Microsoft demands patent reform

The US patent system needs to be reformed, says Microsoft, which spends millions of dollars a year fighting intellectual property lawsuits.

Brad Smith, general counsel for the software maker, on Thursday called for reform in four areas: improving patent quality, reducing excessive litigation, improving the coordination of international patent law, and increasing the accessibility of patent laws for small companies and individuals. Smith was addressing an audience at the American Enterprise Institute for Public Policy Research in Washington.

"We have benefited substantially as an industry and a country from patent protection," Smith said. "But the combination of technological change and a globalizing economy are creating new challenges for the US patent system."

Microsoft, typically faced with an average of 35 to 40 patent lawsuits at any given time, is particularly interested in reform as it hopes to pare down the $100m it spends annually to defend itself against such suits. The software giant's interest in patent reform also comes at a time when the European Commission is exploring the introduction of US-style software patents.

The US Patent and Trademark Office has seen annual applications triple to more than 350,000 since the 1980s, Smith said. Microsoft has submitted more than 3,000 patent applications this year alone, he noted.

But funds to support the agency have not kept pace until recently, when patent user fees were increased, Smith said. Nonetheless, he called on Congress to stop the practice of channelling a large portion of the money raised from patent fees to other government uses.

"Microsoft strongly supports Congress' move toward eliminating this practice, but urges that steps be taken to put a permanent end to all fee diversion from the PTO," Smith said.

Microsoft's top legal executive also addressed the need for a special court to hear all patent cases at the federal district level, as an effort to bring consistency and predictability to patent litigation.

He also expressed a need for patent plaintiffs to demonstrate that they or their company would face irreparable harm that could not be compensated by monetary damages before a court issues a patent injunction on a defendant.

Coordination of international patent offices and their legal standards would be a good move, especially as Europe "wrestles with harmonisation across the EU," Smith said. On Monday, the of the European Union Council formally endorsed a controversial directive, which would legalise software patents. Several member states of the European Union oppose the legislation.

Smith advocated the setting up of patent offices in Europe, Japan and the United States to develop common recognition of patent reviews. One area the United States would need to change is the standard it applies in awarding patents, Smith said.

"The US is the only country in the world that applies a 'first to invent' standard for awarding patents. Every other country applies a 'first to file' standard," he said.

Finally, Smith called on the United States to eliminate patent filling fees for individuals and small businesses, saying the move could encourage more of these inventors to obtain patents.