Clean Tech Companies to Congress: Proposed Patent Damages Reform Bad for Green Innovation and Jobs

If anyone was wondering what clean technology companies think about the patent reform legislation pending in the U.S. Congress, a March 9, 2009 letter sent to Representatives John Conyers, Jr., the Chair of the House Judiciary Committee, and Lamar Smith, the Ranking Republican on the committee (greentech_patent_reform_ltr.pdf), provides some indication.

The letter was signed by industry groups such as the American Council on Renewable Energy (ACORE), the Biomass Coordinating Council and the Ocean Renewable Energy Coalition, as well as individual organizations such as EESTech, Fallbrook Technologies, Southwest Windpower, Ceres, and the Energy and Environmental Research Center.  Other signatories include chemicals giant DuPont, Syngenta, Monsanto and Konarka Technologies as well as Greentech Capital Advisors and patent analytics firm IP Checkups.

A nearly identical letter, signed by PAX Scientific, was sent to the leaders of the Senate Judiciary Committee on March 10th.

The letter asserts that proposed changes to the law of patent damages in the pending legislation would reduce the value of intellectual property rights and could adversely affect the future of the renewable energy industries.

Currently patent infringement damages are calculated by giving equal weight to a variety of factors.  The “entire market value” rule is one tool in the court’s damages toolbox.  It recognizes that the economic value added to a product or process by the patented feature may be greater than that feature alone. 

Thus, the entire market value rule allows for a damages award based on the full value of the infringing product or process where the patented feature provides the basis for customer demand for the entire product or process.  

By contrast, where the patent covers the entire infringing product or process, the law allows apportionment of damages such that only the features credited to the patentable invention (as distinguished from non-patented elements) form the bases of the damages award.

The pending Senate and House bills seek to limit the entire market value rule and elevate the factor of apportionment.  Specifically, the bills would amend section 284 of the patent statute to limit application of the entire market value rule to situations in which the actual invention (i.e., the specific advance over the prior art) forms the basis of consumer demand for the infringing product or process.

This section also would be amended to require that the reasonable royalty an infringer pays to a patent holder is based on “only the portion of the economic value of the infringing product or process propery attributable to the claimed invention’s specific contribution over the prior art.”

The letter argues that reducing patent damage awards would be detrimental to the clean tech sector for two reasons.  First, it would adversely affect funding and slow innovation:

A significant reduction, or elimination of much of the value of the intellectual property that will be generated through this [innovation] process will have an effect on the availability of venture capital required, decreasing the speed at which innovation will occur.

Second, the letter contends that the damages provisions would hinder green job creation:

If the current patent system is modified, making it less costly to infringe on existing or future patent rights, we anticipate that our competitive advantage in the global marketplace will be reduced, impacting the creation of green jobs.

For the moment at least, the signatories seem to have gotten their wish:  the Senate Judiciary Committee has delayed a meeting to discuss the bill amid calls to change the language of the proposed damages provisions.

Eric Lane Avatar

Eric Lane

Eric Lane, the founder and principal of Green Patent Law, is an intellectual property lawyer and registered U.S. patent attorney in New York and is a member of the bar in New York and California. Eric has more than two decades of experience working with wind, solar PV, CSP, biofuels, and geothermal, energy storage technologies, carbon capture and sequestration, medical devices, data communications, mechanical, chemical, internet and software.