Intel's top patent attorney urged a Senate panel Monday to crack down on "trolls" who manipulate the patent system for large profits. The problem, according to David Simon, is greatly exacerbated by the very large number of patents in the software and computer industry.

"Their leverage is the threat of obtaining monetary damages that are disproportionately large, or of obtaining triple damages where there has been no evidence of conduct warranting a punitive measure of damages," Simon told the Subcommittee on Internet and Intellectual Property.

Simon said approximately 300 patent infringement cases are pending against hardware and software companies and added that IT companies pay about $500 million a year in litigation fees.

"Too many of these cases are filed in search of a quick buck through settlement negotiations, rather than by a party legitimately asserting a right because the infringer is interfering with commercial objectives," he said. "This is not to say that all of these cases are without merit, but too many are."

Under current patent law and its interpretation by the courts, punitive triple damages are imposed if the party infringed willfully. Simon said mere knowledge that the infringed patent exists can support a finding of "willfulness, and liability for triple damages.

"This presents a U.S.-based company with a Hobson's choice of deciding whether to settle the matter at a hold-up price or run the risk of having its products shut down," Simon said.

Since a landmark Supreme Court decision in 1981 that opened up software programs for patentablity, software and semiconductor patents have been issued in recent years at a rate between three and five times as fast as patents issued in other industries.

This rush on the Patent and Trademark Office (PTO) has created a serious backlog for examiners. Compounding the problem is that the relatively new field of software patents has not fully developed.

"Computers and computer programs are complex technologies, consisting of hundreds of parts and often millions of lines of code. Thus, it is not always easy to determine whether a specific patent application meets the standards of patentability," Simon said. "Because potentially hundreds of patents may be relevant to a particular computer or software technology, it is often very hard to determine whether infringement may be an issue."

According to Simon, a second element of damages is also in need of attention by Congress. Currently, when a small component of a large and successful product is found infringing, the damages that are assessed may be based not on the value of the infringing component, but on the value of the product as a whole.

"This has led to a number of situations of gross unfairness. We believe reform is needed to make sure courts calculate damages on the value of the component, rather than on the value of the larger product," he said.

Simon cited two major cases in past several weeks to underscore his point: the Sony PlayStation was enjoined because a joystick was infringing and Rim's Blackberry was enjoined because a synchronizing component was infringing.

"As our colleague from General Motors noted, we now have a case of someone wanting to enjoin the sale of pick-up trucks because they contain a built in beer cooler that is claimed to be infringing," Simon added.

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