March 30 (Bloomberg) -- Patents would be issued to whoever files applications first and the U.S. Patent and Trademark Office would be allowed to set its own fees under a measure introduced today in the U.S. House of Representatives.
The proposal, sponsored by House Judiciary Committee Chairman Lamar Smith, a Texas Republican, is similar to legislation passed by the Senate in a 95-5 vote on March 8. If approved and made law, it would mark a fundamental change in how patents are reviewed and the biggest revision to U.S. patent law since 1952.
The measure seeks to give the patent office more power to control its funding, with an end to Congress diverting fees for other non-patent purposes. It would let small businesses pay lower fees, limit the ability to obtain patents on tax-avoidance methods, and curtail lawsuits that accuse companies of putting expired patents on products.
“The strength of our economy relies on our ability to protect new inventions and build on innovation,” Smith said in a statement. “Unfortunately, our outdated patent system has become a barrier to innovation and invites lawsuits from holders of questionable patents seeking to extort millions of dollars from companies. We cannot protect the technologies of today with the tools of the past.”
The most controversial provisions involve a new procedure for challenging issued patents and a change that would grant a patent to the first inventor to file an application, seeking to end years-long disputes over who was the first to come up with an idea.
The U.S. Business & Industry Council, which said it represents independent inventors, contends that those provisions would hurt small businesses.
David Kappos, director of the patent office, said the current system “almost never benefits the independent inventor,” and said the change to give patents to the first inventor to file is “an essential feature of any patent reform legislation.”
“Enactment of the legislation currently under consideration will significantly improve our patent processes -- namely, evaluating patent applications more quickly and improving the quality of issued patents -- reduce litigation uncertainties and costs, and increase the value of patent rights for American innovators,” Kappos said in prepared remarks for a committee hearing today.
Congress has been considering patent law changes for the past six years, spurred by companies such as Intel Corp. and Cisco Systems Inc., 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 contested provisions that had been in earlier versions have been eliminated. Mark Chandler, Cisco’s general counsel, is among witnesses scheduled for the House Judiciary subcommittee hearing.
The debate over changes to patent law has drawn comments from companies in every industry. 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 patent office 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.
The Senate bill had support from a coalition of U.S. companies such as 3M Co., drugmaker AstraZeneca Plc, construction equipment-maker Caterpillar Inc., chemical company DuPont Co., General Electric Co. and International Business Machines Corp.
Gary Griswold, 3M’s former chief intellectual property counsel who now heads the group, said that some elements of the House proposal will need to be modified, including a provision that would put U.S. International Trade Commission cases on hold if someone asks the patent office to review a related patent.
The Coalition for Patent Fairness, whose members include Intel Corp., Cisco Systems Inc., Apple Inc. and Google Inc., was critical of the Senate version. In a statement, the group said there are “improvements in the legislative language” in the House version. It supports putting cases at the ITC or district court on hold until reviews are completed, and wants to make it easier to seek such reviews.
The Financial Services Roundtable and American Insurance Association issued a letter supporting provisions in Smith’s proposal that would make it easier to challenge patents covering business methods.
Innovation Alliance, a group that includes Qualcomm Inc. and Tessera Technologies Inc., said it opposes the House version because it “does not include some important safeguards against the potential for abuse of the post-grant review procedures.” The group had withheld its opposition to the Senate version.
Senator Patrick Leahy, a Democrat from Vermont who sponsored the Senate version, said the similarities in the two proposals reflect the years of work done by the two houses. “I look forward to working closely with Chairman Smith to ensure that patent reform legislation is on the president’s desk before the end of the year.”
The House patent bill is H.R. 1249.
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