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IBM and Microsoft Just Gutted This Sensible Patent Bill

If IBM (NYSE: IBM  ) can agree with Microsoft (NASDAQ: MSFT  ) and Apple (NASDAQ: AAPL  ) on anything, it would have to be about the value of software patents. So maybe I shouldn't be surprised to see that the unlikely trio put their lobbyist armies together in order to erase a troublesome software patent provision from the bipartisan Innovation Act. And, given their large political contribution budgets, it's hardly shocking to see their patent-supporting efforts bear fruit.

House member Bob Goodlatte's patent reform is moving forward, but left its teeth behind in an early review stage. Image source: Rep. Goodlatte's official site.

That's exactly what happened to the Innovation Act, a bipartisan bill that was introduced by House Judiciary Committee Chairman Bob Goodlatte (R-Va.) in late October. The bill aimed straight at abusive "patent trolls," with several provisions making it harder and more expensive to wage baseless patent infringement battles.

What's new?
The Innovation Act just passed review by the Judiciary Committee with a solid 33-5 majority, which sets it up for debate and votes on the House floor. So that's one big step forward for Goodlatte's patent reform ideas.

But the version that moved forward is not exactly Goodlatte's original vision. The original bill met with strong resistance from the software industry. Via the so-called Business Software Alliance, Microsoft carried the flag for this lobbying effort that attacked only one of the act's six provisions -- but arguably the most effective one.

The BSA supported Goodlatte's bill in general, but hated the sixth provision to treat software patents the same way business financial methods are treated. The "covered business method" patents portion would have moved patent review cases out of federal courts and into the Patent and Trademark Office's internal processes. This is a faster and cheaper avenue than the eternally clogged court dockets.

That amounts to "disrupting the patent system itself," according to the BSA. Change is scary, especially when your members are sitting on some of the largest patent portfolios in the known universe -- where some patents describe perfectly acceptable and new innovations but others may be of lower quality.

Making the case for staying put
"We understand the legislation is aimed at eliminating overly broad patents, but the extension of post grant review and the significant changes that would result do not justify this broad change," Microsoft argued in an obvious attempt at astroturfing the issue. That strident quote comes from a letter showing the solidarity of 14 Redmond-linked software developers. By contrast, a letter supporting the full-blown covered business method provision came with signatures from nearly 360 developers and small businesses.

But might often makes right. Broad-based support for a healthy reform idea gave way to the barking of two respected Dow Jones (DJINDICES: ^DJI  ) members, plus Apple and a smattering of lesser lights. Goodlatte bowed to the blue-chip pressure and removed the contentious provision himself.

Why does Microsoft care so deeply about protecting the software patent status quo, and why do fellow Dow Jones members Apple and IBM support Redmond's call to inaction?

The BSA, where all three of these companies are card-carrying members but Microsoft is the brains, argues that the patent system is fine already. If there is a problem, it's in abusive litigation tactics. The way forward, then, lies in removing the incentives to file bad patent-based lawsuits -- not in changing the structure of the patents themselves.

Ten steps forward, nine steps back
If it ain't broke, don't fix it. And it's a very self-serving point of view, with plenty of status-quo love to go around. Apple is a very active patent aggressor, often using questionable patents to protect its iPhone and iPad empires. Microsoft rarely files lawsuits under its own name, but loves attacking rivals via semi-independent intellectual property management companies. IBM files more patents than anyone on the planet.

So the Innovation Act is alive but not looking so well. If this version makes it all the way to the president's signature, we're getting a toothless framework for battling patent trolls -- not the fully armed battle station that Goodlatte originally envisioned.

The big boys largely get what they want. The wheels of change are turning in Washington, but it's a painfully slow process. Americans might end up with a reasonable patent and copyright system someday, and the surviving Innovation Act provisions are most definitely a move in the right direction. But it'll take decades to get there.

Please tell me something that makes sense!
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Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 21, 2013, at 4:24 PM, BuyLowBandit wrote:

    This proposed law is just awful. The law presumes there are two types of patent holders: virtuous manufacturers and patent trolls. It does not consider that some so called trolls have legitimate claims, or that many inventors are individuals that already have a difficult time waging war against a billion dollar company, and that this law would make hurdle impossible. The law also would punish companies like QCOM, which only license out their tech without producing stuff. The very notion of a patent troll is offensive and one-sided, when you consider that most of the companies pointing fingers at the would be trolls are so often found in court to be common thieves. Trolls want tolls. Thieves want whatever you have.

  • Report this Comment On November 22, 2013, at 12:15 PM, cdkeli wrote:

    The author seems misinformed. The definition of a troll is a company that purchases patents from original owners and seeks to sue others that appear to employ similar technology hoping these companies will be so scared that they'll simply settle out of court for a big cash sum. Got it?!

    Patent documents may or may not be well written - often it's the patent attorney's fault and not the inventor. The problem is using litigation as a manipulative and bullying technique to force compliance prior to establishing guilt or innocence. Individual inventors have a long and horrible history of failing to win against big companies that have arrogantly and blatantly stolen some of the best and most lucrative ideas (television, LASER, ad nauseum). This problem is less common than others but should never be ignored and must be improved significantly so individuals don't wait decades for proper decisions and monetary compensation.

  • Report this Comment On November 22, 2013, at 1:46 PM, pragmatistfool wrote:

    This article says the provision that was removed was "arguably the most effective one", but clearly the author doesn't understand what the provision was, how it worked, or even if it is ready for prime time.

    In fact the grown-ups came to the opposite conclusion. At the most recent Congressional hearing, the previous head of the USPTO said the PTO was not ready to add expand the "Covered Business Method"(CBM) pilot project, and that there had only been one case through the system in the 12 months since the program started.

    And even better, the executive who testified for Yahoo! (which actively supports the provision) was asked for an example of a case where, if the CBM provision had been law, there would have been a better outcome. A softball question, right?

    Nope. Turns out he had not a single example of how CBM would have made a difference in a current case.

    Finally, the provision did nothing to lower the practical costs to small businesses. All it did was add yet another layer of uncertainty and another place to pay a lawyer.

    Let's learn from other failed roll-outs that we are better off to test, analyze and improve before expanding a law that affects billions of dollars and thousands of businesses.

  • Report this Comment On November 22, 2013, at 3:52 PM, staff1 wrote:

    'Sensible Patent Bill'

    Sure, about as sensible as eating our children when food prices are high.

    Just because they call it "reform" doesn't mean it is.

    "patent reform"...America Invents Act, vers 1.0, 2.0, 3.0...

    “This is not a patent reform bill” Senator Maria Cantwell (D-WA) complained, despite other democrats praising the overhaul. “This is a big corporation patent giveaway that tramples on the right of small inventors.”

    Senator Cantwell is right. All these bills do is legalize theft. Just because they call it “reform” doesn’t mean it is. The paid puppets of banks, huge multinationals, and China continue to brain wash and bankrupt America.

    They should have called these bills the America STOPS Inventing Act or ASIA, because that’s where they’re sending all our jobs.

    The patent bill (vers 1, 2, 3, etc) is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated the bill will help them steal our inventions. Congress passed it and Obama signed it. Who are they working for??

    Patent reform is a fraud on America. Congress and Obama are both to blame. This bill will not do what they claim it will. What it will do is help large multinational corporations maintain their monopolies by robbing and destroying their small entity and startup competitors (so it will do exactly what the large multinationals paid for) and with them the jobs they would have created. They have already damaged the US patent system so that property rights are teetering on lawlessness. This bill will only make it harder and more expensive for small firms to get and enforce their patents. Without patents we cant get funded. In this way large firms are able to play king of the hill and keep their small competitors from reaching the top as they have. Yet small entities create the lion's share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” Meanwhile, the large multinationals ship more and more jobs overseas. This bill is a wholesale destroyer of US jobs. Those wishing to help fight this bill should contact us as below.

    Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors. Congress and Obama tinkering with patent law while gagging inventors is like a surgeon operating before examining the patient.

    Those wishing to help fight big business giveaways and set America on a course for sustainable prosperity, not large corporation lobbied poverty, should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    Please see for a different/opposing view on patent reform.

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