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House Panel Takes Next Step Toward New Patent Rules

A sweeping overhaul of the U.S. patent system appears to be gaining momentum in Congress. Today, Representative Lamar Smith (R-TX), chair of the House Judiciary Committee, unveiled his panel's reform plan (H.R. 1249), called the America Invents Act. It includes many of the same principles adopted in a bill approved by the Senate earlier this month by a vote of 95-5.

Most importantly, both the House proposal and the Senate-passed bill would stop giving priority to the first person who claims an invention and instead recognize the first person to file a patent application. This "first-to-file" standard is already used by most of the rest of the world. Arguing for this new approach, Smith wrote in Politico today that its clarity would be a boon to inventors:

By adopting a first-inventor-to-file standard, we would simplify the process of determining who owns a patent. We also would make it easier for U.S. inventors to get innovations patented overseas because they would not have to prepare applications for two different systems.

The two bills also would give the U.S. Patent and Trademark Office more control over revenue from application fees—in the hope this would boost the agency's speed and competence—and create a streamlined review procedure for challenging patents after initial approval. This administrative review is intended to bring challenges forward more quickly and resolve them at a lower cost than the present system, which can trigger many years of legal wrangling.

One lobby representing large businesses--the Coalition for 21st Century Patent Reform—supports the House bill in general, particularly the shift to a first-to-file standard. But a leading member of the coalition, Procter & Gamble attorney Steve Miller, testified today before the Judiciary Committee that some provisions in the House bill could be deal-breakers. He said that "delicate compromises reached by numerous stakeholders after years of negotiations may be upset by a handful of new provisions," including aspects of a proposed new administrative review that he argued would make it too easy to initiate a patent challenge.

Mark Chandler, an attorney for Cisco Systems Inc., a leader in another industry group that includes many electronics companies, the Coalition for Patent Fairness, said today that the House bill "has improved upon" the Senate bill but needs to go further. For example, Chandler faulted the House proposal for not going far enough to protect the so-called prior user rights of those who develop new ideas as trade secrets rather than by seeking patents.

Taking the opposing position was John Vaughn, representing the Association of American Universities (AAU). Vaughan testified that the House bill goes overboard in attempting to expand inventors' rights under trade secrecy.

Universities believe that expanding prior-user rights is an unwise expansion of immunity from the assertion of patent rights. Such an expansion would degrade the patent system overall by substantially reducing patent certainty, and any reduction in patent certainty could seriously impair the process by which universities transfer their discoveries into the commercial sector for development.

Vaughn said that AAU is also "very concerned" about the House bill's provisions for administrative review of patents, echoing Chandler's fear that they would make it easier to initiate a challenge.

Several groups representing small companies and inventors have lobbied against a move to a first-to-file standard, arguing that doing so would make it more difficult for their members to obtain patents. The critics, who did not appear at today's hearing, include the National Small Business Association, American Innovators for Patent Reform, the National Congress of Inventor Organizations, the Professional Inventors Alliance USA, and the U.S. Business and Industry Council. They supported an earlier attempt to block the first-to-file approach; it failed by a large margin (87-13) when it came before the Senate in February.

The challenge facing Smith is to come up with a final bill that can knit together 6 years of legislative wrangling over patent reform. Observers are betting that a system that hasn't been updated in more than half a century will get refurbished this year.