Jeff John Roberts at GigaOM reports there is a battle going on in Washington DC over patent reform. Some in DC are attempting to rewrite the broken patent system. Under the current patent laws, what the author calls the struggling old guard firms can exploit the patent system to abuse monopolies over basic software concepts from decades ago. The result has been to smother start-ups and weigh down vibrant parts of the tech economy with frivolous lawsuits; lawyers get fat at the expense of those who are building real businesses.

The latest push by Congress to fix the software patent problem suffered a setback after Congress allowed Microsoft and IBM to gut a key House bill that would have made it easier for victims to push back. TechEye explains that the “covered business method” (CBM) program drew the ire of Microsoft (MSFT) and IBM (IBM). The changes proposed would have sped up the method for the Patent Office to get rid of low-quality software patents. Under the reformed program, MSFT and IBM could not sue someone until the Patent Office considered if the patent was viable. TechEye reports that IBM flexed its political muscle (cash?) to stop the effort to expand the CBM program. An IBM spokesperson said that while “we support what Mr. Goodlatte’s trying to do on trolls, if the CBM is included, we’d be forced to oppose the bill.”

The upshot according to GigaOM is that for the second time in three years, the U.S. is poised to pass a law that will make cosmetic changes to the patent system without addressing the root cause — garbage software patents — that has made the system a mockery and a byword for legalized extortion.

The article claims that reformers shouldn’t despair quite yet. GigaOM cites sources close to the legislative process that think real reform could still happen if powerful senators prevail and if opponents outgun Microsoft and its allies in the grubby money and lobbyist game. GigaOM lays out how the reform was de-railed.

Money Talks in the House

The chair of the House Judiciary Committee, Rep. Bob Goodlatte (R. Va.), was scheduled to bring his much-touted patent bill for a vote. The bill arrived on schedule — but it was a neutered version.

A key provision, which would have provided a way to challenge software patents at the Patent Office, is no longer in the bill, which Fat cat money passed 33-5 vote by the committee. The change is significant, the author says because it means victims of patent bullies must still pay millions to challenge the patents in federal court or, as most do, simply swallow hard and pay a licensing fee.

Mr. Goodlatte’s decision to drop the provision is a victory for IBM and Microsoft, which have stacks of old software patents that provide licensing revenue even as their product lines sputter. It’s also a victory for trolls, which the article says are shell companies backed by private equity firms and lawyers that use patents (often obtained from Microsoft and others under a “privateering” arrangement) to wage ruinous legal war against everyone from Martha Stewart to individual users. (rb- Click here to read about IBM’s efforts to Patent Patent Trolling)

According to reports, the change to the Goodlatte bill came after intense lobbying from groups linked to Microsoft, IBM, and others. The account was confirmed by a source close to Google (GOOG) and other groups that pushed for the provision to challenge software patents.

“They outspent the living shit out of us,” said the source, who did not want to be named. He said that the companies spent heavily to lobby Democrats on the Committee and freshman Republicans, forcing Mr. Goodlatte to remove the provision rather than seeing it voted down at this stage.

A source with a lobbying group allied with Microsoft said the software giant’s role had been overstated, and that the change in the bill was less about money than it was about “shoe leather” lobbying.

Patent reform in the Senate

“If we had a quarter of the people who opposed SOPA supporting this anti-patent troll law, we’d win,” Sen. Chuck Schumer (D-NY) told the author. Mr. Schumer was joined by the Electronic Frontier Foundation, to talk patent reform and his up his bill to take on trolls, which he said are “preying on New York’s technology industry.”

Mr. Schumer is pushing a bill that includes the key provision about software patents that was stripped from the House bill. Schumer’s support is significant, not only because he carries clout in the Senate, but because he succeeded in including a similar provision aimed at frivolous financial services patents in the America Invents Act of 2011.

Other patent reform bills are circulating in the Senate including similar bills from Sen. Patrick Leahy (D-Va.) and Sen. John Cornyn (R-Tx.). According to the source tied to Google, Mr. Leahy has signaled that his bill is a “Christmas tree,” meaning other politicians can hang their preferred provisions atop it; the bill that will ultimately get a vote on the Senate floor will likely contain a provision to challenge software patents.

Washington insiders said patent legislation is one of the few bipartisan initiatives available to members of Congress, who are eager to notch legislative achievements before the mid-term campaign season begins next summer. This means that the bills are expected to go to a full floor vote in the House and Senate by early 2014 and that a markup session on a final bill will take place in the spring — the only question is which version will prevail.

The endgame

“There’s months to go till conference committee,” said the source close to the reform lobby, predicting that the balance of power will tilt towards the software patent reform camp, as Google and others ramp up lobbying efforts. The source tied to Microsoft, unsurprisingly, panned this prediction and declared that challenges to software patents are now a “third rail” that most in Congress don’t want to touch.

The outcome will be determined in large part by money, and whether Google and the other companies that recognize the harm caused by software patents (Twitter (TWTR) is another) are willing to seize the chance at reform that is within their grasp.

Today, attitudes have changed after a steady parade of patent horror stories: Boston University using a 1997 patent to sue Apple and seek an iPhone ban; a troll using a 1998 patent from a Holocaust foundation to shake down the New York Times; a troll lawyer who boasts he likes to “go thug,” and is pressing an extortion campaign against hundreds of companies.

All of this has led everyone from small app developers to President Obama to suggest the patent system is out of hand. After years of asking defendants to take it on faith that the system is working, it’s now up to Microsoft and others to justify that their ancient software patents — which award 20-year monopolies in a fast-moving industry — do more good than harm.

 rb-

While I’m not a lawyer, this seems pretty messed up to me. But that is the magic of Democracy, we get the leadership we elect.

Related article

• Congress uses cartoon video to explain the problems with patent trolls and “legalized extortion” (gigaom.com)

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.