Senate Votes to Let U.S. Patent Office Set Fees, Keep Cash

The U.S. Patent and Trademark Office would be allowed to set its own fees and keep all the money it collects under legislation aimed at speeding protection for innovations that passed the Senate yesterday.

The legislation, which passed 95-5, has the support of the Obama administration. It would mark fundamental changes in how patents are reviewed and is considered the biggest revision to U.S. patent law since 1952.

President Barack Obama has called for an increase in research and new technologies as a way to improve the U.S. economy and create more jobs. The president urged increased support for innovation during his Jan. 25 State of the Union address, which he called “Winning the Future.”

“This long-overdue reform is vital to our ongoing efforts to modernize America’s patent laws,” Obama said in a statement after yesterday’s vote.

The agency has said the changes are needed to hire more examiners, improve the agency’s computer systems and speed patent reviews to reduce a backlog of 700,000 applications.

“It’s a key driver of our country’s success,” Patent Office Director David Kappos said in a March 1 conference call with the media. “Innovation starts with our innovation agency.”

‘Commonsense Legislation’

The measure, S.23, was sponsored by Patrick Leahy, who heads the Judiciary Committee; Charles Grassley, a Iowa Republican who is the ranking member of the committee, and Orrin Hatch, a Utah Republican who has teamed with Leahy on past proposals.

“It is commonsense legislation that will help preserve America’s position as the global leader in invention and innovation,” Leahy, a Vermont Democrat who sponsored the bill, said after the Senate vote.

Three Republicans, Mike Crapo and James Risch of Idaho, and John Ensign of Nevada, and two Democrats, Barbara Boxer of California and Maria Cantwell of Washington, voted against the measure.

Congress has been considering patent law changes for the past six years, spurred by companies such as Intel Corp. (INTC) and Cisco Systems Inc. (CSCO), which claimed they were often targeted by owners of patents of questionable validity. U.S. courts have issued opinions that scaled back patent rights, so many of those early provisions have been eliminated.

House Plans Bill

The House “will introduce similar legislation this month,” Representative Lamar Smith, a Texas Republican who chairs the House Judiciary Committee, said in a statement yesterday.

The Senate bill had won support from U.S. companies such as 3M Co. (MMM), drugmaker AstraZeneca Plc (AZN), construction equipment-maker Caterpillar Inc. (CAT), chemical company Dupont Co., General Electric Co. (GE) and International Business Machines Corp. (IBM)

Some large technology companies remained critical of the bill. The Coalition for Patent Fairness, a group that includes Intel, Cisco, Apple Inc. (AAPL) and Google Inc. (GOOG), said in a statement, “We continue to have concerns about the bill and could not support its passage at this time.”

The group said “additional changes need to be made to the bill in the House to reflect the concerns of America’s leading technology innovators and job creators as they continue to drive the economic recovery.”

Authority to Set Fees

The Senate legislation would give the patent office the authority to set its own fees; create or expand provisions to review issued patents to curtail litigation; and let small companies pay a reduced amount to participate in a patent office program to speed certain applications.

Funding of the patent office has been a key goal of all sides in the debate. The office, one of a few self-funded federal agencies, wants the ability to set its fee structure without having to await permission from Congress.

A provision in the bill would set up a fund to hold money collected by the agency above its budget. That money would only be used by the patent office. More than $800 million has been kept by Congress since a 1990 law mandated that the office pay for itself through fees, according to the agency’s 2010 performance report.

First to File

Another provision would grant patents to the first person to file an application on an invention, eliminating costly and lengthy disputes over who was first to come up with an idea. That would bring the U.S. in line with other countries and help in efforts to work with patent offices worldwide to eliminate redundant work.

Senator Dianne Feinstein, a Democrat from California, sought to remove that provision, saying it would hurt small business and cause a “rush to the patent office” that would “lead to the over-filing of dead-end applications.”

Hatch said few small businesses can fight over who was first to invent because such disputes can cost about $500,000 in legal fees. “Small inventors do not have the resources to engage in the system we have now,” he said.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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