Thursday, July 12, 2007

Intel's Sewall publishes "Patent Nonsense" in WSJ on day Senate takes up S. 1145

Bruce Sewall, general counsel for Intel Corp., has a commentary in the Wall Street Journal entitled "Patent Nonsense," which appears [surprise!] just as the Senate takes up S. 1145. The first paragraph includes text:

Fortunately, the bipartisan "Patent Reform Act of 2007," introduced in both the House and Senate, would improve the process for granting patents, and rebalance court rules and procedures to ensure fair treatment when patents wind up in litigation. The Senate Judiciary Committee will take up S.1145 today [July 12, 2007].

Sewall raises the patent quality issue: The number of questionable, loosely defined patents, moreover, is rising. One company holds patents that it claims broadly cover current technologies that allow people to make phone calls over the Internet. Another has staked a claim on streaming video over the Internet generally and has pursued colleges for royalties on their distance-learning programs. In 2002, a five-year-old boy patented a method of swinging on a swing.

Significantly, the first "reform" addressed by Sewall is the post-grant opposition, including the controversial second window:

Unfortunately, under current law, parties that want to innovate in areas covered by questionable patents have only two options, both of them bad: an ineffective, rarely used re-examination process, or litigation -- the average cost of which is, by some estimates, $4.5 million. This impedes innovation, as the FTC noted: "One firm's questionable patent may lead its competitor to forgo R&D in the areas that the patent improperly covers."

The Patent Reform Act would allow patents already issued to be reviewed, either immediately after the patent is granted or later, if a party can establish that significant economic harm may arise from the assertion of the patent. This new procedure would help weed out bad patents and cut down on litigation as a first resort, as it would allow for meaningful challenges to bad patents in the patent office, which is best situated to evaluate the claims. While some fear this will give patent infringers a tool to challenge patents they are infringing, the Patent Reform Act authorizes the director of the patent office to develop and enforce rules to prevent such abuse.

One can only surmise that Sewall is unfamiliar with what Deming said about the lack of quality in adding inspection steps to a production process.

Separately, IPBiz notes that the "rarely used" process of re-exam was used against the Eolas patent (unsuccessfully), against the Smucker crustless sandwich patent (successfully) and is being used right now against three stem cell patents of Thomson / WARF. This "showing of an antiquated understanding of the facts" reminds one of David M. Simon, chief patent counsel of Intel, who referred to the conclusions of the first Quillen and Webster paper in the year 2003 (specifically, before Congress on July 24, 2003), after the conclusions had been modified by Quillen and Webster in 2002.

Sewall does not use the word troll, but he could have: Shell corporations have been established all over the country to take advantage of this loophole, with patents being assigned to such corporations simply for the purpose of filing a suit. For example, one California-based company aptly named Plutus IP routinely transfers patents to shell corporations that it incorporates in remote jurisdictions it perceives as advantageous days before filing lawsuits. Earlier this year, it incorporated one such shell corporation, Gemini IP, in Wisconsin just 10 days before it filed a lawsuit there against a major, California-based networking company to get procedural advantages -- even though no known witnesses or documents relevant to the case were located in Wisconsin.

Sewall did take advantage of other soundbyte opportunities: The U.S. Supreme Court has taken four patent cases over the past year, an astonishingly high number, and in all four of those cases it decisively ruled in favor of those advocating reform. "Gobbledygook," "worse than meaningless" and "retards progress" are just a few phrases used by justices recently to describe some key patent standards.

Recall that the Coalition for Patent Fairness has president Doug Comer, who is also Intel's director of legal affairs and technology policy.

Sewall's commentary evokes T.D. Wilson's text: First, vested commercial interests will always seek to distort the system to their benefit through political action and lobbying and where the prevailing ideology supports the notion that the market is always and ultimately beneficial for the economic well-being of the country, politicians will be swayed. Sewall is talking about a "reform" that is good for Intel, but not necessarily for other folks (e.g., small inventors, universities) who also participate in the patent system. Of the problems with post-grant opposition, look at IPFrontline, with a similar comment unpublished by Intellectual Property Today. [If various periodicals, such as the Wall Street Journal, publish only one side of "patent reform", the true third party observer will never get the facts to make an objective decision on patent reform.]

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