Tech Sector Rides High in 110th

Posted January 31, 2007 at 6:54pm

Lobbyists for big technology companies, emboldened by friendly Democratic majorities in Congress, are looking to exploit their new advantage over the GOP-cozy pharmaceutical industry in an unfolding debate over patent law.

Tech companies including Microsoft, Cisco Systems and Apple are calling for a raft of reforms to patent laws, pitting their industry directly against drug companies whose close GOP allies just lost majority status in the House and Senate.

Although lobbyists working all sides of the patent debate say the reform efforts have long had supporters on both sides of the aisle, several well-placed sources said the pharmaceutical industry last year was able to scuttle patent reform bills it saw as harmful to its bottom line.

One technology industry lobbyist said the difference this year is that Democrats control Congress. The Pharmaceutical Research and Manufacturers of America took the tactic last year “of pretending like they were negotiating with tech,” this lobbyist said, adding, “PhRMA no longer has a hold over leaders in the House and Senate, and it has a lot of other big fish to fry legislatively.”

In the most recent sign of tech’s stepped-up efforts, the tech-centered Coalition for Patent Fairness today will send a letter to House and Senate leaders calling for a patent law revamp this Congress, according to a copy of the letter provided to Roll Call by a representative from one of the coalition companies. More than 60 companies signed the letter, including Visa and Mastercard as well as tech firms.

“The main reason we need patent reform is to drive innovation and growth,” said Steve Elmendorf, a top Democratic lobbyist who runs the patent fairness coalition. “Modernizing the system will encourage more research and development and lead to greater U.S. economic competitiveness.”

Elmendorf was a longtime aide to former House Democratic Leader Richard Gephardt (Mo.).

The letter states that patent reforms are long overdue, since the last big revision happened in “1952, a time when typewriter correction fluid was new technology.” It will arrive at a time when patent reform is gaining momentum on Capitol Hill.

Already key legislators such as Rep. Howard Berman (D-Calif.), chairman of the House Judiciary intellectual property subcommittee, has called patent reform a priority. Congressional sources said that legislation could be introduced as soon as this month.

The main conflict between technology interests and pharmaceutical giants is over patent litigation. The big tech companies say they are tired of fighting off lawsuits over the thousands of patents it takes to put together laptop computers and others devices. Pharmaceutical companies use only a handful of patents for a drug, and their lobbyists say they must be able to go after rivals that infringe on those patents or the industry will find itself in peril.

“The patent litigation system greatly favors the plaintiff,” said another tech industry lobbyist, “and pharma companies are usually the plaintiffs, where high tech and financial services companies are usually on the defense. This is a fundamental difference in our business models.”

In an e-mail statement, PhRMA spokesman Ken Johnson said that the group “is concerned that changes to the current patent system could potentially reduce incentives for pharmaceutical companies to research and develop new life-saving medicines for patients suffering from a wide range of chronic and life-threatening diseases. We welcome a dialogue with members of Congress and other interested parties on important patent issues so that together we can continue to highlight the fact that a strong and vibrant patent system can help foster the innovation of new medicines that help patients live longer, healthier lives.”

Tom DiLenge, general counsel and vice president of the Biotechnology Industry Organization, said his group shares those concerns about changes to damages paid for patent lawsuits. “Our concern is as they’re trying to fix the problem for the high tech folks, there are potentially unintended negative consequences for our industry,” DiLenge said. “In biologics, all the patents have to work together, that’s a different situation than a laptop.”

But the issue doesn’t only pit tech companies against pharmaceutical interests. It also has led to fissures within the pharmaceutical and technology sectors, and industry groups on all sides are racing to sign up lobbyists with ties to the House and Senate Judiciary committees and Congressional leaders.

In a sign of the growing dispute within the tech sector, tech companies that make money from licensing their patented technologies formed the Innovation Alliance in recent weeks to counter Elmendorf’s Coalition for Patent Fairness. The alliance already has Manus Cooney, a former Senate GOP Judiciary aide, working on its side, and it includes small tech companies such as Qualcomm, Tessera and InterDigital.

“They are concerned that when it comes to reforms, if you have too blunt an instrument, it will also apply to legitimate companies and make it harder for them to enforce their property,” said Cooney, a lobbyist with Potomac Counsel. “We believe that our companies ought to have the right to benefit from the strong patent system that Intel and Google and Cisco and HP had.”

Cooney isn’t the only lobbyist to sign a new client recently in the patent debate. In the past week, the Coalition for Patent Fairness also tapped Patton Boggs lobbyist Jonathan Yarowsky, a Democrat who has long focused on Judiciary issues, to serve as policy counsel.

Yet another group, the Coalition for 21st Century Patent Reform, which includes several pharmaceutical companies and 3M, General Electric and Caterpillar, hired a team of lobbyists from Akin Gump Strauss Hauer & Feld in recent days. Daniel Spiegel and Bruce Lehman, who led the patent office during the Clinton administration, will take the lead. “We’re reaching out to Members of the Judiciary committees,” Spiegel said.

On the financial services side, lobbyists for that industry say they are definitely interested in working with the tech companies but haven’t decided whether to join the patent fairness coalition.

Andy Barbour, a lobbyist with the Financial Services Roundtable, said that Tuesday his board voted to make patent reform a priority and that the industry is looking at joining the Elmendorf tech coalition, starting its own or working the issue on its own. “We are very close to sharing the same positions with the tech companies with only a very few differences of priority,” Barbour said.

While tech and financial services have more in common than not, the pharmaceutical industry is not so lucky.

Pharmaceutical industry lobbyists said that some companies in the sector view any kind of patent reform as a dire threat where others are willing to make bargains to help their own bottom lines. By and large, lobbyists for pharmaceutics and biotech companies say, the current system works to their advantage.

In one split, Roche Pharmaceuticals has been shopping for a patent reform vehicle to change patent laws to help it sell a product that would compete with an Amgen therapy for anemia. One source familiar with the Roche-Amgen fight said that Roche is actively working to get its preferred patent change included in a larger reform bill and is looking to cut a deal with technology companies.