Andrew Noyes calls my Zuckerberg, and raises me one Gates, with a quote on Patent reform!

By paul principato on March 14, 2008 2:44 PM

-1145 Patent Reform Bill 2007/Boondoggle

The "REAL" meaning of special interests:
After an exhausting 6 months, all eyes cautiously look towards March, where the next installment of "Who Wants to Reform the Patent System?" is being prepared in the Congress. As a small inventor I might concur that our patent system is in need of some reform, but I am very concerned that the bill in its present form picks winners and losers among industries with different business models in a way that has never before been attempted in patent law or practice.

A gross example of this objective: Sen. Jeff Sessions (R-Ala.) has sponsored an unusual provision at the urging of the nation's banks granting them immunity against an active patent lawsuit, potentially saving them billions of dollars. Adopted with little fanfare, the amendment would prevent a small Texas company called DataTreasury from collecting damages from banks for infringing on its patented method for digitally scanning, sending and archiving checks.The provision introduced by Sessions did not name DataTreasury but was carefully tailored to apply to that company and its "check collection" system. The patents were upheld last summer by the U.S. Patent and Trademark Office after they were thoroughly challenged.

Justification of the Sessions Amendment seems to be that the Check 21 Act forced the banks to adopt new check processing procedures with the innocent banks (who were merely complying with government regulation) thereby finding themselves opportunistically and indiscriminately sued for infringement by a“patent troll.” This view, however, fails to recognize that the (Data Treasury) patents in question were filed years before the Check 21 Act, that thus far the key Data Treasury patents have withstood the best legal challenges the banks could buy, and that some of the more responsible banks have admitted the validity of the patents by licensing them. And every entity that has been sued almost surely had opportunity to negotiate a license before being sued.

But two added facts make the bank's legislative duplicity even more reprehensible.

The first is simply that nothing in the Check 21 Act requires banks infringe the Data Treasury patents.

The second is that Check 21 made it possible for the banks to dramatically reduce check clearance costs, relative to then current processes. ( $3.75 per cleared paper check as opposed to two to three cents per check using Data Treasury's Technology). Check 21 was opportunity, not burden!!

The Data Treasury Technology is a roadmap to pocketing these savings. Banks remain free to process checks the old way or themselves invent a non-infringing new way or license use of the Data Treasury roadmap for a modest portion of the savings it offers. But some banks are just plain greedy. They expect to use the Data Treasury road map, realize huge savings, and pay Data Treasury nothing. A number of financial institutions considered themselves above the patent law that applies to the rest of us and now, after 5 years of infringing and ongoing litigation, are on the cusp of facing huge damage awards for willful infringement. Any idea that the Sessions Amendment is justified as "relief" is simply preposterous. It is no more or less than the financial lobby buying a "Get out of Jail Free" card from congress.

Although the amendment would not invalidate DataTreasury's patents, it would spare the banks from paying for infringing them should courts decide that's warranted. If DataTreasury collected a royalty of just a couple pennies per check, the cost would run into billions of dollars. It seems that Sessions and his Ilk are ready to, once again, throw the American taxpayer under the bus. This time to the tune of a billion dollar and more back door bail out for the banking industry. The federal government would have to pay $1 billion + (albeit grossly undervalued) to DataTreasury over 10 years as compensation for taking its property under the amendment, according to estimates by the Congressional Budget Office. Hence, let us not forget the poor victims, (banking industry) who have realized almost
$300 Billion in profit during the period they have utilized this valuable technology. And all of this on the heels of the sub prime loan mess!! Apparently the financial industry feels that there is no downside to their risky business practices. As long as they continue to contribute generously to the right politicians the taxpayers will continue to bear the burden of their mistakes while they reap the fruit of their exuberant gains. Who would invest in developing a new technology if the big corps can steal it and then buy off Congress to pass a law giving them immunity from liability? Those that wish to see a clear and crass example of who gets bought in Congress and how,

might read the amendment in contrast to the act and then examine who gives how much to Sessions and Schumer. Political action committees of financial institutions were the largest single category of industry donors to Sessions, with $52,300 in the current election cycle.

The Commerce Department has objected to the amendment, including in a letter last week to Sen. Patrick J. Leahy (D-Vt.), the Judiciary Committee chairman. "Limiting patent holders' rights and remedies in this instance could reduce innovation in this technology area," wrote Assistant Secretary Nathaniel F. Wienecke. "The Administration does not support exceptions to patent protection based on a particular technology."

Overall, this bill is a great disservice to the small technology companies and independent inventors that drive American innovation. Reforms are needed. But this Bill, with or without Sessions, should go back to committee in a Congress with a "Purer Heart."

By paul principato on March 14, 2008 2:46 PM