How the Senate’s Feel-Good Moment Fell Apart

In the upper chamber, “next week” could mean “never” for patent reform.

U.S. Sen. Patrick Leahy (D-VT) speaks with reporters following a weekly Democratic caucus policy luncheon at the U.S. Capitol June 25, 2013 in Washington, DC. Leahy has introduced a bill seeking to rein in NSA programs.
National Journal
Dustin Volz
May 13, 2014, 1 a.m.

It was only 19 words, but they came from the pres­id­ent of the United States. And every­one was listen­ing.

“Let’s pass a pat­ent-re­form bill that al­lows our busi­nesses to stay fo­cused on in­nov­a­tion, not costly, need­less lit­ig­a­tion,” Pres­id­ent Obama said dur­ing his State of the Uni­on ad­dress in Janu­ary.

It was far from empty rhet­or­ic. Obama’s words came after the House had passed a bill aimed at slay­ing pat­ent trolls — com­pan­ies that buy up pat­ents and then leach cash from in­vent­ors by threat­en­ing in­fringe­ment law­suits. The bill, which seeks to make trolling less luc­rat­ive and bet­ter po­liced, passed with enorm­ous bi­par­tis­an sup­port and — in con­gres­sion­al time — at light­ning speed: 43 days from in­tro­duc­tion to ap­prov­al.

With House ac­tion and White House back­ing, pat­ent re­form ap­peared pos­sible, even in a polit­ic­al en­vir­on­ment where nearly no oth­er le­gis­la­tion did.

Enter the Sen­ate.

Des­pite sup­port for re­form from a wide swath of in­dus­tries — in­deed, per­haps be­cause of it — the up­per cham­ber’s Ju­di­ciary Com­mit­tee has re­peatedly failed to find the just-right Goldilocks lan­guage for pat­ent-lit­ig­a­tion re­form. In­stead, nu­mer­ous delays have left the fate of its once-ex­pec­ted pas­sage in doubt dur­ing an elec­tion year.

Chair­man Patrick Leahy has pushed back a vote on pat­ent re­form — ori­gin­ally sched­uled for March — so many times that some watch­ers have lost count. Sources say they now ex­pect the earli­est vote to take place next Thursday, a date that is dan­ger­ously close to the Sen­ate’s end-of-May re­cess. Sen. Chuck Schu­mer, a Demo­crat­ic com­mit­tee mem­ber who has been cent­ral to the on­go­ing ne­go­ti­ations, has pub­licly stated that a pat­ent bill needs to get out of com­mit­tee by May for it to have any chance of get­ting to the pres­id­ent’s desk this year.

WHAT’S THE HOL­DUP?

A di­verse ar­ray of tech com­pan­ies, en­tre­pren­eurs, phar­ma­ceut­ic­al com­pan­ies, uni­versit­ies, and fin­an­cial ser­vices sup­port some level of re­form to the na­tion’s pat­ent-lit­ig­a­tion sys­tem. But some stake­hold­ers are more full-throated than oth­ers, and a num­ber of key play­ers have warned that over­cor­rect­ing could quash Amer­ic­an in­nov­a­tion.

Sen­ate staffers for months have been try­ing to forge a com­prom­ise to sat­is­fy the li­on’s share of stake­hold­ers, but even slight changes to cer­tain sec­tions have be­come battle­grounds.

Sources on and off Cap­it­ol Hill say one tricky pro­vi­sion in par­tic­u­lar con­tin­ues to be­dev­il ne­go­ti­ations: fee-shift­ing. This would make the loser pay the win­ner’s leg­al fees in some in­fringe­ment cases that are con­sidered mer­it­less. Re­pub­lic­ans gen­er­ally fa­vor a strong fee-shift­ing pro­vi­sion, but Demo­crats, who typ­ic­ally earn sup­port from tri­al law­yers fear­ful of any­thing that sounds like tort re­form, are less bullish.

{{ BIZOBJ (video: 4880) }}

Still, a way for­ward looked to be emer­ging dur­ing and after April’s two-week re­cess. Fol­low­ing weeks of back-and-forth talks, Schu­mer and Sen. John Cornyn — a Texas Re­pub­lic­an at the fore­front of his party’s pro-pat­ent-re­form bloc — offered Leahy a pack­age deal. It would have re­quired fed­er­al judges to shift fees — but only when a judge deems the los­ing party did not “be­have in an ob­ject­ively reas­on­able fash­ion,” ac­cord­ing to a cir­cu­lated draft.

But Leahy balked, ac­cord­ing to pat­ent lob­by­ists close to the ne­go­ti­ations. In­stead of ac­cept­ing the bi­par­tis­an com­prom­ise, Leahy at­temp­ted to cobble to­geth­er un­an­im­ous Demo­crat­ic sup­port for his ori­gin­al bill. As of this week, both ap­proaches ap­peared to lack the votes ne­ces­sary to punch through the com­mit­tee.

Leahy is “try­ing to swing from one end of the pen­du­lum to the oth­er, try­ing to see where he can get the votes — and he hasn’t found the sweet spot yet,” said one pat­ent lob­by­ist, who would speak only on back­ground be­cause of the sens­it­iv­ity of the ne­go­ti­ations. Vote-coun­ters be­lieve Demo­crat­ic Sens. Dick Durbin and Chris­toph­er Coons are likely to op­pose either meas­ure, and sev­er­al Re­pub­lic­ans re­main in doubt, as some have sug­ges­ted they could craft a bet­ter bill if they re­claim the Sen­ate after the midterm elec­tions.

Ad­di­tion­ally, two Su­preme Court rul­ings handed down at the end of April may have fur­ther com­plic­ated ne­go­ti­ations. The opin­ions make it easi­er for fed­er­al judges to im­ple­ment fee-shift­ing in pat­ent cases, which some say has de­creased the level of ur­gency in the Sen­ate.

“The folks that are try­ing to slow down or de­rail the bill are clearly try­ing to make the case that the Su­preme Court has solved the prob­lem, and we should wait and see,” said Peter Pap­pas, former chief of staff at the Pat­ent and Trade­mark Of­fice. “Those are im­port­ant steps, but the Court moved the needle from what was an in­cred­ibly high bar where it was vir­tu­ally im­possible to fee shift to a lower bar, but you’re still lim­ited un­der ex­ist­ing law to ex­cep­tion­al cases.”

What’s more, it re­mains un­clear wheth­er Sen­ate Ma­jor­ity Lead­er Harry Re­id has any in­ten­tion of bring­ing pat­ent re­form up for de­bate dur­ing a tight elec­tion year if a com­prom­ise ever gets through the Ju­di­ciary pan­el. Any le­gis­la­tion could run the risk of up­set­ting tri­al law­yers, who are typ­ic­ally a strong Demo­crat­ic donor base.

IS TIME RUN­NING OUT?

Des­pite its slug­gish pace, re­form ad­voc­ates for months res­isted cri­ti­ciz­ing the Ju­di­ciary Com­mit­tee, in­stead ex­press­ing con­fid­ence that a slow and steady ap­proach would ul­ti­mately yield res­ults. But with the shed­ding of each cal­en­dar page, stake­hold­ers are turn­ing up the rhet­or­ic.

Last week, after the com­mit­tee delayed a vote for the fifth time, the pro-re­form Con­sumer Elec­tron­ics As­so­ci­ation re­leased an un­usu­ally force­ful state­ment blast­ing the Ju­di­ciary pan­el — and oth­er stake­hold­ers plead­ing for a more cau­tious ap­proach — for cost­ing the eco­nomy $1.5 bil­lion each week it fails to act. That num­ber, it said, came from a fre­quently cited Bo­ston Uni­versity study that es­tim­ates pat­ent trolling saps the eco­nomy of $80 bil­lion each year.

“It is time for the Sen­ate to do the right thing: Ig­nore the pleas of tri­al law­yers, uni­versit­ies, and oth­ers who routinely profit from pat­ent ab­use, and pass strong, com­mon­sense re­forms to pro­tect Amer­ic­an in­nov­at­ors and en­tre­pren­eurs,” said Mi­chael Pet­ricone, CEA’s seni­or vice pres­id­ent of gov­ern­ment af­fairs.

Many re­form cru­saders re­main — on the re­cord, at least — con­fid­ent that the Sen­ate Ju­di­ciary will get something out of com­mit­tee soon, even as lob­by­ing from big tech, uni­versit­ies, phar­ma­ceut­ic­al com­pan­ies, and oth­ers con­tin­ues un­abated.

“Our gen­er­al view is to be good rather than to be fast,” said Dana Rao, Adobe’s vice pres­id­ent of in­tel­lec­tu­al prop­erty and lit­ig­a­tion, told Na­tion­al Journ­al last month. It’s es­pe­cially im­port­ant to get le­gis­la­tion just right, he ad­ded, be­cause “we’re not go­ing to get a third shot at a pat­ent bill in Con­gress,” re­fer­ring to the Amer­ica In­vents Act that Con­gress passed in 2011, which over­hauled some as­pects of the pat­ent sys­tem.

Such changes are “on the edge, not in the middle,” ad­ded Rao, who test­i­fied on the im­pact of pat­ent trolling be­fore the Sen­ate Ju­di­ciary Com­mit­tee in Decem­ber.

While the Sen­ate Ju­di­ciary tries to smooth out those edges, re­form back­ers will con­tin­ue to do what they have done for months: wait and see.

WHAT'S THE HOLDUP?

A di­verse ar­ray of tech com­pan­ies, en­tre­pren­eurs, phar­ma­ceut­ic­al com­pan­ies, uni­versit­ies, and fin­an­cial ser­vices sup­port some level of re­form to the na­tion’s pat­ent-lit­ig­a­tion sys­tem. But some stake­hold­ers are more full-throated than oth­ers, and a num­ber of key play­ers have warned that over­cor­rect­ing could quash Amer­ic­an in­nov­a­tion.

Sen­ate staffers for months have been try­ing to forge a com­prom­ise to sat­is­fy the li­on’s share of stake­hold­ers, but even slight changes to cer­tain sec­tions have be­come battle­grounds.

Sources on and off Cap­it­ol Hill say one tricky pro­vi­sion in par­tic­u­lar con­tin­ues to be­dev­il ne­go­ti­ations: fee-shift­ing. This would make the loser pay the win­ner’s leg­al fees in some in­fringe­ment cases that are con­sidered mer­it­less. Re­pub­lic­ans gen­er­ally fa­vor a strong fee-shift­ing pro­vi­sion, but Demo­crats, who typ­ic­ally earn sup­port from tri­al law­yers fear­ful of any­thing that sounds like tort re­form, are less bullish.

{{ BIZOBJ (video: 4880) }}

Still, a way for­ward looked to be emer­ging dur­ing and after April’s two-week re­cess. Fol­low­ing weeks of back-and-forth talks, Schu­mer and Sen. John Cornyn — a Texas Re­pub­lic­an at the fore­front of his party’s pro-pat­ent-re­form bloc — offered Leahy a pack­age deal. It would have re­quired fed­er­al judges to shift fees — but only when a judge deems the los­ing party did not “be­have in an ob­ject­ively reas­on­able fash­ion,” ac­cord­ing to a cir­cu­lated draft.

But Leahy balked, ac­cord­ing to pat­ent lob­by­ists close to the ne­go­ti­ations. In­stead of ac­cept­ing the bi­par­tis­an com­prom­ise, Leahy at­temp­ted to cobble to­geth­er un­an­im­ous Demo­crat­ic sup­port for his ori­gin­al bill. As of this week, both ap­proaches ap­peared to lack the votes ne­ces­sary to punch through the com­mit­tee.

Leahy is “try­ing to swing from one end of the pen­du­lum to the oth­er, try­ing to see where he can get the votes — and he hasn’t found the sweet spot yet,” said one pat­ent lob­by­ist, who would speak only on back­ground be­cause of the sens­it­iv­ity of the ne­go­ti­ations. Vote-coun­ters be­lieve Demo­crat­ic Sens. Dick Durbin and Chris­toph­er Coons are likely to op­pose either meas­ure, and sev­er­al Re­pub­lic­ans re­main in doubt, as some have sug­ges­ted they could craft a bet­ter bill if they re­claim the Sen­ate after the midterm elec­tions.

Ad­di­tion­ally, two Su­preme Court rul­ings handed down at the end of April may have fur­ther com­plic­ated ne­go­ti­ations. The opin­ions make it easi­er for fed­er­al judges to im­ple­ment fee-shift­ing in pat­ent cases, which some say has de­creased the level of ur­gency in the Sen­ate.

“The folks that are try­ing to slow down or de­rail the bill are clearly try­ing to make the case that the Su­preme Court has solved the prob­lem, and we should wait and see,” said Peter Pap­pas, former chief of staff at the Pat­ent and Trade­mark Of­fice. “Those are im­port­ant steps, but the Court moved the needle from what was an in­cred­ibly high bar where it was vir­tu­ally im­possible to fee shift to a lower bar, but you’re still lim­ited un­der ex­ist­ing law to ex­cep­tion­al cases.”

What’s more, it re­mains un­clear wheth­er Sen­ate Ma­jor­ity Lead­er Harry Re­id has any in­ten­tion of bring­ing pat­ent re­form up for de­bate dur­ing a tight elec­tion year if a com­prom­ise ever gets through the Ju­di­ciary pan­el. Any le­gis­la­tion could run the risk of up­set­ting tri­al law­yers, who are typ­ic­ally a strong Demo­crat­ic donor base.

IS TIME RUNNING OUT?

Des­pite its slug­gish pace, re­form ad­voc­ates for months res­isted cri­ti­ciz­ing the Ju­di­ciary Com­mit­tee, in­stead ex­press­ing con­fid­ence that a slow and steady ap­proach would ul­ti­mately yield res­ults. But with the shed­ding of each cal­en­dar page, stake­hold­ers are turn­ing up the rhet­or­ic.

Last week, after the com­mit­tee delayed a vote for the fifth time, the pro-re­form Con­sumer Elec­tron­ics As­so­ci­ation re­leased an un­usu­ally force­ful state­ment blast­ing the Ju­di­ciary pan­el — and oth­er stake­hold­ers plead­ing for a more cau­tious ap­proach — for cost­ing the eco­nomy $1.5 bil­lion each week it fails to act. That num­ber, it said, came from a fre­quently cited Bo­ston Uni­versity study that es­tim­ates pat­ent trolling saps the eco­nomy of $80 bil­lion each year.

“It is time for the Sen­ate to do the right thing: Ig­nore the pleas of tri­al law­yers, uni­versit­ies, and oth­ers who routinely profit from pat­ent ab­use, and pass strong, com­mon­sense re­forms to pro­tect Amer­ic­an in­nov­at­ors and en­tre­pren­eurs,” said Mi­chael Pet­ricone, CEA’s seni­or vice pres­id­ent of gov­ern­ment af­fairs.

Many re­form cru­saders re­main — on the re­cord, at least — con­fid­ent that the Sen­ate Ju­di­ciary will get something out of com­mit­tee soon, even as lob­by­ing from big tech, uni­versit­ies, phar­ma­ceut­ic­al com­pan­ies, and oth­ers con­tin­ues un­abated.

“Our gen­er­al view is to be good rather than to be fast,” said Dana Rao, Adobe’s vice pres­id­ent of in­tel­lec­tu­al prop­erty and lit­ig­a­tion, told Na­tion­al Journ­al last month. It’s es­pe­cially im­port­ant to get le­gis­la­tion just right, he ad­ded, be­cause “we’re not go­ing to get a third shot at a pat­ent bill in Con­gress,” re­fer­ring to the Amer­ica In­vents Act that Con­gress passed in 2011, which over­hauled some as­pects of the pat­ent sys­tem.

Such changes are “on the edge, not in the middle,” ad­ded Rao, who test­i­fied on the im­pact of pat­ent trolling be­fore the Sen­ate Ju­di­ciary Com­mit­tee in Decem­ber.

While the Sen­ate Ju­di­ciary tries to smooth out those edges, re­form back­ers will con­tin­ue to do what they have done for months: wait and see.

What We're Following See More »
27TH AMENDMENT
Congress Can’t Seem Not to Pay Itself
2 hours ago
WHY WE CARE

Rep. Dave Young can't even refuse his own paycheck. The Iowa Republican is trying to make a point that if Congress can't pass a budget (it's already missed the April 15 deadline) then it shouldn't be paid. But, he's been informed, the 27th Amendment prohibits him from refusing his own pay. "Young’s efforts to dock his own pay, however, are duck soup compared to his larger goal: docking the pay of every lawmaker when Congress drops the budget ball." His bill to stiff his colleagues has only mustered the support of three of them. Another bill, sponsored by Rep. Jim Cooper (D-TN), has about three dozen co-sponsors.

Source:
THE QUESTION
How Far Away from Cleveland is the California GOP Staying?
3 hours ago
THE ANSWER

Sixty miles away, in Sandusky, Ohio. "We're pretty bitter about that," said Harmeet Dhillon, vice chairwoman of the California Republican Party. "It sucks to be California, we're like the ugly stepchild. They need us for our cash and our donors, they don't need us for anything else."

ATTORNEY MAY RELEASE THEM ANYWAY
SCOTUS Will Not Allow ‘DC Madam’ Phone Records to Be Released
3 hours ago
WHY WE CARE

Anyone looking forward to seeing some boldfaced names on the client list of the late Deborah Jeane Palfrey, the "DC Madam," will have to wait a little longer. "The Supreme Court announced Monday it would not intervene to allow" the release of her phone records, "despite one of her former attorneys claiming the records are “very relevant” to the presidential election. Though he has repeatedly threatened to release the records if courts do not modify a 2007 restraining order, Montgomery Blair Sibley tells U.S. News he’s not quite sure what he now will do."

Source:
DOWN TO THE WIRE
Sanders Looks to Right the Ship in Indiana
19 hours ago
THE LATEST

Hillary Clinton may have the Democratic nomination sewn up, but Bernie Sanders apparently isn't buying it. Buoyed by a poll showing them in a "virtual tie," Sanders is "holding three rallies on the final day before the state primary and hoping to pull off a win after a tough week of election losses and campaign layoffs." 

Source:
‘SPOOKED’ IN NORTH DAKOTA
Cruz Delegates Having Second Thoughts?
23 hours ago
THE LATEST

As unbound delegates pledged to Ted Cruz watch him "struggle to tread water in a primary increasingly dominated by Trump, many of them, wary of a bitter convention battle that could rend the party at its seams, are rethinking their commitment to the Texas senator."

Source:
×