House Approves Major Overhaul Of Patent System

TrademarkThe House on Thursday voted to rewrite 60-year-old patent law to give inventors a better shot of obtaining patents in a timely manner and bringing the U.S. patent system in line with those of other industrialized nations.

The legislation also takes steps to help the underfunded U.S. Patent and Trademark Office deal with a backlog that forces inventors to wait three years to get a decision on patent applications and has swamped the agency with some 1.2 million pending applications.

The vote was 304-117, closer than the 95-5 vote by which a similar bill cleared the Senate in March. The two chambers still have to reconcile differences, but the bill has the advantage of being supported by the White House, major business groups, and leaders from both parties who have hailed it as a major jobs-creating measure.

“This legislation modernizes our patent system to help create private-sector jobs and keep America on the leading edge of innovation,” said House Speaker John Boehner, R-Ohio.

Before getting to a final vote, House supporters had to overcome challenges from opponents who charged that the legislation violated the Constitution and would make it more difficult for the small-scale inventor to prevail in disputes with large corporations.

There was also strong opposition to a provision that allows financial institutions to challenge patents issued on business methods, such as ways to process checks. The opponents said the provision amounted to a bailout for banks, but Rep. Robert Goodlatte, R-Va., chairman of the Judiciary intellectual property subcommittee said business method patents, a fairly recent phenomenon, were “a fundamental flaw in the system that is costing consumers millions each year.”

An amendment to remove the section concerning the business method patents was defeated 262-158.

The most significant change brought about by the bill would put the United States under the same first-inventor-to-file system for patent applications used by Europe and Japan. Currently the country operates on a first-to-invent system that House Judiciary Committee Chairman Lamar Smith, R-Texas, said is “outdated and dragged down by frivolous lawsuits and uncertainty regarding patent ownership.”

A chief opponent of the change, former Judiciary Committee Chairman John Conyers, D-Mich., said it would “permit the Patent and Trademark Office to award a patent to the first person who can win a race to the patent office regardless of who is the actual inventor.”

But Smith said that for a $110 fee an inventor can file a provisional application that gives him a year to prepare for his formal application. He said it can cost $5 million for legitimate inventors to defend themselves against unwarranted lawsuits.

The Senate and House will also have to work out differences on another major element of the bill, how to fund the patent office.

The Senate ensures that the PTO can keep all the user fees it collects. Since 1992, the office has lost nearly $1 billion because it gets less from Congress than the fees it collects, which go to the general Treasury. This is a major factor in the backlog in processing applications.

The House, however, acceded to Appropriations and Budget committee demands that Congress retain control over the PTO’s purse strings. As a compromise it was agreed to set up a reserve fund for fees collected that exceed what Congress allots to the PTO in a given year. An attempt to reverse this decision was defeated 283-140.

The chief Senate sponsor of the bill, Judiciary Committee Chairman Patrick Leahy, D-Vt., and the White House said they continued to support the bill despite the House change in the office’s revenue stream.

Among supporters of the legislation ? some with specific concerns ? are IBM; the U.S. Coalition for 21st Century Patent Reform, which represents major manufacturers and pharmaceutical companies; and the Coalition for Patent Fairness, which represents Apple, Dell, Google and other high-tech companies.

Opposition came mainly from groups representing independent inventors, small businesses and academics.

The legislation sets up a process for third parties to submit information regarding a patent application and establishes a new administrative framework for post-grant reviews that allows disputes involving patent quality and scope to be settled, ideally without lawsuits.

Source: The Associated Press.