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Latest patent reform bill taking shape in Congress

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Federal lawmakers have been busy working on patent reform legislation already this year, with several moves being applauded by San Diego attorneys.

Senators added amendments to the Patent Reform Act of 2011 that end fee diversion and allow for the formation of several satellite patent offices.

Following an active debate, the Senate passed legislation, now renamed the America Invents Act, March 8 by an overwhelming vote of 95-5.

Meanwhile, the House Judiciary Committee approved its version of the America Invents Act, which differs slightly from the Senate bill, on April 14. The full House is expected to vote on the measure sometime this month or in June.

"There definitely appears to be momentum that we haven't seen in several years," said Harry Leonhardt, deputy general counsel for Amylin Pharmaceuticals (Nasdaq: AMLN). "There have been so many late-breaking changes, it's hard to know how they're going to look at this."

Senators voted to add a provision that would allow the U.S. Patent & Trademark Office to keep all of the user fees it collects. In the past, more than $800 million of patent office funding has been diverted to other government programs.

"It's a tremendous amount of money that is essentially a tax on innovation," said Mike Fuller, an intellectual property partner with Knobbe Martens Olson & Bear.

"The PTO doesn't have the funding to hire enough examiners. Their IT infrastructure is incredibly antiquated, so they have trouble maintaining their website and providing all the services that users want."

The lack of examiners has contributed to a major backlog of patent applications, which some have estimated to be 700,000. It takes an average of three years for a patent request to be granted.

Timothy Tardibono, policy director and chief counsel for Connect, said if the only change to the patent system involved fee diversion, the issues about patent quality and the patent office's efficiency would eventually disappear.

"Before Congress undertakes all the other provisions, it should only do the funding legislation and then allow time for those funds to come in and for the patent office to implement them appropriately," he said.

"It's a little hard to grade the PTO on its ability to be effective when they don't have the resources and funding."

Senators also passed an amendment allowing the patent office to create three or more regional offices around the country within the next three years.

Agency director David Kappos has already announced it will open its first satellite office in Detroit, an area with a high number of highly skilled unemployed workers.

"We have a high unemployment rate here in San Diego County, so I think it would be a tremendous economic boon to have the satellite office here in San Diego," said Ken Jenkins, a partner with Kilpatrick Townsend & Stockton. "There are some efforts locally to inform Congress of the benefits of having it out in San Diego."

Silicon Valley, Washington state and Denver are other areas vying to host one of the patent office's regional hubs.

Tardibono, who's helping lead Connect's efforts to lobby Washington, said San Diego is an ideal fit.

"San Diego has such a unique cross section of technologies and innovation beyond a particular sector that we certainly have the intellectual (capital) and infrastructure for them to have a satellite office here," he said.

Both the House and Senate bills change the United States to a “first to file” system from the currently used "first to invent" standard. The House, however, would establish prior user rights for an earlier inventor who failed to file first but would required a reduction to commercial use at least one year before the late inventor filed an application.

Small inventors and startup companies are against changing the United States to a "first to file" system, claiming it would create a race to the patent office and giving companies with more resources an advantage.

The current Senate bill contains other potential roadblocks, including provisions involving venue, damages and post grant review.

Jim Mullen, a partner with Morrison & Foerster, said those contentious issues will likely hold up any patent reform legislation.

"I think we have a long way to go before we get a sense of what patent reform is going to look like," he said.

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1 UserComments
staff 7:13am May 9, 2011

Just because they call it “reform” doesn’t mean it is. Patent reform is a fraud on America. This bill will not do what they claim it will. What it will do is help large multinational corporations maintain their monopolies by robbing and killing their small entity and startup competitors and with them the jobs they would have created. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill is a wholesale slaughter of US jobs. Those wishing to help in the fight to defeat this bill should contact us as below. Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. Please see http://truereform.piausa.org/ for a different/opposing view on patent reform.