On Friday November 17th at Boston University Law School, a number of patent scholars along with a few attorneys from public interest advocacy groups, think tanks and industry legal departments met to discuss the question of whether software patents are a good thing and if not what can be done about it. A similar discussion occurred at a conference held at Michigan Law School in late September. Many of the same people gathered to discuss the weaknesses of the one size fits all patent system particularly for the information technology industry. Another twist on a recurrent theme among those interested in the question of patent reform ââ?¬â?? the glacial divide between the information technology sector and the pharma sector. There seemed to be a general consensus of the problem but an efficacious solution remains elusive. The differences between the software and pharma industryââ?¬â?¢s relationship to the patent system are systemic and economic. Generally software products include hundreds if not thousands of patents whereas pharma products have a few if not in some cases one patent covering the drug. These differences lead to clear (er) (read: pharma) vs. fuzzy (ier) (read: software) boundary issues, manageable (read: pharma) vs. unmanageable (read: software) clearance problems. Different economic models: (i) the pharma industry is driven by a highly regulated and complex drug approval process which demands significant capital costs and leads to a strong bias to protect that investment with patent protection; but (ii) business development in the information technology industry particularly software can occur with relatively modest capital and short ramp up time. This has traditionally meant many software companies did not focus on patents particularly before the explosion in patent applications and litigation of recent years. Many scholars contend that if everyone knew in 1994 what they know now about the effects of the expansion of the patent system to include software patents they would turn the clock back and make a different decision. Whether or not thatââ?¬â?¢s true and the Federal Circuit would have made different decisions weââ?¬â?¢ll never know. Itââ?¬â?¢s hard to ignore a growing chorus of voices warning about the negative effects of two decades of decisions by the specialized patent court. Three factors have created a perfect storm resulting in a growing industry of patent investors (also referred to by some as ââ?¬Ë?speculatorsââ?¬â?¢ and/or ââ?¬Ë?trollsââ?¬â?¢) that are successfully taxing the information technology sector but are also moving toward other sectors such as financial services, retail and manufacturing. The expansionistic approach of the Federal Circuit to patentable subject matter most significantly the decisions in the mid-90ââ?¬â?¢s formalizing software patents and the State Street 1998 decision legitimizing business method patents contributed to a significant increase in the number of patents sought and granted. Second an understaffed and underfinanced patent office struggled to meet the increased demand for its services and in the view of many generated far too many weak and overbroad patents, meaning they donââ?¬â?¢t stand up to scrutiny and/or can not readily be understood to know what activity they cover. Third clever attorneys discovered that certain district courts were more favorable to patents and high judgment awards leading to forum shopping. Many in-house litigation counsel settle rather than litigate a claim even one they believe they could win on the merits just because the case has been filed in one of these jurisdictions. As was stated at the Boston U conference, patents in information technology impact the economy differently because they infiltrate all aspects of the economy. Brick and mortar companies need information technology to compete and are vulnerable to the overtures of the patent investor. In many cases these entities canââ?¬â?¢t afford to contest the action so agree to license the patent whether or not it would have been found to have covered the activity or to actually be valid. In the Blackberry case the patents are under reexamination by the patent office and many believe will be found to not be valid. A similar situation is occurring with the famous Amazonââ?¬â?¢s one click patent it successfully asserted against Barnes and Noble in 1999. There were some who voiced doubt that Congress could successfully solve the problem particularly with current industry differences. General wisdom inside the beltway is that politicians want industry consensus (read: election support). These conferences follow in the wake of the failed attempt in 2005 to effectuate major patent reform in Congress. As many close to that situation say, the differences in needs and interests toward the patent system caused the pharma and information technology sectors to stalemate the legislative process. A recent bill proposed in August 2006 by Senators Hatch and Leahy incorporates many of the changes that stalled the 2005 bill. Chances may be greater for significant change from the courts particularly the Supreme Court. Itââ?¬â?¢s a generalist court and from two recent opinions, Justice Kennedyââ?¬â?¢s concurring opinion in eBay v. Mercexchange and Justice Breyerââ?¬â?¢s dissent in the Labcorp v. Metabolite (to dismiss as improvidently granted), there seems to be some on the Court that are concerned about the deleterious effects on the economy and society from the current patent system. Justice Breyer warns that State Street is not settled doctrine and hints that it may be inconsistent with Supreme Court precedent. Justice Kennedyââ?¬â?¢s concurrence in eBay left some patent attorneys scratching their head when he implied that district court judges should consider whether the patent suffers from ââ?¬Ë?suspect validity and potential vaguenessââ?¬â?¢ when deciding whether to grant an injunction. Is that another way of saying that the patent office is issuing suspect patents and the jury system can not be trusted to ferret them out? In the political economy of patent reform it appears that an alignment of interests are developing along the following fault lines: (i) favor changes to the patent system that make patents harder to get, harder to enforce, and/or yield lower damage awards for infringement or (ii) disfavor of the above. Generally the information technology industry along with many other industries who have begun to be impacted negatively by the system including financial services, manufacturing and retail as well as public interest groups like EFF and special interest groups like AARP are lining up for the former. Supporting the latter are the pharma industry, major elements of the IP bar and the patent investors (some say speculators and some say trolls). Just look at the line up of the amicus briefs in KSR v Teleflex .

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