Here’s why one software lobby hates a program designed to kill bad patents

October 29, 2013

BSA members include Microsoft, Apple, Adobe, and Oracle. (Photo by Robert Scoble)

One of the most hotly debated ideas for patent reform is to expand what's known as the Covered Business Methods program, which creates a streamlined process for challenging patents. Advocates argue that expanding the CBM program would help to invalidate low-quality patents that are the weapon of choice for patent trolls.

But not everyone in the technology sector is enthusiastic about the idea. The BSA, an industry group that used to call itself the Business Software Alliance, counts patent-rich software companies such as Microsoft, Oracle and Apple among its members. And in recent weeks it has been a leading voice opposing the expansion of the CBM program. Tim Molino, the BSA's director for Government Relations, talked to me on Thursday about why his group opposes expanding the CBM program, and what policies they do support for reforming the patent system. The transcript has been edited for length and clarity.

What are your thoughts on House Judiciary Committee Chairman Bob Goodlatte's proposed patent legislation?

We look at the Goodlatte bill like we look at all pieces of legislation in the patent space. Our goal is to make sure that whatever the legislation is, it makes life harder for bad actors and easier for innovators. In looking at it through that lens, there are a lot of positive things we really like, like fee shifting, curbing discovery abuses, making plaintiffs be more precise when they [file a lawsuit], and also making cases run more efficiently through the discovery process.

There are things we don't like, which is expanding the covered business method program, and we don't like the idea of taking away the broadest reasonable interpretation when the patent office reviews a patent. We think those are not good for innovation.

Can you walk me through what the "broadest reasonable interpretation" standard is and why you think it's important?

Currently under the patent office rules, during inter partes, ex parte review [procedures where the patent office reviews an issued patent to make sure it's valid] and the covered business method program, the patent office will look at patent claims under their broadest reasonable interpretation. That makes it a lot easier to find a piece of prior art that invalidates it. The Goodlatte bill has the patent office look at it the same way a court does, a narrower reading. That makes it harder to find prior art to invalidate a patent.

What do you find objectionable about expanding the covered business method program?

We find expanding the covered business method program problematic because it discriminates against one technology over another. [The CBM program applies only to business method patents.] Also, the way the CBM program is structured allows a competitor to slow-walk a court case. It lets them delay a legitimate infringement claim while the court has to go through this administrative review. So while the case is being delayed, the infringer, who in a lot of these cases is stealing the technology, is allowed to take market share. You can't make that up with money damages at the end of a four- or five-year litigation.

Software and business method patents seem to account for a disproportionate share of litigation. Doesn't it make sense to focus reform efforts on fields where there are the most problems?

[The reason] there is more litigation in the software or computer implemented field is because there's been an explosion of technology in that field. That's where most of the inventions are occurring. What we should be doing is to go after bad actors. To focus on different technologies is not a path forward. We want technologies to merge. Treating one technology differently from another prevents that merger.

But you don't deny that there are patent quality problems in software, do you? There are lots of stories of companies receiving demand letters for offering WiFi to their customers or using scanners with e-mail functionality.

We're not going to disagree that there are patents that slip through the cracks at the patent office. The thing is, what you're describing, there are poor-quality patents that are already out there. But there are inter partes and post-grant proceedings [two mechanisms for challenging patents at the patent office] that are taking care of that today. Both of those proceedings cover all technologies.

If those existing processes are sufficient to deal with patent quality problems, then why have we seen non-technology companies like restaurants suddenly complaining about patent litigation problems?

We'll agree with you that litigation has gotten way too expensive. One factor is we live in an electronic age. [In litigation, companies are required to produce] a ton of documents that make litigation super-expensive for the defendant. We're for a lot of good things in the Goodlatte bill. Delaying the costs for the defendant, having the plaintiff fix costs. Are the post-grant and inter partes proceedings any more expensive? The covered business method proceedings use the same rules as post-grant. There's very little difference except that it can cover patents that may not be covered by post-grant. Those same patents will be covered by inter partes. The cost for post-grant review, inter-partes review and CBM review are really the same. The time period for adjudication is one year [for all three processes].

So are there other measures for improving patent quality that the BSA would support?

The current balance that the [2011 America Invents Act] found in creating post-grant review and inter partes review is the balance Congress wanted, and it's working today. They are cleaning out the patents that slip through the cracks. Those systems are working. We're talking about changing the CBM program, but it's only been in existence for a year. How can we say that any of them aren't working? Let's let them try to work before we try to mess with the system again.

We do know there are asymmetries in the cost of litigation that are driving up the costs [to defendants] in any litigation. [Other reforms in the Goodlatte bill such as] fee shifting, delaying discovery, limiting discovery, shifting costs of discovery, will lower costs for defendants as a whole. [We want] to go after the bad actors without trying to mess up the system that made us the most innovative country in the world.

In previous writing I've suggested that BSA members such as Microsoft oppose CBM expansion because they have a lot of low-quality patents that they're afraid would be invalidated. Am I wrong?

Their patents can be invalidated under both the post-grant review program and the inter partes program.

In your article, you mentioned only four software companies [i.e., Adobe, IBM, Microsoft, Qualcomm and Xerox]. We thought it would be fair to mention other companies like medical device companies, app developers, brick and mortar manufacturing companies that also signed the letter [opposing expansion of the CBM program]. Those weren't mentioned as part of your argument. Without going out and looking, I bet there were only a handful of large software companies that signed.

My impression from talking to various stakeholders in the patent debate is that Microsoft has been a major force lobbying against the expansion of the CBM program and has put a lot of lobbying resources into this issue. Am I wrong about that?

I can't even tell you who's putting the most resources into it. I know that 102 other companies [also signed the letter opposing CBM expansion]. A lot of them are very small and very innovative companies that didn't fit into the paradigm [of] your article. There was a pro-CBM letter that had a lot of large companies, too. We didn't see [you write an article asking] why a lot of large companies were [supporting CBM expansion].

To close, when we look at the Goodlatte bill, we do want reform to happen. We just want legislation that makes it harder for people to bring abusive litigation, while making sure we protect innovation.

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