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Patent Bill Unites Past Enemies

Measure Still Faces Tests in House, Senate

Well, that didn’t take long.

Two weeks ago lobbyists for banks and retailers were waging rhetorical “cage matches” over debit card swipe fees. Now, they are holding hands on patent reform in advance of a key vote.

With an overhaul of the nation’s patent system expected on the House floor as soon as today, the National Retail Federation sent a letter Tuesday to lawmakers in support of a bank-friendly provision aimed at rooting out bad patents.

“Banks sometimes are retailers, too,” said David French, the chief lobbyist for the NRF, the world’s largest retail trade association. “This is Washington; we know we have fights. Sometimes we are with people, and sometimes we are against them.”

The provision, which applies to patents on business processes used by the financial services industry such as check-scanning practices, would allow banks charged with patent infringement to demand a government review of the patent’s validity. It’s one of several contentious elements in what was expected to be a noncontroversial makeover of the patent system.

But retailers, from McDonald’s to, have also been sued for infringing on these kind of patents, which they describe as low-quality patents held by nonpracticing entities.

In the letter sent to House Judiciary Chairman Lamar Smith (R-Texas) and ranking member John Conyers (D-Mich.), French noted that the technologies are used in merchants’ marketing, payment and customer service practices.

For months, the Financial Services Roundtable, the Independent Community Bankers of America and other financial trade groups have been leading the fight for the provision, known as Section 18, arguing it is necessary to deal with a spate of “business-method” patents
inappropriately issued earlier in the decade for practices that were already widely in use.

But when lobbyists for a few of these patent holders began to gain traction with lawmakers on both sides of the aisle, the financial services industry reached out to retailers ­— still glowing from their major victory on the swipe-fee vote — for help.

An amendment sponsored by Reps. Aaron Schock (R-Ill.) and Maxine Waters (D-Calif.) striking Section 18 from the bill is expected to come up for a vote today on the floor. Lobbyists on both sides spent the week making their final case to lawmakers and reporters, with business-method patent holders arguing that the provision amounts to an earmark for big banks, which stand to save millions of dollars in patent-infringment fees if it becomes law.

But for all the lobbying and controversy surrounding Section 18, another roadblock in the form of Sen. Tom Coburn (R-Okla.) could stand between patent reform and president’s pen.

Even as House Republicans reached an agreement Tuesday to move long-stalled patent reform legislation, Coburn remained opposed to any deal that gives Congressional appropriators a hand in the patent office’s finances.

The bill, which enjoys the support of the Obama administration, has been bogged down thanks to a fight between the Appropriations and Judiciary committees regarding oversight of how patent office fees are spent under the bill.

According to Senate aides familiar with the situation, Coburn is unlikely to accept a last-minute deal cut in the House that would segregate fees collected by the Patent and Trademark Office in a separate fund because the arrangement would still give the Appropriations Committee broad authority regarding how the funds are spent. The Senate-passed bill allowed the PTO to keep and use its fees.

“He wants to talk to [House Majority Leader Eric] Cantor … but he is not interested in giving the appropriators any access to that fund,” a Senate GOP aide said, adding that the dispute is a “classic appropriations turf war.”

But whether Coburn will end up using procedural tactics to block the bill remains unclear as he continues to hold his cards close to the vest. A Coburn spokesman declined to comment.

“He always leaves all procedural options on the table and often comes up with new ones,” the Senate aide quipped.

It also remains unclear what effect Coburn’s opposition will have on the timing of the legislation. At press time, the bill was expected to go before the Rules Committee, and aides said floor consideration could begin Wednesday.

But that could change because the hope had been to pass a bill out of the House that would easily pass muster in the Senate, allowing it to avoid a lengthy amendment process and subsequent conference committee.

Notably, after years of missteps on the issue, the patent reform bill had widely been seen as a rare example of policy legislation that could pass both chambers and make it to President Barack Obama’s desk.