Issues

Patent Reform

Defining the Issue

Background

Cisco’s Position

Additional Resources

Defining the Issue

U.S. patent law is in need of reform—its last major overhaul was in 1952. The patent system is encumbered by out-of-date procedures, limited resources, and obsolete guidelines that result in the commonplace granting of overly-broad patents. This climate has led to an increase in unjustified lawsuits by speculative patent holders against large and small companies alike. As a consequence, fear of litigation and mounting legal costs are stifling technology innovation and threatening U.S. competitiveness in the global economy.

Background

Cisco strongly supports patent protection. We hold more than 2,500 issued U.S. patents, with active applications for more than 4,000 others. The value of our company rests upon the intellectual property embodied in our networking products—both hardware and software. Cisco's patent program helps ensure the company's ability to improve and successfully market its products.

We believe that the purpose of the patent system is to ensure that inventors, such as those within Cisco, have the incentive to invest in further innovation and promote public access to new inventions. But patent law has not kept pace with the global and innovative nature of the 21st century innovation economy.

Patent speculators claim overly-broad patents for technologies that they do not intend to develop, and aggressively and widely enforce their patents against alleged infringers by attempting to negotiate outrageous licensing fees and litigating the case if fees are refused. Patent speculators are notorious for bringing their case to court in districts that are known for favoring the plaintiff in patent lawsuits, a practice known as forum shopping.

The process and guidelines used by the U.S. Patent and Trademark Office (PTO) do not take into account the growth of patent litigation. Current rules encourage jackpot-like lawsuits that rob companies and the U.S. economy of billions of dollars that would otherwise be invested in jobs, innovation, consumer savings and shareholder value.

Cisco’s Position

Federal patent reform legislation is needed to curb excessive patent litigation and improve patent quality. Cisco supports efforts to pass common-sense patent reform legislation and is working with industry groups and legislators to address these issues. Patent reform legislation to repair the broken U.S. patent system will foster more innovation, increased investment in research and jobs, greater shareholder value and enhanced U.S. competitiveness in the global marketplace. Among our priorities are:

  • Improved patent quality. Dedicated patent examiners at the PTO are inundated with record numbers of patent applications. Despite their diligence, a substantial number of problem patents are issued each year due to outmoded procedures, insufficient training and lack of resources. Improving patent quality and making changes at the PTO are important parts of patent reform.
  • Timely patent review. Timely reviews of the patent will ensure its validity and enable questionable patents to be challenged before litigation occurs. Cisco supports proposals to create a post-grant review process that allows third parties to thoroughly evaluate the patent within the PTO, not the courts.
  • Proportionate damages. Complex technology devices may be composed of thousands of patented components. Patent infringement damages should be proportionate to the value of the component in question, not the value of the entire product.
  • Justified punitive damages. Punitive damages must be justified, not automatic. The standard for assessing "willful infringement," which triggers a tripling of ordinary damages, must ensure that "willful" damages are only assessed where there is truly egregious conduct.
  • Prohibition of forum shopping. An end to the practice of patent case forum shopping will ensure that patent lawsuits are resolved in courts that have a reasonable connection to the underlying claim. Patent laws should be revised to ensure that companies are not held liable in U.S. courts for worldwide damages from acts of infringement that are claimed to have occurred in other countries.

Additional Resources:

Coalition for Patent Fairness