June 29, 2015
CBM Amendment To The Innovation Act Defeated In House Judiciary Committee

Efforts to reform patent laws, over concern about so-called patent trolls and other issues, have been opportunities to extend the Covered Business Method (CBM) patents transitional program. This is also true with the recent House Judiciary Committee consideration of the Innovation Act, where another attempt to extend CBM was defeated, IPWatchdog reported. The Innovation Act attempts to reform patent laws by reducing frivolous patent lawsuits and also require losing plaintiffs to pay for the legal costs of the defending party in such suits.

During consideration of the Innovation Act in the House Judiciary Committee, once again Cong. Darrell Issa introduced an amendment to extend the CBM program, which is set to expire in 2020. The CBM program began in 2012 and will sunset on September 16, 2020.

A patent under the CBM program is one "that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions," IPWatchdog explains.

The CBM program primarily affects technology patents for products such as computer software and provides for a different process of adjudicating patent infringement claims under those patents. Issa's amendment would have extended the program until 2026.

"We should be ending [CBM] rather than extending it," Congressman John Conyers (D-MI) argued in regard to Cong. Issa's amendment to extend CBM.

Conyers pointed out that the U.S. Patent and Trademark Office (USPTO) has expanded the scope of CBM beyond its intent at the expense of independent inventors and small businesses. Conyers added that CBM is "a new tool for infringers to drain legitimate patent holders of resources."

The committee defeated Issa's amendment by a 18 to 13 vote and after that passed the Innovation Act by a 24-8 vote, ABA Banking Journal reported.

The ABA Banking Journal described the defeated amendment as an "ABA-supported amendment to extend the Covered Business Method program — which protects the rights of legitimate patent holders while providing an efficient alternative to patent litigation over questionable patents — failed."

The House Judiciary Committee passed the Innovation Act one week after their counterparts in the Senate passed similar legislation, National Journal reported. One of the major differences between the version is the "loser pays" concept in the House bill, where losing patent claim plaintiffs would pay the legal costs of the defendants.

Opponents of the CBM review procedure place a cloud over the patents of innovators by subjecting such patents, throughout their lifetime, to commercially-motivated challenges on terms extremely favorable to the challenger. Additionally, the CPM program provides for an 18-month waiting period that could allow a patent infringer to continue its practices and gain market share while the patent holder waits for a decision on the challenge. CBM has strayed from its original intent, opponents claim, that was in reviewing patents on the financial services business method, and now it is often used to challenge software patents.

Extension of the CBM program is opposed by a number of organizations, including the American Conservative Union, Americans for Tax Reform, Center for Individual Freedom, Citizens Against Government Waste, and other groups, who wrote a letter to Congressional leaders urging them to not extend CBM.

[Photo of Congressman Darrell Issa by Chip Somodevilla for Getty Images]