengthened patent system, which has been overwhelmed by new filings. Until this year, the Bush administration had been diverting money from patent filings for other uses. With those funds restored, the Patent Office has hired more than 1,200 new examiners, and plans to add another 1,000 per year over the next five years.

They have their work cut out for them. The office received 440,000 applications in 2006, and the backlog is around 700,000.

Patent law has not been updated since 1952. The absence of Congressional action since then has forced the courts to sort out many of the issues raised by the explosion of new products, some of which incorporate hundreds or thousands of patented ideas or technology. The U.S. Supreme Court under Chief Justice John Roberts has taken special notice of the problem, in April tossing out a $1.5 billion judgment against Microsoft in favor of AT&T.

Numbers that size get even Congress’ attention, and reform efforts began two years ago. But as is often the case, Grzelak says, the debate remained behind the scenes until the U.S. House of Representatives passed its bill a week ago.

He has not been able to keep up with the calls and e-mails since then, says Grzelak, who stresses that his views are that of the IEEE, not necessarily Wells St. John. Thursday, he and a group he says will include a pre-eminent high-tech pioneer fly to Washington, D.C., to express their concerns to key Senate staff members.

For Grzelak, they boil down to the damage that will be done to inventors and entrepreneurs that are the font of new economic activity and jobs.

Proposed new pre- and post-patent review would expose ideas to copycats — read: major technology companies — with the technical, legal and financial resources to squash small companies, he says. Changes in the way damages would be calculated if the infringed patent was just one of hundreds in a new device could shrink awards to the point a claim would be meaningless.

Hans Sauer, a Washington, D.C., attorney for the biotech industry, says reform takes on “existential proportions” for companies that are nothing without intellectual capital, and the venture capital that vanishes if patents are suspect.

Neither the House nor Senate bill, he says, address “inequitable conduct” provisions in existing law that permit courts to toss out legitimate, enforceable patents if there is anything in the prodigious exchange of information between examiner and company that is inconsistent or otherwise calls into question its legitimacy.

Grzelak and Sauer say no bill would be preferable to either bill.

Getting a handle on massive damage awards, which the courts have undertaken, will silence many who criticize current law. But a framework 50 years old surely needs legislative review as well. With patents and intellectual property under attack globally, protecting both is more important than ever.

Reform should be done with care, but it should be done.