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Patent Pending

A Bill on a Highly Specialized Topic Gets Top-Drawer Lobbying

Patent reform has a ring to it that makes Congressional staffers’ eyes glaze over. Even the lobbyists who work the issue seem to have developed an inferiority complex that few other specialists — other than, say, tax attorneys — could understand.

But the ongoing flurry of behind-the-scenes maneuvering, deal-making and bickering among companies and trade groups over patent reform legislation has become positively riveting.

For years, companies, especially those in the high-tech sector, have called for reforms to the U.S. patent system. But as a draft bill by the House Judiciary Committee’s subcommittee on the courts, the Internet and intellectual property has circulated, a growing number of interested parties have galvanized their lobbying efforts.

These groups include not just a slew of tech companies and their trade groups, but also such giants as the Pharmaceutical Research and Manufacturers of America and the Financial Services Roundtable.

“High-tech may have started the debate,” said Ralph Hellmann, chief lobbyist for the Information Technology Industry Council.

But, he added, as the reality of legislation inches closer, more players have placed patent reform near the top of their agenda.

Lobbyists on all sides of the issue cheer many of the provisions in the draft version. But a few items have proven so contentious that there may be little hope of finding an equitable resolution, some industry insiders said.

“I think much of what’s in this [draft], I really like,” said former Rep. James Rogan (R-Calif.), a one-time head of the Patent and Trademark Office who’s now a partner at the law firm Venable. “Some things give me a little heartburn.”

The biggest sticking points, lobbyists said, include the ease with which patent-holders can seek an injunction against a company it believes is infringing on their patent; whether a patent is granted to the person who first invented something or to the inventor who filed the earliest application; and moving some patent disputes out of the court system and into the patent office.

Rep. Lamar Smith (R-Texas), chairman of the intellectual property subcommittee, said his panel has had discussions with “all the major interest groups for a number of weeks. It has been a major undertaking.”

Those groups include the American Intellectual Property Law Association, the American Bar Association, the Business Software Alliance and the Biotechnology Industry Organization, among others.

Before introducing a bill, Smith said, outside groups plan to meet “one more time at my request.” Then, the committee will work on drafting the bill over the week of Memorial Day. “It’ll be ready when we return,” he said, indicating that he will introduce legislation the week of June 8.

Although he declined to discuss specifics about the bill, Smith said, “We’re making progress on all fronts.”

Rogan, who said he opposes the idea of making it more difficult to get injunctive relief, said that’s one of the most controversial aspects of the possible legislation.

“What seems like this obscure piece of language, that’s going to be the huge fight,” Rogan said. Another big fight, he said, will be on the first to file versus first to invent matter. “Those are the two battlegrounds that you’ll see in this bill,” he said.

On one side of the issue are PhRMA and such groups as the American Intellectual Property Law Association. High-tech groups have taken the other side.

“Our deep concern, as one of the industries deeply invested in intellectual-property rights, is when you start changing the patent law, there is the potential for weakening patent rights,” said former Rep. Billy Tauzin (R-La.), who took the reins of PhRMA in January. “The laws are obviously subject to revision and reform, but our concern is that they not be diminished or in any way harmed. We’re all over the world arguing for patent and intellectual property protections. … It would be harmful if in our own country we developed less protections.”

Unlike many of the software and technology companies, PhRMA’s members want to maintain their ability to stop a patent infringer from making a product.

In real world terms, Tauzin said, drug companies have 1,000 new products in the pipeline that could cure or treat diseases like diabetes, cancer and AIDS. “If consumers want the process of discovery and innovation to continue you’ve got to be careful not to damage that protection system,” he said.

Tauzin said that PhRMA has continued to negotiate with software firms and high-tech companies. On the lobbying front, he said PhRMA’s and other groups’ efforts are “just getting started.”

On the other side, representatives of the high-tech sector said that lawsuits over patents — or the threat of an injunction — has stifled technological progress.

“We want to curb the lawsuits,” ITI’s Hellmann said. “It’s beginning to curb innovation.”

In one key alliance, tech companies have lured financial services concerns to their side of the table.

One motivation driving the two sectors together is a fight against “patent trolls.”

“A patent troll,” said Bruce Lehman of the law firm Akin Gump Strauss Hauer and Feld, “is someone who all they do is get the patent and look at people who already have products on the market that embody the technology, and then they sue them.”

Generally, he said, patent trolls don’t sue little guys: “They go after deep pockets.”

Andrew Barbour, vice president of government relations for the Financial Services Roundtable, said that his members, like the software companies, fear the patent trolls.

“Their business model is to hold companies hostage and extract money from them under the threat of permanent injunction,” Barbour said. “We consider an injunction provision to be central to achieve meaningful patent reform.”

On May 19, ITI convened a meeting at its Franklin Square offices of the usual tech suspects but also financial services allies.

“There was a feeling that there were a number of lobbyists in the room that said that PhRMA in particular is ramping up its lobbying effort in this area every day,” said one participant in the meeting.

One of the meeting’s main topics was PhRMA’s activity on the matter. One technology industry source said the patent debate went from a tech-dominated issue to one that is now more intensely focused on PhRMA.

“The entrance of PhRMA,” the source said, “is one of the most significant developments.”

A lawyer and lobbyist who works on patent issues added, “There’s a lot of opposition that has been spun up from some of the industries that have been late to the game, and I think PhRMA’s involvement has given everyone pause.”

A Republican lawyer who has lobbied on intellectual-property issues for years said, “PhRMA has a big war chest and PhRMA is used to getting their way. In this, they’re getting into a fight where there are a lot of other very big dinosaurs.”

The tech industry source added that some Democrats have championed patent reform, in part because PhRMA doesn’t have many allies on that side of the aisle. He pointed to a recent letter sent by the New Democratic Network in support of reforms encouraged by the tech sector.

But at the same time, high-tech industry lobbyists said their message has remained keenly focused on something that resonates strongly with Republicans: tort reform.

“It is very much a legal-reform issue,” Hellmann said.

Q. Todd Dickinson, vice president of intellectual property for General Electric and a former undersecretary of Commerce for intellectual property said, “We’re at a very ripe point for patent reform.” But, he added, “If you try to deal with the problems that one particular industry has by lowering the value of everybody else’s patent portfolio, that’s a problem.”

On “patent trolls,” Dickinson said that “one person’s troll is another person’s business. While I think there are abuses that need to be carefully monitored, the fact that people own patents and then seek to use that or recover on that investment, I think that’s how the system is supposed to work.”

Dickinson added that “it’s a tough tough set of issues,” though he gives patent reform good odds for passing.

“It’s very important and doesn’t have the sexy appeal that a lot of other issues have — like judicial nominations — but has real-life impact on the economic health of the country,” he said.

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