Lawmakers appear close to finally passing patent reform legislation, but the process still has a few obstacles to overcome.
There are two major sticking points between the Senate and House versions of the America Invents Act while discussion has stalled as legislators focus on the nation’s debt ceiling.
The most significant difference in the bill involves the distribution of funds collected by the U.S. Patent & Trademark Office.
The Senate bill seeks to end fee diversion completely while the House provision allows the House Appropriations Committee to maintain control over where any extra funds are spent.
“We’ve gone very far down the road here but ‘chasm’ is the right word to use (for the size of the difference in the two bills),” said James Mullen, an intellectual property partner with Morrison & Foerster. “My feeling is the reason why the bill passed the Senate 95-5 is because it has this fee issue in it. They’re saying, ‘We’re going to make the patent office work better by giving them more money.’ The House version muddies up that issue.”
Both versions of the America Invents Act will now either go to conference, where representatives from both houses will work on reconciling the differences, or the Senate can simply send the House version to President Obama for his signature.
Neither option seems likely in the near future as lawmakers are currently focused on whether or not to raise the nation’s debt ceiling by Aug. 2.
Many local patent attorneys would like to see the PTO keep all of the fees it collects. Unlike other government agencies, the patent office is not funded by taxpayers, but rather by user fees.
The PTO has a funding cap and once it exceeds that, funds are diverted to other areas of the government. In the past two decades, more than $900 million has been diverted away from the PTO.
“It’s widely agreed that the PTO is pretty underfunded and has been underfunded for a long time,” said Joseph Mallon, a partner with Knobbe, Martens, Olson & Bear. “If they could hire more examiners and update their I.T. infrastructure, then patent pendency would come down and that would be great for innovation and the economy.”
Mallon said the House Appropriations Committee recently raised the PTO’s funding cap by 28 percent from the 2011 level, a favorable development should they maintain oversight of the patent office’s funding.
“The way it’s being interpreted is they intend to live up to their agreement to fully fund the PTO and money won’t be diverted,” Mallon said.
Additionally, the House version of the bill expands prior user rights, which is another key difference from the Senate bill.
While the current statute allows for a limited prior user rights defense from those with business method patents, the House version expands those rights beyond the business method context to any prior user.
“That’s a huge increase,” said Ken Jenkins, a partner with Kilpatrick Townsend & Stockton. “A lot of people view that as an erosion of patent rights.
“It’s a high reward for those who practice trade secret protection.”
The House version also includes an adjustment to patent term extension, a move seen as an attempt to appease one pharmaceutical company.
There is plenty of agreement between the Senate and House bills. Most significantly, both versions require changing America’s patent system from “first to invent” to “first to file.”
Lawmakers also have agreed on a couple of false marking provisions. If the bill is signed, false marking claims will require proof of competitive injury and companies will be able to “virtually” mark their products with the address of a website, which can be constantly updated.
Several amendments proposed in previous versions of patent reform – like those involving apportionment – have been eliminated altogether.
“Part of the reason for that is the courts have been addressing these issues,” said Michael Rosen, an intellectual property litigator with Fish & Richardson. “Congress and many in the industry have become more satisfied with the state of the law.”
Both sides are coming close to sending a final version to Obama.
“This is as far as we’ve gotten in a very long time,” Jenkins said. “We’re hopeful something will come out this year. There definitely seems to be a real desire to get something done in Congress and a real desire to get something done by the administration.”