Patent Overhaul Gathers Steam

Patent reform inched closer to reality last week when the Senate approved a package of amendments to bipartisan legislation that would overhaul the U.S. patent system for the first time in almost 60 years. The bill would transform how the agency sets and collects fees, spur action on a massive patent application backlog, and potentially overturn the U.S. basis for patent recognition.

One amendment would allow the U.S. Patent & Trademark Office (PTO) to keep all the fees it collects from patent filings. Under the main bill (S. 23), sponsored by Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) and the panel’s top Republican member, Sen. Charles E. Grassley of Iowa, the agency could also set its own fees. These changes, lawmakers say, would enable the hiring of more examiners to work on the patent application backlog.

It now takes the patent office about three years to process an application. Of 1.16 million patent applications pending at PTO, more than 718,000 are awaiting a preliminary examination. “Among them could be the next medical miracle, the next energy breakthrough, the next leap in computing ability, or the next killer app,” Leahy said in remarks on the Senate floor last week.

The backlog results from a lack of resources. PTO is funded entirely by the fees it collects. Congress determines how much the office can charge for its services. But over the past 20 years, legislators have siphoned off more than $800 million in PTO fees to other government programs.

The Senate voted 97-2 to approve the package of amendments, including one, crafted by Sen. Thomas A. Coburn (R-Okla.), that would end the diversion of money from the patent office. He noted that last year some $53 million in application and other fees paid to PTO were spent elsewhere. “By providing a permanent end to fee diversion, Congress has the ability to contribute greatly to the enhanced efficiency of this agency,” Coburn said.

The most controversial change in the legislation is a proposal to transition the U.S. from a “first to invent” application system to a “first to file” system, which is used by other industrialized nations. The White House supports the bill and says the first-to-file system would simplify the process of acquiring patent rights, reduce legal costs, and improve fairness.

Worried that they lack resources to compete with large corporations, independent inventors and small companies oppose the switch. Sen. Dianne Feinstein (D-Calif.) tried to strike the first-to-file provision from the bill, but the Senate rejected her amendment by a vote of 87-13.

“As a first-to-invent country, we have been the leader of world innovation, and those countries with first-to-file systems have been playing catch-up,” Feinstein said. “I wouldn’t trade America’s record of innovation with anyone.”

But PTO Director David J. Kappos told reporters last week that the transition would provide greater legal certainty for small businesses. “First inventor to file is a win for all American innovators of all sizes, and in all industries,” Kappos said.

As the Senate moved toward final passage of its bill, House Judiciary Committee Chairman Lamar S. Smith (R-Texas) indicated that he would introduce a patent reform bill in his chamber “in the next few weeks.”