Medical Devices Today reports that identical bills introduced in the House and Senate April 18 (HR 1908
and S 1145) could weaken the value of patents and jeopardize firms' access to venture capital. The reforms are backed by IT giants like Microsoft, Cisco Systems
and Intel. Sponsors say the legislation will prevent litigation abuses
and increase patent quality. There are three primary changes in the draft legislation.

Infringement Penalties

One key change to the patent system included in the legislation
would be to base penalties for infringement on the isolated value of
the patent in question instead of the value the patent may add to the
overall product, a guiding consideration under current practice. As a
result, awards would likely be smaller.

This so-called "apportionment" provision was included at the behest
of information technology firms that have had to pay damages that some
say are far greater than the worth of the minor patent involved.

However, in the medical device arena, "there is this iterative
process [where] one minor improvement can really mean the difference of
tremendous additional sales in the marketplace," Leahy explained. "We
feel that the overall value should be captured."

Another far-reaching provision in the bills would establish a
"post-grant opposition" system under which patents could be challenged
through the Patent and Trademark Office instead of in court. The idea
is to offer parties an alternative to high-cost litigation.

Patent Challenges

The provision would allow persons to petition the patent office to
cancel a patent during the first 12 months after it is granted. Then a
"second window" would open for the rest of the patent's lifetime
whereby anyone at risk of "significant economic harm" could challenge
the patent's validity.

MDMA and other med-tech groups are particularly concerned about the
"second window" provision. While petitioning through this patent-office
avenue would preclude one's ability to make the same challenge in
court, device stakeholders are concerned that the open-ended timeframe
will lower the value of their patents by creating uncertainty about
their long-term stability.

Changes Regarding Patent Continuations

A third major provision in the bill grants the patent office
explicit rulemaking authority. Stakeholders believe this is a backdoor
way of finalizing the office's January 2006 proposal to limit the
number of continuations a firm can file on any one patent application.

Continuation applications allow firms over time to add new
knowledge, discoveries and innovations to the original "parent
application." Such applications are commonplace for medical devices,
but the patent office's proposal would allow firms to file only one
continuation per parent application. The proposed change provoked
criticism from hundreds of stakeholders.

Continuation applications give firms the flexibility to modify
claims as their inventions develop, and Leahey explained they can
reduce the upfront cost of filing for patents by allowing firms with
limited resources to build their patent portfolios over time.

The legislation is quickly moving ahead; device vendors and others are scrambling.