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Patent reform nearing reality

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The biggest legislative change to the U.S. patent system in more than 50 years is about to become a reality.

Last week, the Senate passed the House version of the Leahy-Smith America Invents Act by a vote of 89-9, sending the bill to President Barack Obama, who is expected to sign it into law on Friday.

"It's pretty amazing they could get together on this," said James Mullen, an intellectual property partner in the San Diego office of Morrison & Foerster. "I have been wrong about this bill at every junction, so I stopped being surprised once it got out of the House."

The most significant provision of the bill is one that changes the United States to a "first to file" system from "first to invent," harmonizing America with the rest of the world.

It also sets out to curb fee diversion with the establishment of a "patent and trademark fee fund" in the Treasury, where excess fees would be stored and made available only to the patent office. Currently, more than $1 billion in fees have been diverted to other areas of government.

Additionally, the America Invents Act creates a post-grant review program and allows for the "virtual marking" of products with a Web address.

Controversy has followed the patent reform debate throughout the process, and, even now with a finished bill, it's still difficult to determine who are the winners and losers, according to local attorneys.

"I think the good and bad fall on both sides of the ledger (between biotech and the electrical arts)," Mullen said. "If the post-grant review procedures work out the way they're supposed to, I think companies will spend less on patent litigation in the future."

The legislation partly changes what qualifies as prior art, and it also creates a "prior user" defense for companies facing a claim of infringement if they were using the product before the patent was issued.

"I think the new legislation will help restore balance to the patent system in the sense of encouraging innovation and maintaining the importance of patents to our system, but also modernizing aspects of it to enable companies to continue to compete in the market," said San Diego IP litigator Michael Rosen, a principal with Fish & Richardson.

"I do think it is a step in the right direction for the American patent system. Nothing is perfect, and there are parts of the bill that people on all sides surely will complain about, and parts of the bill that are still subject to interpretation by the courts."

Several aspects of previous versions of the patent reform bill have been addressed by the judicial branch with landmark decisions by the U.S. Supreme Court and the Federal Circuit Court of Appeals.

"In a sense, the courts caught up with what Congress had been doing and made Congress' job a little easier," Rosen said.

The changes to post-grant review and inter partes review likely will lead to a reduction in lawsuits by non-practicing entities, according to Morrison & Foerster's Mullen.

One of the goals of patent reform was to reduce litigation and significantly decrease the backlog at the patent office. Currently, it can take an average of three years to get an application approved.

"It will be awhile before all the dust settles, and it could be a prime example of the law of unintended consequences," Mullen said. "Because now it's up to the courts to figure out what it really means. The language is not perfectly clear."

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Tom Mullen (no relation to Mofo's Mullen) 9:45am September 14, 2011

Additionally, Gary Lauder of Lauder Partners a VC firm, is correct when he says: "Today's patent law allows entrepreneurs to wait to file patent applications...the one-year grace period lets inventors discuss their ideas with investors and strategic partners and experiment with different versions of the idea. Even if during that time the idea leaks out, the company can still win a patent as long as it applies within one year of first public disclosure. According to David Boundy, Vice President for Intellectual Property at Cantor Fitzgerald, the America Invents Act would: require a company to file premature, hasty, and expensive patent applications on every baby-step idea to preserve rights against third parties who are dabbling in the field without intent to develop a commercial product. This red tape would slow innovation and cost America jobs. Why change the current law? This is exactly the point.

Tom Mullen 9:25am September 14, 2011

This was a terrible bill in part, bargained for by huge multi-national corporations. They have and will stifle the little guy...

staff 8:34am September 14, 2011

“This is not a patent reform bill” Senator Maria Cantwell (D-WA) complained, despite other democrats praising the overhaul. “This is a big corporation patent giveaway that tramples on the right of small inventors.” "patent reform" Just because they call it “reform” doesn’t mean it is. The patent bill is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated the bill will help them steal our inventions. Who are the supporters of this bill working for??