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`Software patent reform just died in the House, thanks to IBM and Microsoft | The Switch
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`Software patent reform just died in the House,
`thanks to IBM and Microsoft
`By Timothy B. Lee, Updated: November 20, 2013 at 10:17 am
`On Wednesday, the House Judiciary Committee is scheduled to consider legislation aimed at reining in
`abusive patent litigation. But one of the bill's most important provisions, designed to make it easier to nix
`low-quality software patents, will be left on the cutting room floor. That provision was the victim of an
`aggressive lobbying campaign by patent-rich software companies such as IBM and Microsoft.
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`The legislation is sponsored by Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee.
`He unveiled a new version of his bill last month, touting it as a cure for the problem of patent trolls. One
`provision would have expanded what's known as the "covered business method" (CBM) program, which
`provides an expedited process for the Patent Office to get rid of low-quality software patents. That change
`would aid in the fight against patent trolls because low-quality software patents are trolls' weapon of choice.
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`But the change could affect the bottom lines of companies with large software patent portfolios. And few
`firms have larger software patent portfolios than Microsoft and IBM. These companies, which also happen
`to have two of the software industry's largest lobbying budgets, have been leading voices against the
`expansion of the CBM program.
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`The CBM program provides a quick and cost-effective way for a defendant to challenge the validity of a
`plaintiff's patent. Under the program, litigation over the patent is put on hold while the Patent Office
`considers a patent's validity. That's important because the high cost of patent litigation is a big source of
`leverage for patent trolls.
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`The original CBM program, which was created by the 2011 America Invents Act, was limited to a relatively
`narrow class of financial patents. The Goodlatte bill would have codified a recent decision opening the
`program up to more types of patents. And advocates hoped that change would be a steppingstone to
`eventually subjecting all software patents to greater scrutiny.
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`But large software companies had other ideas. A September letter signed by IBM, Microsoft and several
`dozen other firms made the case against expanding the program. The proposal, they wrote, "could harm U.S.
`innovators by unnecessarily undermining the rights of patent holders. Subjecting data processing patents to
`the CBM program would create uncertainty and risk that discourage investment in any number of fields
`where we should be trying to spur continued innovation."
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`Of course, advocates of the program disagree. They point out that software patents are disproportionately
`responsible for the recent rise of patent litigation. The fact that technology startups almost inevitably face
`patent threats is itself a significant disincentive for innovation. So it's far from clear that subjecting software
`patents to greater scrutiny would be bad for innovation.
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`http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/20/software-patent-reform-just-died-in-the-house-thanks-to-ibm-and-micros...
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`1/5/2014
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`Software patent reform just died in the House, thanks to IBM and Microsoft | The Switch
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`Page 2 of 2
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`Last week, IBM escalated its campaign against expanding the CBM program. An IBM spokesman told
`Politico, "While we support what Mr. Goodlatte’s trying to do on trolls, if the CBM is included, we’d be
`forced to oppose the bill."
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`Sources close to the negotiations say the campaign against the CBM provisions of the Goodlatte bill has
`succeeded. The House Judiciary Committee is scheduled to hold a markup of the legislation Wednesday,
`and Goodlatte will introduce a "manager's amendment" to remove the CBM language from his own bill.
`IBM hailed that change in a Monday letter to Goodlatte.
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`The revised legislation would still take significant steps to curb abusive litigation tactics favored by trolls.
`But troll tactics are merely a symptom of the patent system's dysfunction. The more fundamental issue is the
`large number of low-quality patents, and the Goodlatte bill no longer has a provision to deal with that
`problem.
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`But the fight against bad software patents isn't over. After Goodlatte's about-face, the House of
`Representatives is unlikely to pass legislation expanding the CBM program. But CBM expansion has a
`powerful supporter in the Senate. Sen. Chuck Schumer (D-N.Y.), who was the driving force behind the
`original CBM program in 2011, remains determined to expand the CBM program in the Senate's patent
`reform legislation. Sen. Patrick Leahy (D-Vt.), the chairman of the Senate Judiciary Committee, has
`signaled his willingness to work with Schumer on the proposal.
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`"Creating a low-cost alternative to litigation in order to address the poor-quality patents that are currently
`plaguing startups and small businesses is a cornerstone of effective reform," Schumer said in a statement
`Tuesday night. "I am continuing to have productive conversations with my colleagues and stakeholders in
`the Senate, and fully expect the critical issue of patent quality to be addressed in the Senate legislation."
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`Schumer will have powerful allies. The White House endorsed CBM expansion in June. A broad coalition
`of brick-and-mortar industries, including casinos, supermarkets, chain restaurants, airlines, the printing
`industry, real estate agents, hotels and retailers, endorsed the concept in a letter last month.
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`Still, companies with large software patent portfolios have a lot to lose if their patents are subjected to
`serious scrutiny. So, Schumer won't get his way without a fight.
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`© The Washington Post Company
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`http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/20/software-patent-reform-just-died-in-the-house-thanks-to-ibm-and-micros...
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`1/5/2014