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US House Takes up Patent Reform

By a GenomeWeb Staff Reporter

NEW YORK (GenomeWeb News) – A bill that would make the US award patents to the first inventors to file for a patent rather than the first inventor and would enable new post-patent grant review processes has landed in the US House of Representatives, just weeks after a counterpart bill passed overwhelmingly in the US Senate.

Introduced yesterday before a hearing in the House Judiciary Committee, the America Invents Act is similar to its Senate namesake in that it would move the US to a first-inventor-to-file (FITF) system from its current policy of awarding patents to the first inventors. It also would establish a new administrative construct called post-grant opposition that would allow disputes involving patent quality to be settled outside of the court system.

The act also would make changes to the process of re-examination of business method patents, would enable third parties to submit information regarding a patent application that could be relevant to an examiner, and it would establish fees at the US Patent and Trademark Office to recover costs of services it provides inventors and trademark filers and to hire new examiners to address the patent backlog.

The Senate version of the America Invents Act (S. 23), had broad bipartisan support and passed on a 95-5 vote in early March.

"Unfortunately, our outdated patent system has become a barrier to innovation and invites lawsuits from holders of questionable patents seeking to extort millions of dollars from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," House Judiciary Committee Chairman Rep. Lamar Smith (R – Texas), said in a statement late Wednesday.

"We need reforms that discourage frivolous suits, enhance patent quality and streamline international principles. Better patents lead to products and innovations that generate jobs and drive economic growth," Smith said.

The Obama Administration has been supportive of the bill, and USPTO Director David Kappos at the Judiciary Committee hearing yesterday said, "Patent reform will support growth and encourage innovation that improves American competitiveness, economic prosperity, and job growth. It is past due."

Kappos, who also is under secretary of commerce for intellectual property, told the committee that USPTO supports the major provisions in both House and Senate drafts of the bill.

The transition to a first-inventor-to-file system is "an essential feature of any patent reform legislation," Kappos said, pointing out that the US is alone in keeping the first-inventor system.

"The transition will simplify the process of acquiring rights while maintaining a one-year grace period that protects innovators. It will reduce legal costs, improve fairness, objectivity and transparency, and support US innovators seeking to market their products and services in other countries," Kappos continued.

One criticism of the proposed system is that it would give a competitive advantage to big companies over smaller firms or lone inventors because they could be quicker on the draw in filing patents and would be less burdened by the process and fees.

Kappos argued that the current system "almost never benefits the individual inventor."

He said that in the past seven years more than three million patent applications were filed, but only 25 patents were granted to small entities that were the second inventors to file but proved they were the first to invent, and of those only one was an individual inventor.

"Thus, in the last seven years, only one independent inventor's filing out of more than three million total patent filings would have received a different outcome under the first-inventor-to-file system."

Kappos also argued that legal fees for interference proceedings to determine who the first inventor averages between $400,000 and $500,000, and can balloon from there if there are appeals, and therefore the current system "favors those with deep pockets and works to the disadvantage of small companies and independent inventors with limited resources."

The USPTO director also said that the White House supports the measures in the bill to create a new post-grant review proceeding and the retooling of the existing post-grant re-exeamination process. He said the proposed changes will "minimize costs and increase certainty by offering fast alternatives to litigation as a means of reviewing questions of patent validity."

John Vaughn, executive VP of the Association of American Universities, said that as the bill has developed it has asked Congress to hold on to three components of current US law. Yesterday, Vaughn said those three wishes were granted in the America Invents Act.

The law would maintain a 12-month grace period for publishing articles containing a disclosure of an invention, it would enable the filing of provisional applications, and it would require applicants to sign an oath that he or she is an inventor of a claimed invention.

AAU also supports the other main provisions in the bill, including the creation of post-grant review proceedings. Vaughn told the committee that such a procedure should provide a less costly way to challenge patents and to avoid litigation, and it would eliminate patents that should not have been issued while strengthening those that survive the challenges.

But Vaughn said that AAU and the other university groups he was representing yesterday do not like certain parts of the bill, and he focused his concerns on the expansion of prior-user rights.

Expanding prior-user rights "would degrade the patent system overall by substantially reducing patent certainty," which could damage the technology transfer processes universities use to move their discoveries into the market, Vaughn said.

Although the prior-user provision includes a 'carve-out' for university patents, it still causes problems when companies get involved with universities, he explained. Many firms that license university patents then "intermingle" their own intellectual property with the licensed IP in order to develop their new products.

"The commercial prospects for those products would be at risk with the expansion of prior-user rights, even with a university carve-out, since it would increase the vulnerability of non-exempt patents to assertions of a prior defense by a competitor," Vaughn added.

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