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Senate Passes Biggest Revamp of U.S. Patent System Since 1952

Thursday, 08 Sep 2011 06:35 PM

 

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Sept. 8 (Bloomberg) -- The Senate passed an overhaul of the U.S. patent system that President Barack Obama has called crucial to his administration’s effort to boost job growth.

In a 89-9 vote today, the Senate cleared a bill passed by the House in June that would fundamentally alter the way patents are reviewed and mark the biggest change to U.S. patent law since at least 1952. The measure, called the America Invents Act, now heads to the White House for Obama’s signature.

The legislation, H.R. 1249, would let the U.S. Patent and Trademark Office set its own fees and exercise greater control over its budget, providing the agency with more funding to address a backlog of almost 700,000 applications awaiting first review. Reducing the time it takes to give inventions legal protection will speed new products to the market and spur economic growth, according to the bill’s supporters.

“This bill is important for our economy,” Senator Patrick Leahy, a Vermont Democrat who sponsored the measure, said before the final vote. “It’s important for job creation. It’s a product of bipartisan and bicameral collaboration.”

The legislation, which culminates more than six years of negotiations and lobbying, covers every step of the patent process, setting new procedures to review issued patents while curtailing some litigation. It has the support of large companies including Microsoft Corp., International Business Machines Corp. and a group that represents Johnson & Johnson, Eli Lilly & Co., 3M Co. and General Electric Co.

‘Rational Patent System’

The changes “will ensure that innovators in our troubled economy can benefit from a predictable and rational patent system, with new tools to eliminate patents that should not have issued and to speed the processing of patents that should be issued,” Horacio Gutierrez, Microsoft’s deputy general counsel for intellectual property and licensing, said in a Sept. 6 blog posting.

The funding provision, which also would let the agency increase fees paid by inventors and patent owners, is the cornerstone of the bill. Since 1990, the agency says, more than $800 million in fees have been diverted by lawmakers to non- patent purposes.

The Obama administration says the money is needed to hire more examiners and improve agency computer systems to cut the current 34-month wait for patent approval. The U.S. Chamber of Commerce, Washington’s largest business lobbying organization, supported passage, as did the United Steelworkers. A group representing large technology companies including Google Inc., Apple Inc., and Intel Corp. also backed the measure.

Bill Opponents

Another group of technology companies that includes InterDigital Inc. and Tessera Technologies Inc. opposed the bill, saying the House-passed measure doesn’t do enough to guarantee more funding for the patent office.

Senator Tom Coburn, an Oklahoma Republican who tried unsuccessfully to alter the bill to give the agency full control over the fees it collects, said language in the House bill was inadequate to keep Congress from diverting the funds.

“Investors in this country have paid the fees to have their patents examined and evaluated and reviewed, and yet we -- because of a power struggle -- have decided that we’re not going to let that money go to the patent office,” Coburn said before the Senate vote.

Groups representing small businesses say the legislation will benefit large companies over independent inventors, create a rush to the patent office and establish onerous review procedures that will weaken the power of patents to protect inventions.

Small Business

“This legislation will irreversibly damage the ability of small-business owners and entrepreneurs to create, develop and commercialize their innovations,” said Todd McCracken, president of the National Small Business Association, a Washington-based group that says it represents 150,000 small businesses nationwide. “To think this bill will have anything but negative implications on job creation is absurd.”

Under the legislation, patents would be granted to the first inventor to file an application, ending an often time- consuming procedure to determine who came up with an idea first and bringing the U.S. in line with patent laws in other countries.

All newly issued patents may be subject to a challenge from third parties, a variation of a process used by the European Patent Office. Third parties would be allowed to submit information for consideration during the application process.

Tax Avoidance

The bill also would limit patents on tax-avoidance strategies, though companies including Intuit Inc. and H&R Block Inc. have said they would retain protections for their tax- preparation software.

Banks including Bank of America Corp. and Citigroup Inc. would get new power to seek to cancel finance-related business method patents that they argue are of questionable validity. Companies that own such patents, including DataTreasury Corp. and Trading Technologies International Inc., have accused the banks of using their clout in Washington to avoid paying for using someone else’s inventions.

The trade group for generic-drug companies including Mylan Inc. and Watson Pharmaceuticals Inc. opposes the bill because there’s a provision that lets patent owners retroactively correct errors that might otherwise lead a court to invalidate the patents.

The Washington-based Generic Pharmaceutical Association also objects to language in the bill that would ease deadlines for seeking a patent-term extension granted to compensate drugmakers for the time it takes to get regulatory approval.

Medicines Co.

The provision would provide a clear victory to Medicines Co., which won a court ruling that it was entitled to an extension even though it missed a deadline for an extension on the main patent for its only drug, the anticoagulant Angiomax.

Fresenius SE’s APP Pharmaceuticals unit is appealing that decision after the government said it wouldn’t challenge the judge’s decision in favor of Medicines Co.

Other provisions would limit lawsuits in which a manufacturer is accused of putting expired patent numbers on packaging and establish satellite offices the agency could set up nationwide to tap into local workforces.

--Editors: Michael Shepard, Allan Holmes

To contact the reporters on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net; Allan Holmes at aholmes25@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

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