What Changes In Patent Legislation Means For Your Firm and Its Clients

Patent law has not seen changes for over 60 years. Today, however, the U.S. House of Representatives joined the Senate in voting on a complete overhaul of patent legislation by passing the America Invents Act in a 304 to 117 vote.

This means patents will now be awarded based on a “first to file” rather than “first to invent” basis.

Proponents of the America Invents Act argue that the bill will reconcile the U.S. patent system with patent legislation of other nations in Europe, as well as Japan. This would streamline the patent process for companies aiming to file patents in multiple countries.

The vote on this bill in the House comes just three months after a similar bill passed in the Senate in March. Before the legislation can be officially signed and passed by President Obama, both the House and the Senate must agree on a single draft.

Although the bill looks promising, it’s not easy to quell the fears and objections voice by the opposition. Those against the “first to file” system claim the law disadvantages individuals in favor of large corporations and multinationals with the money and means to pay patent fees.

“When Canada shifted to a first-to-file system in 1989, researchers noted that it ‘skewed the ownership structure of patented inventions toward large corporations and away from small businesses.’”[1]

Innovation and royalties awarded for them are ultimately what’s at stake. So, if passed, what does this law mean for your firm?

First, the bill is a win for your banking clients.

“The banking industry scored a victory when lawmakers included a provision in the bill which would make it easier for banks to get re-examination of patents on financial business processes such as check-scanning, in an effort to avoid paying patent-infringement fees. The U.S. Chamber of Commerce and the National Retail Federation joined the banking industry to push for the provision, which was opposed by some small inventors.”[2]

Second, the bill is a loss for your small tech and biotech companies—especially any that belong to the lobbying group Innovation Alliance. In at least the House version of the patent bill, fees paid to the U.S. Patent and Trademark Office (USPTO) will be—in part—diverted to Congress.

“The office runs on the fees it collects, however in the past two decades Congress has diverted upwards of $800 million in patent fees for other programs.”[3]

Some believe this “fee diversion provision” will lead to the continued backlog of patent approvals. If the USPTO maintains a fixed budget and does not retain all of its fees, the office will lack funds necessary to expedite the patent application process.

Currently there is a backlog of 700,000 unprocessed patent applications, not to mention the various challenges to applications for patents and trademarks.

Innovation Alliance issued the following statement regarding the bill:   

“The Innovation Alliance is disappointed that the House of Representatives has approved legislation that will not end permanently the diversion of user fees from the U.S. Patent and Trademark Office…  Reducing the patent backlog and strengthening the USPTO is essential for driving innovation, job creation, and economic growth. We will continue to work with lawmakers and other stakeholders to ensure that any patent bill that becomes law ends fee diversion permanently.”[4]

Unfortunately, if Congress’ joint bill does include a provision to ceiling the USPTO’s budget and divert the rest of its collected fees, the office’s backlog and the general sluggishness of the IP process will continue to affect your clients’ pending applications and suits.

Ideally, the “first to file” system will make litigation regarding intellectual property (IP) disputes easier to resolve. At the same time, it’s likely lawfirms’ larger, multinational and corporate clients will benefit most.

To conclude, it’s last call for writing your local Congressman with opinions about the “first to file” system. And, while your letter’s in the mail, best file that trademark and patent application you’ve been sitting on.

One thing that hasn’t changed about IP cases, timing is everything.


[1] http://thehill.com/blogs/congress-blog/economy-a-budget/146149-first-to-file-is-threat-to-job-creation

[2] http://online.wsj.com/article/SB10001424052702303339904576404202339206490.html

[3] Ibid.

[4] http://www.innovationalliance.net/news-and-resources/statement-innovation-alliance-passage-hr-1249-america-invents-act


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