House bill unveiling moves US patent system overhaul another step closer
This article was originally published in SRA
US House Judiciary Committee Chairman Lamar Smith (Republican-Texas) has introduced a bill in the House of Representatives that aims to restructure the nation's patent system1,2. The legislation, known as HR 1249, is a companion to a bill that overwhelmingly passed the Senate on 8 March in a 95-5 vote3.
Senate Judiciary Committee Chairman Patrick Leahy (Democrat-Vermont), who authored the Senate legislation, S 23, with Senators Orrin Hatch (Republican-Utah) and Charles Grassley (Republican-Iowa), noted that the similarity in the two measures is no coincidence4. "We have been working on a bicameral, bipartisan basis for six years now," he said.
As with the Senate version of the America Invents Act, the House legislation seeks to move the US patent application system from a first-to-invent to a first-inventor-to-file, which awards a patent to the first person to file an application with the US Patent & Trademark Office rather than the first person to create the invention. The first-inventor-to-file is a standard already used by most of the world's developed nations.
While supporters of that change have insisted it would bring more certainty to the US patent application process, opponents have decried it as a potential innovation killer by only benefiting large patent owners, while bringing harm to small businesses, inventors and start-ups and encouraging a rush to the patent office with hastily drafted applications.
But US PTO director David Kappos insisted those fears were "unfounded and inconsistent with the facts"5. The current first-to-invent system almost never benefits the independent inventor, especially in the one case where that inventor would be expecting a benefit where that person is the first to invent but not first to file, he told lawmakers during a 30 March hearing convened by the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet6.
Of over 3 million applications filed in the past seven years, only 25 patents were granted to small entities that were the second inventor to file but were able to prove they were first to invent, and of those 25, only one patent was granted to an individual inventor, Mr Kappos said.
Plus, Mr Kappos pointed out, under the current system, the cost of proving who was first to invent – with average legal fees of $400,000 to $500,000, which can double if a case is appealed – is prohibitive to small businesses and independent inventors.
"Most independent inventors simply do not have the resources to participate in these proceedings," he said. "So the facts demonstrate that the current system actually favors those with deep pockets and works to the disadvantage of small companies and independent inventors with limited resources."
By contrast, under the House and Senate legislation, a $110 provisional application will establish effective rights to an invention, securing first-inventor-to-file status with no risk of subsequent disputes, Mr Kappos contended.
He also disputed the assertions of a "race to the patent office" frenzy, arguing that Canada's adoption in 1990 of a first-inventor-to-file system gives no support of such fears, with the Canadian patent office experiencing only a moderate 5% increase in filings.
"We believe that the certainty, predictability, and reduced costs of the first-inventor-to-file system will benefit all stakeholders, both small and large entities, regardless of the area of technology," Mr Kappos asserted.
The House legislation also mirrors the Senate bill in seeking to create a post-grant review process, which would allow disputes involving patent quality and scope to be settled, serving as a faster alternative to litigation, he contended. The post-grant review is intended to weed out bad patents, ultimately resulting in higher quality patents, Mr Kappos said.
Industry concerns
Generics industry association GPhA, however, expressed "strong concerns" about Section 11 of the pending House bill relating to the supplemental examination of patents7. In a statement to the March 30 House Judiciary Subcommittee hearing, the association claimed that the proposed language would "significantly weaken the inequitable conduct defense, compromise the integrity of the current patent process, add unnecessary workload" to the US PTO, and "impact the ability of generic manufacturers to bring lower-cost generic drugs to the market". "While we strongly support measures to protect the integrity of the patent process, we also believe that Americans should have timely access to lower cost generic versions of brand medicines."
“Unfortunately, proposed language in HR 1249 includes a provision on 'supplemental examinations' that would allow a patent holder to ask the PTO to reconsider or correct information that was not in existence when the original patent was granted," the GPhA said. "In other words, the bill as drafted would allow a patent holder to 'cleanse' its patent, even if the patentee engaged in deceptive or inequitable conduct to obtain the patent," it explained.
Biotechnology industry Organisation BIO also expressed worries over the House bill8. “BIO has serious concerns with several significant changes made in the House bill regarding the inter partes review system," the organisation said. "Taken as a whole, these changes would make it easier to bring frivolous challenges to patents, harder for patent owners to enforce them, and more likely that patent owners will find themselves in duplicative and costly patent-related proceedings." In addition, BIO said it was concerned about the inclusion of broader prior user rights in the House bill, and believes that this issue, coupled with the harmful inter partes review changes, could set back efforts to pass meaningful patent reform this year by undermining the broad coalition of American innovators currently supporting patent reform.
Fees and tackling the patent application backlog
Both the House and the Senate bills have the goal of helping the US PTO diminish the burdensome 770,000 backlog of pending patent applications that have weighed the agency down for the past several years. Indeed, it currently takes 36 months on average for a patent application to be processed.
Permitting the US PTO to set its own fees would help ensure the agency has the reliable funding necessary to tackle that backlog, argued Mr Kappos, who said the office could bring in an additional $300 million if it were permitted to set its own fees.
While the US PTO is a "100% fee-funded operation," under the existing funding system, the office only has access to the portion of its fee collections provided for in annual appropriations bills, he said. Where actual fee collections have exceeded the level of spending authority provided, the additional fees have gone to other government programmes and not to the processing of patents and trademarks, Mr Kappos explained.
He noted that the patent reform legislation also would permit the US PTO to offer an expedited patent application process of 12 months for a higher fee.
"Fee setting authority coupled with the availability of fee collections will permit the US PTO to engage in multiyear budget planning and achieve a stable funding model that supports future investments and improvements in operations that will significantly reduce pendency and backlog levels," Mr Kappos insisted.
Large companies, small businesses, universities and independent inventors "have long favored" authorising the US PTO to set its own fees, as proposed in the House and Senate legislation, "but only if coupled with a mechanism to ensure that the fees collected can be retained by the patent office and spent for the purposes for which they were paid," Steven Miller, general counsel for intellectual property at Procter & Gamble, told lawmakers during the hearing9.
Representative Smith urged his colleagues in the House to quickly take up the bill and get it passed.
"Our outdated patent system has become a barrier to innovation and invites lawsuits from holders of questionable patents seeking to extort millions of dollars from companies. We cannot protect the technologies of today with the tools of the past," he said, noting that the US patent system has not undergone a major overhaul in nearly 60 years.
References
1. Congressman Lamar Smith (Republican - Texas) press release, 30 March 2011, http://lamarsmith.house.gov/News/DocumentSingle.aspx?DocumentID=232137
2. America Invents Act, 30 March 2011, http://judiciary.house.gov/news/2011/march/033011_America%20Invents%20Act.pdf
3. US Senate adopts patent reform bill, Regulatory Affairs Pharma, 10 March 2011
4. Senator Patrick Leahy (Democrat-Vermont) press release, 30 March 2011, http://leahy.senate.gov/press/press_releases/release/?id=46b94419-5286-46a4-a754-e5e811604466
5. USPTO, Director Kappos testimony, 30 March 2011, www.uspto.gov/news/speeches/2011/kappos_house_testimony.jsp
6. House Judiciary Subcommittee on Intellectual Property, Competition and the Internet, Hearing on HR 1249, the "America Invents Act", 30 March 2011
7. GPhA press release, 31 March 2011, www.gphaonline.org/media/press-releases/2011/gpha-submits-written-statement-house-judiciary-subcommittee-intellectual-p
8. BIO press release, 31 March 2011, www.bio.org/news/pressreleases/newsitem.asp?id=2011_0331_02
9. Testimony of Steven W Miller of Procter & Gamble Company, 30 March 2011, http://judiciary.house.gov/hearings/pdf/Miller03302011.pdf