SAN JOSE, Calif. – The U.S. House of Representatives passed a patent reform bill by a vote of 304-117, the last major hurdle in revamping the U.S. patent system.
The final bill still needs to be reconciled with an earlier version passed by the Senate in March. President Obama has signaled he will sign the resulting bill into law.
The so-called America Invents Act shifts the U.S, patent system from first-to-invent to a first-to-file system to harmonize with most other patent offices around the world. It creates new procedures at the patent office to challenge patents after they are granted in an effort to reduce rising patent litigation in court.
One major difference between the House and Senate bills is how they open the door to the overburdened patent office keeping all the fees it generates. All sides agree the office needs help given it faces a backlog of at least 700,000 applications and it takes on average three years to grant a patent.
Both bills would allow the patent office to set its own fees. Today the office lives on an annual budget approved by Congress and any additional fees generated from applications are returned to the general fund unless Congress passes an annual exception to the diversion.
In the last several years Congress has allowed the funds to flow back to the office. However over the last decade it has also siphoned off more than $800 million in fees to the federal general fund.
The Senate bill would let the office keep all its fees. The House struck a last minute compromise in its bill that would put the fees in an escrow fund. The patent office must petition for the money each year as a way to keep Congressional oversight over the office.
The bill includes a number of other smaller but still significant measures. For instance, it would also expand rights of companies who are the first to commercially use an invention, even after someone else wins a patent on that invention.
Congress has debated patent reform for at least six years. The last major patent reform act was passed was nearly 60 years ago.
"No longer will American inventors be forced to protect the technologies of today with the tools of the past," said Lamar Smith (R., Texas), who sponsored the House bill. "H.R. 1249 brings our patent system into the 21st century, reducing frivolous litigation while creating a faster and more efficient process for the approval of patents," he said.
Smith charged that the current patent system has become a burden to innovators.
"Unwarranted lawsuits that typically cost five-million dollars to defend prevent legitimate inventors and industrious companies from creating products and generating jobs," he said. "China is expected to surpass the United States for the first time this year as the world’s leading patent publisher," he added.
The bill was controversial to the end. It faced as many as 33 amendments earlier this week, including two that wanted to strike the first-to-file provision as unconstitutional. In the end all the amendments failed, except a friendly one from the bill's sponsors.
Much of the debate in and out of Congress on patent reform is whether provisions favor large corporation or small startups and individual entrepreneurs. Another line of debate has pitted big product companies against generally smaller patent licensing firms.
IBM was quick to come out in favor of the bill. The company has won the most U.S. patents every year for the last 18 and now holds a war chest of more than 75,000 patents.
Top Silicon Valley companies also lobbied hard for reform under groups such as the Coalition for Patent Fairness which includes Apple, Cisco, Dell, Google, HP, Intel and others. The group clashed on some specifics with the Innovation Alliance which represents a group of tech companies who tend to have large licensing activities such as Tessera and Qualcomm.
Some entrepreneurs charge the first-to-invent system will force a rush to the patent office that will favor big companies and disadvantage startups.
There's no doubt patent licensing has become a big business. So called patent trolls have popped up in recent years, buying up patents with the sole aim of licensing them without any plans for products or further technology development.
The trend has spawned other companies who have retaliated by buying patents to prevent litigation, some even actively developing technology for the sole reason of controlling the patents.