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Patent reformers: Beware of legislative intent and other trojan horses

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Software patent plaintiffs like Versata could attempt to undermine the PTAB's CBM rules in court by citing Congress's failure to enact CBM expansion.

Silicon Valley and patent risk

The risk of patent litigation is an overwhelming preoccupation to many Silicon Valley businesses today. Business leaders are devoting ever increasing energy to intellectual property risk management. In many instances investment and partnership opportunities are being foregone as a result of patent risk.

Silicon Valley has begun to focus on Washington more intently, demanding that needless, unproductive litigation risks be addressed. Eyes are now turned to ongoing reform efforts and to developments in court.

A day of victory for patent reform advocates

Reformers had much to cheer on Friday. The Supreme Court granted certiorari in a pivotal software patent case, Alice v CLS. Another case, Wildtangent v Ultramercial, is on-deck for consideration on Monday. And of course on Thursday, the Goodlatte patent reform bill passed the House by an overwhelming bipartisan majority. There may be a trojan horse lurking in the shadows, however.

Legislative intent and other trojan horses

The Goodlatte bill initially proposed provisions to strengthen the Covered Business Method review (CBM) program. That program was originally introduced by the America Invent's Act (AIA). It provides a cost-effective means of invalidating low quality software and business method patents. The expansion would have eliminated a 2020 sunset provision. The bill also would have explicitly codified a decision of the Patent Trial and Appeal Board (PTAB). That PTAB decision was criticized by software patent proponents because it did not confine review to a narrow range of financial inventions.

Withdrawal of CBM provision

CBM expansion was scrapped after heavy lobbying from big corporate interests. Those interests have massive software patent portfolios. It is in those entities' economic interest to hobble trolls and dissipate resistance to software patents, while keeping their own portfolios largely intact.

It may seem strange, but by simply considering action and then not taking it, it's conceivable reformers could pave some sort of path for a legal challenge to CBM as it is operating today. Legislative intent and similar concepts have been used to subvert reform and to expand the scope of eligible subject matter in the past. In one instance, a reform bill passed in the wake of the State Street Bank case was actually turned on its head and used to support the existence of business method patents. And the Patent Act of 1952 itself seems to have been subject to attempts to manipulate legislative intent and expand subject matter eligibility.

Bilski v Kappos and the American Inventor's Protection Act of 1999

In the immediate aftermath of the State Street Bank decision, which opened the floodgates wide to all sorts of business method patents, Congress quickly enacted legislation to stem the damage. The provision provided a limited defense to some who were accused of infringement. In passing the legislation, Congresspeople were in no way attempting to validate, legitimate or buttress software and business method patents.

And yet, Bilski, in it's appeal to the Supreme Court, argued that the legislation did indeed do that by recognizing the existence of business method patents. Indeed, although Bilski was ultimately unsuccessful and lost the case, Justice Kennedy's opinion noted that the language of the statute undermined the notion that business methods were categorically unpatentable subject matter (see page 9 of Kennedy's opinion). Justice Stevens, in his concurring opinion, criticized this notion (see pages 34-38 of Justice Stevens' concurrence).

Justice Kennedy invoked a cannon of interpretation that requires the Court to avoid "interpreting any statutory provision in a manner that would render another provision superfluous." He reasoned that since business method patents were specifically mentioned, any claim that they are categorically unpatentable subject matter is questionable. Justice Stevens argued, correctly, that the Congress would not have even passed the legislation if they had known this would be the result. Although the meaning of Congressional intent is frequently manipulated (often in support of broader subject matter eligibility), in this case, it is very difficult for an objective observer to conclude that Congressional intent was not subverted.

The Patent Act of 1952

In 1952, the patent laws of the United States were streamlined and modernized with the Patent Act of 1952. What, if any, changes in the law were actually made is a source of contention to this day. As reported previously, there is evidence that the unelected drafters of the bill manipulated legislative history and intent. This may have been done in order to obtain results that could not be achieved democratically. Although this all happened a long time ago, it has continuing ramifications.

Ongoing attempts to undermine existing CBM in the courts

PTAB made it's first decision to institute a review in SAP v Versata. In essence this was the first test of the rules it promulgated earlier. Those rules govern which patents are subject to review. That decision is generally supported by software and business method patent opponents, and challenged by those who believe in broader subject matter eligibility.

Versata has challenged the decision (and the verdict which it lost after CBM was actually conducted). Given that CAFC will be hearing the case, patent reformers may have some reason to worry about what that outcome will be. In any event, if reformers don't want to see their efforts sabotaged as that litigation progresses, they may need keep a careful eye on statements made in hearings, on the floor and even to reporters. Such statements can be planted into the legislative history and used to manipulate legislative intent after the enactment (or non-enactment). The Examiner will be reviewing documents as they are generated to see what if any ammunition might be provided to litigants in the appeal.

Obviously if a CBM provision is ultimately enacted, the potential for these types of outcomes is mitigated. But as we have demonstrated, strange things can happen. For example, perhaps present litigants could argue the PTAB was in error because, otherwise, enactment of such a provision would have been unnecessary. Given the outcome we cited in Bilski, it does not seem to be outside of the realm of possibility.

A failure to attend to legislative history now could undermine current litigants and undermine the PTAB while things are being worked out in Congress. And one cannot know whether a CBM provision will be included in final reform legislation until much later in the game. If reformers are not successful in getting CBM expansion into the final legislation, and all the while opponents were planting negative legislative history, it would be difficult to undo the damage at that later stage. So tending to legislative history now could make sense for reformers. It could potentially help people who are in litigation now, and it would act as a backstop in case CBM is not included in the final statute.

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