By Lynn C. Tyler of Barnes & Thornburg LLP
Patent reform legislation is pending in both houses of Congress again this year, but the prospects for passage of a reform bill this year appear low at the moment for both substantive and procedural reasons. Patent reform has been an issue since at least 2005 and various draft bills have included several proposals, including converting from a “first-to-invent” standard to a “first- to-file” standard for inventorship, adopting post-grant opposition procedures similar to those employed in Europe, and limiting awards of compensatory damages. It is the latter issue -- compensatory damages -- that is most confounding legislators this year as they pursue the subject.
On the one hand, some constituencies, primarily the information technology and financial services industries, represented in part by a group called the Coalition for Patent Fairness (CPF), are adamant about reducing reasonable royalty awards in patent cases. The CPF favors the version of proposed reform legislation pending in the House because it includes provisions requiring the amount of a reasonable royalty for an invention to be based on the value of its contribution over the prior art. In other words, the reasonable royalty should be explicitly limited to the value of the incremental improvement the patent represents over the prior art, the so-called “essence of the invention” determined after performing a “prior art subtraction.&rdquo...
