How patent reform’s fraught politics have left USPTO still without a boss


The U.S. Patent and Trademark Office complex in Alexandria, Va. (Photo by Larry Morris/ The Washington Post)

The directorship of the United States Patent and Trademark Office has sat vacant for more than 16 months, at once a reflection the fact that the world of patents has long been what one veteran observer calls a "backwater" and that it isn't anymore — especially as the technology world has rapidly gained political might and turned its attention to figuring out how to pull the levers of government.

The first round in the fight over who should fill that chair ended when the Obama administration's reported pick to run the agency was derailed after an outcry from the technology world, particular those in the Internet sector of it. The skirmish was over in less than two weeks, but the conflict highlighted how the once-sleepy agency nestled in northern Virginia has, quickly, become a battleground for who will control how government and innovation intersect in the United States. On Wednesday, the fate of the patent office will be the subject of a House Judiciary hearing.

The controversy began in late June when rumors started to trickle out that the White House would nominate Philip S. Johnson to lead the USPTO. On paper, Johnson seemed like a shoo-in: a patent lawyer with more than 30 years of experience, he is currently the head of the patent practice for pharmaceutical giant Johnson & Johnson. But tech company leaders, venture capitalists, and allies in Congress objected. White House officials will not comment on the episode publicly. But by all accounts the administration gave up on Johnson's nomination, leaving the U.S.'s patent agency with no obvious next director since former IBM executive David J. Kappos resigned on the first day of February last year.

"There is a politicization to the position now," says Robert L. Stoll, the Commissioner for Patents from 2009 through 2012, "and it can seem like Google vs. the pharmaceutical industry." Stoll, a 29-year veteran of the USPTO, has stayed in the thick of the patent debate as a partner in the Washington, D.C. office of the law firm Drinker Biddle & Reath. "Everybody recognizes that things could be better, and maybe there has been some overreaching. But we need somebody who has the gravitas to represent the country internationally and be a measured voice on patents inside the [Obama] administration."

The stakes are now enormous, with patents — which under the Constitution give creators time-limited rights to their inventions — crucial to the fates of two of the largest, best performing sectors of the U.S. economy.

For bio-pharmaceuticals companies like Pfizer and Merck, a single patent can protect a hugely lucrative investment. When, for example, in 2011 the 20-year patent expired on Lipitor, sales of the cholesterol-fighting drug dropped from $8 billion a year to about a quarter of that.

But in the tech world, patents are often attached to obsolete inventions and used to squeeze money from innovators. In 2012, Etsy, a site that allows people to trade homemade and crafted goods, was slapped with a "troll" lawsuit for allegedly infringing upon an obscure electronic messaging patent, shortly after completing a $40 million fundraising round. The plaintiff has also gone after AT&T, Google, Twitter and Facebook. "It really just feels like a tax on innovation," said Althea Erickson, Etsy's policy director.

Those situations, to many in tech, highlight the absurdity of a patent system that seems to reflexively rubber-stamp the most trivial applications.

"Twenty years ago," says John M. Whealan, the Associate Dean for Intellectual Property Studies at the George Washington University, "patent law was a tier three issue. It was niche. Now you see not just company patent lawyers get involved, but it's their CEOs, their heavy hitters."

Johnson, as a leader of a group called the Coalition for 21st Century Patent Reform, was seen by many as unduly resistant to upending the way patents are issued and enforced. When his name was floated, Johnson's opponents in the tech world responded with a tally of complaints. Johnson could be personally prickly, some tech advocates said. Moreover, Johnson might even be a Republican; in 2012, the Pennsylvania-based lawyer gave $2,500 to the Romney campaign.

But mostly Johnson was seen as insufficiently committed to smashing "patent trolls," or people or companies who hold patents simply so they can extract money from those who allegedly infringe upon them, critics said. In public, he was carefully calibrated. "The innovation ecosystem in the country is extremely sensitive to changes in our patent system," testified Johnson in Congress last winter, added that it would be "best to table" a proposal pushed for by Senator Chuck (D-NY) Schumer that would expand challenges to the sort of "business method" patents common in the software-reliant financial services sector. But Johnson, fumed the tech critics, was at heart a "patent maximalist."

One detail particularly annoyed Johnson's critics. This spring, Schumer and Sen. John Cornyn (R-Tex.) were attempting to craft a compromise "troll"-targeting bill, that would have, among other things, forced those who file complaints to detail exactly how their patent was infringed. When it fell apart, many in tech placed responsibility on Johnson and others from the pharmaceutical world. When Johnson's name popped up, foes passed around a Word document said to show Johnson's tracked edits that, as they saw it, would gut patent troll legislation circulating on Capitol Hill.

Johnson's fans argue that his critics are guilty of a serious misreading of what Johnson's advocacy work, which, they say was aimed preventing a destabilization of the whole U.S. patent system. Andrew S. Baluch, former White House Director of International Intellectual Property Enforcement, argued in an e-mail that those who opposed Johnson won't be satisfied "unless a nominee supports 100% of what is contained in all the bills as introduced."

The tech community, adds George Washington University professor John Whealan, himself a deputy General Counsel for Intellectual Property Law at the USPTO from 2001-2008, "has, with all due respect, become an anti-patent community. It wants what it wants, and it doesn't want to compromise."

And the tech world has found reason to be encouraged about its growing influence in Washington. In the winter of 2012, companies like Google, Reddit, and Craigslist helped brought down the digital copyright bill called the Stop Online Piracy Act. The SOPA fight served as a baptism in the ways of the Beltway, and through it technologists found allies, formed relationships, and came to a growing sophistication about their power in shaping public policy.

The left, and Obama in particular, has benefited a great deal from that partnership. It's not just about Democrats fundraising millions in Silicon Valley. The president has also gained geek cred from the glamour of having dinner in San Mateo with Steve Jobs and Mark Zuckerberg, participating in "Twitter town hall" with Twitter co-founder Jack Dorsey in the East Room of the White House, and getting campaign strategy on the trail from Google's Eric Schmidt.

So on patents issues, reformers were beginning to believe that they had a strong ally in the Oval Office.

The White House championed the reform-minded America Invents Act that passed Congress in September, and advocates were thrilled when, in his 2014 State of the Union, the Obama took a moment to hammer "costly and needless [patent] litigation." Days later, their glee only rose when, during a social media "hangout," an uncharacteristically pointed Obama slammed those "trying to essentially leverage and hijack somebody else's idea and extort some money out of them."

And so when Johnson's supposed nomination was floated — mostly through the e-mail list of Florida patent lawyer Hal Wegner, who, on June 27, presented Johnson as "director-designate" — it felt like an unexpected slap in the face. Says W. Nicholson Price, an assistant professor at the University of New Hampshire Law School who has written widely on the intersection of patents and the pharmaceutical industry: "There was an anger over, 'Why in the world would you appoint someone to run an agency who would be vehemently opposed to your reforms for it?'" (Moreover, many in that world believed that the Obama administration had a perfectly good nominee close at hand in Michelle K. Lee, a former "head of patents and patent strategy" at Google and current USPTO Deputy Director.)

But if the tech world's successful fight against SOPA fight was a populist movement, the opposition to Johnson was pure inside Washington. "The technology world," said Julie Samuels, the executive director of the tech-oriented Engine Advocacy, "was able to make enough noise to make its feelings known," even if the vast majority of it happened behind closed doors. Engine Advocacy helped rally entrepreneurs and venture capitalists to express their disappointment with the Johnson pick.

Schumer, meanwhile, stressed to the White House that he would oppose Johnson if the White House nominated him to the Senate-confirmed post, according to a person familiar with the matter who spoke on condition of anonymity because of the private nature of the conversation. In public, Schumer said, "We needed somebody who understood that the patent trolls, which are hurting so many tech start ups, had to be reigned in, and Mr. Johnson was unsympathetic to that viewpoint."

The White House by all appearances backed away the nomination, and Johnson's opponents declared victory. On July 9, for instance, the Consumer Electronics Association, a Virginia-based technology advocacy group that counts Google, Pandora, and Apple among its members, issued a celebratory release: "CEA Praises White House Decision to Bypass Johnson at PTO Nominee."

The unfolding of events was a jolt to both sides of the patent debate. Some of Johnson's supporters continue to express amazement that someone with Johnson's sparkling resume, a seasoned and valued member of the close-knit patent community well positioned to manage the apparatus of the 10,000-employee organization and its considerable backlog of patent applications, was somehow found to be unfit to lead it; Robert Stoll, the patent veteran, describes the gauntlet Johnson faced as "terrible."

Those in the tech community can still hardly believe that Obama would have been so tone-deaf in the first place.

"Was [Johnson] a bright, qualified lawyer? Yes. Is he the right person? No. The issue is that he has worked diligently against the president's reform agenda," said Michael Petricone, the senior vice president of regulatory affairs at the Consumer Electronics Association, which had deemed Johnson's nomination "absurd."

The symbolism of who will next head the U.S. Patent and Trademark Office has political implications, too. In 2013, the tech industry and the pharmaceutical manufacturing industry both spent about $140 million on lobbying, according to the Center for Responsive Politics. Tech has leaned Democratic, but of late Republicans are finding more success in Silicon Valley. Billionaire and one-time Facebook president Sean Parker, for example, recently made news for making six-figure donations to Republicans across the country.

Many in the tech world stress, though, that they won't insist on a nominee who will champion their vision of patent reform, only one who will accept that their concerns now have to be taken into consideration alongside those of the pharmaceutical world and other players. All those involved though, seem to agree on one point, says Erika Harmon Arner, the head of the patent practice at the law firm Finnegan, Henderson, Farabow, Garrett & Dunner.

"It seems to me there's broad consensus that there needs to be someone at the head of the Patent Office," says Arner, adding, "Given the importance of innovation in this economy, it seems irresponsible to leave it open."

 

Have more to say about this topic? We take your questions every week in our weekly livechat, Switchback, Fridays at 11 a.m. ET. The comment box is open, so submit your questions now.

Nancy Scola is a reporter who covers the intersections of technology and public policy, politics, and governance.
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