Administration Says Patent Law Change Will Spur U.S. Economy

White House officials said the overhaul of the U.S. patent system that President Barack Obama will sign into law today amounts to the most significant jobs bill passed by Congress this year.

The measure, which the president has repeatedly cited in speeches promoting his economic policies, gives the U.S. Patent and Trademark Office more control over its funding and makes fundamental changes in how patents are processed and reviewed. It passed the House in June and won final approval Sept. 9 on an 89-9 vote in the Senate.

“By creating a faster process for the approval of patents and reducing the amount of uncertainty, it will increase investment in the economy today and start creating jobs today,” Jason Furman, deputy director of the National Economic Council said yesterday in a conference call with reporters.

The patent office, which is funded entirely by user fees, will be able to set its own fees, with any money in excess of the budgeted amount going to a fund that can only be used by the agency. The office plans to hire as many as 2,000 more examiners in the coming fiscal year, revamp an outdated information technology system that it has described as “beyond horrific,” and open satellite offices across the country to tap into local workforces.

The goal is to address a backlog of almost 700,000 applications awaiting first review and decrease the average 34 months it takes to issue a patent. Reducing the time it takes to give inventions legal protection will speed new products to the market, helping economic growth, according to the bill’s supporters.

Research Promotion

The president also plans to announce new programs to promote the commercial use of work done by scientists at universities and government research labs. The National Institutes of Health will help companies cut the time and cost for developing new drugs and the National Science Foundation will establish a prize to reward the university that makes the most progress in accelerating job growth, Furman said.

Obama is scheduled to sign the legislation at Thomas Jefferson High School in Alexandria, Virginia. The suburban Washington town is home to the patent office headquarters and the school is named for the third U.S. president who, as secretary of state under George Washington, signed the nation’s first patent law in 1790.

Fast Track

The patent office already has been working to speed up the application process, including giving green technology fast- track reviews. DuPont Co., the Wilmington, Delaware-based chemical company, used the program to obtain patents on biofuels, said DuPont Chief Executive Ellen Kullman, who is a member of the president’s Council on Jobs and Competitiveness

“Pace is really critical here,” she said. “If you can get the pace of the patents going, you can accelerate the pilot launch; you can accelerate the production.”

The legislation is the culmination of more than a decade of discussions and six years of negotiations and lobbying by every industry. It covers each step of the patent process, setting new procedures to review issued patents while curtailing some litigation. It has the support of companies including Microsoft Corp. (MSFT), International Business Machines Corp. (IBM) and a group that represents Johnson & Johnson (JNJ), Eli Lilly & Co. (LLY), 3M Co. (MMM) and General Electric Co. (GE)

Furman said that the breakthrough came during a December meeting Obama held with business leaders, including Lilly Chief Executive Officer John Lechleiter and Cisco Systems Inc. CEO John Chambers, who disagreed over how much the bill should deal with changes in litigation. Then-Commerce Secretary Gary Locke followed up to resolve the differences, Furman said.

Big Companies

Some small business have criticized the legislation as giving big companies an unfair advantage in obtaining patents and creating new hurdles to enforcing patent rights against companies that copy inventions without compensation.

Supporters have expressed reservation on the funding issue, saying it doesn’t go far enough to protect the patent office from having funds siphoned off to other priorities. Congress has diverted almost $1 billion from the agency since a 1990 law required the patent office to pay for itself.

Under the bill, 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.

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

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

To contact the reporter on this story: 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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