February 14, 2012
WASHINGTON — The House on Wednesday took up the most far-reaching overhaul of the patent system in 60 years, a bill that leaders in both parties said would make it easier for inventors to get their innovations to market and help put people back to work.
The legislation, supported by the Obama administration and a broad range of business groups and high tech companies, aims to ease the lengthy backlog in patent applications, clean up some of the procedures that can lead to costly litigation and put the United States under the same filing system as the rest of the industrialized world.
The Senate passed a similar bill last March on a 95-5 vote. If the bill makes it to the White House for the president’s signature, it could be one of the first congressional actions this year to have a concrete effect on business after months of the GOP-led House voting on bills that head straight for the political graveyard of the Democratic-controlled and slow-moving Senate.
A final vote is expected later in the week.
“After six years of working towards patent reform, we are near the finish line,” said House Judiciary Committee Chairman Lamar Smith, R-Texas. “If Congress is serious about economic growth and job creation, we must pass patent reform.”
The first major overhaul of the patent system since 1952 has faced resistance. A planned vote last week was put off after the Republican chairmen of the Budget and Appropriations committees objected to a critical element that would allow the U.S. Patent and Trademark Office to keep all the user fees it collects.
Currently those fees go to the general Treasury fund, and Congress appropriates money for the Patent and Trademark Office. But since 1992 the PTO has lost nearly $1 billion because the sums it gets from Congress are less than the fees. This fiscal year the agency had authority to spend $2.1 billion, about $85 million less than it expects to receive in fees.
That’s a major reason that the agency can’t hire enough examiners, that it takes an average of three years to get a patent approved and that the agency has a backlog of 1.2 million pending patents, including more than 700,000 that haven’t reached an examiner’s desk.
A compromise reached this week sets up a reserve fund for any fees collected in excess of the money the PTO receives from Congress. The agency would thus get more money while Congress would still control the purse-strings and get more oversight authority.
Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee and author of the bill in the Senate, said he was disappointed the House approach on fees was different, but said the bill remained “a tremendous boon for American inventors, American manufacturers and American jobs.”
The White House issued a similar statement, lauding the overall bill while saying it wanted to work with Congress to ensure that the PTO “will have timely access to all of the fees collected.”
The second pillar of the legislation is a provision that would switch the United States from the “first-to-invent” system now in effect to the “first-inventor-to-file” system for patent applications used by all other industrialized countries.
Former Judiciary Committee chairmen Jim Sensenbrenner, R-Wis., and John Conyers, D-Mich., question the constitutionality of the change and some colleges and small-scale inventors say the change would favor large corporations and stifle academic cooperation.
Alexander Poltorak, head of the American Innovators for Patent Reform, representing independent inventors, university researchers and small companies, said the bill gives big corporations an advantage by weakening the one-year grace period under which an inventor can develop his product before filing for a patent and giving corporations more post-grant challenging rights.
He said the first-to-file system will lead to a rush to file where “large companies with in-house attorneys will always be able to beat small inventors and universities in the race to the patent office.”
But supporters say the current system, in addition to being out of sync with the rest of the world, invites costly litigation over patent ownership that deters the raising of capital. The PTO says it costs $400,000-$500,000 to pursue an interference proceeding, claiming the right to a patent based on an earlier invention.
Among the supporters — at times with reservations — are IBM; the U.S. Coalition for 21st Century Patent Reform which represents major manufacturing, pharmaceutical and research companies; and the Coalition for Patent Fairness, which represents Apple, Dell, Google, and other high-tech industries.
The legislation also sets up a process for third parties to submit information regarding a patent application and establishes a new administrative framework called post-grant opposition that allows disputes involving patent quality and scope to be settled, ideally without lawsuits.
Another contested provision in the bill allows for the review of patents for business-method innovations such as check processing. Critics argue that the provision rewards large banks by giving them a way to challenge the validity of such patents, but supports say the provision merely addresses mistakes when business-method patents were first issued in the late 1990s. They say good patents that pass re-examination will have even stronger legal integrity.