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Senate Debates Historic Patent Reform Act
By Lauren Henry – Edited by Jad Mills

S. 23: Patent Reform Act of 2011

The Senate is currently debating the Patent Reform Act of 2011, also known as the Invent America Act (“the Act”).  If passed, the Act would be the first major reform to the patent system in over fifty years. The Act is co-sponsored by Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., Sen. Orrin Hatch, R-Ut, and Sen. Chuck Grassley, R-Ia. It enjoyed bipartisan support in the Judiciary Committee, passing unanimously in early February of this year. According to The Washington Post, Leahy’s office listed major drug companies, IBM, the AFL-CIO, the Association of American Universities, Caterpillar and USPIRG as supporters of the Act.

The two major points of debate are: 1) the shift to a “first-to-file” regime from the existing “first-to-invent” regime, which would simplify patent priority disputes; and 2) altering the grace period to file after third-party disclosures to push inventors to patent inventions earlier. Another area to watch is the Act’s potential impact, or lack thereof, on the status of business method patents.

Under the Act’s proposed first-to-file system, whoever wins the race to the patent office is the presumed owner of the patent, though the Act provides for proceedings that penalize bad faith actors. By contrast, the current first-to-invent system operates by granting the first inventor who conceives of a technology or reduces it to practice the rights to the patent. Therefore, if two or more parties file patent applications claiming the same invention, then an interference proceeding would be held to determine which inventor was the first to invent.

Patently-O carefully describes the difference between the two regimes. The Coalition for 21st Century Patent Reform and the Patent Fairness Coalition, who represent industry players in biotechnology and information technology, support the first-to-file regime because it provides a clear standard that is used by a majority of other countries with large technology sectors. Patent Docs reports that Senator Diane Feinstein, D-Ca, along with six co-sponsors, proposed an amendment that would have removed the first-to-file provision, arguing that such a patent system would disproportionately harm small businesses. While the amendment failed to pass, Feinstein’s arguments provide a preview of arguments that may appear in the House debate. Inventive Step also compares the two regimes; however, it observes that the two may not lead to practically different results because it is already very hard for subsequent patent filers to succeed in interference proceedings.

The Act assigns new significance to disclosures by third parties in determining whether an inventor can file for a patent. Patently-O explains: “If the inventor or someone who obtained the invention from the inventor publicly discloses the invention less than a year before the inventor files an application, the invention can still be patented [under the Act, like in the status quo]. However, a public disclosure made by anyone else before the inventor files an application will prevent the inventor from obtaining a patent unless the disclosure is subsequent to the disclosure by the inventor or someone who obtained the invention from the inventor.” By contrast, under the current regime, a patent applicant has a grace period for filing a patent application regardless of whether the disclosure was made by the applicant or others during a one-year grace period prior to the filing the application. Inventive Step argues that this provision could have the salutary effect of encouraging inventors to file patents sooner. However, the Professional Inventors Alliance (“PIA”), a coalition of small businesses, argues in letters addressed to each member of the Senate that the costs to small business may outweigh any of the benefits that might accrue. Most strikingly, PIA cites an empirical study suggesting that this change could cost American small businesses one billion dollars each year, with negligible benefits to large companies and increased costs for the government from processing a greater number of low quality patents.

There has been some debate about how this Act should address business method patents. Patent Docs reports that Sen. Charles Schumer, D-Ny, proposed an amendment in committee that would have created a temporary procedure for the Patent Office to invalidate business method patents without the expense of litigation, but it was not put to a vote. The Electronic Frontier Foundation supports Senator Schumer’s proposed changes and shares some of his concerns. The O’Reilly Radar Blog also quotes Senator Leahy’s office as saying that changes to the patent system may “[c]reate a pilot program to review the validity of business practice patents” because many are “of dubious validity . . . [and] are not truly inventive.” Leahy did introduce some amendments to the Act that address business method patents. However, those with concerns about the current business method patent regime might still find these changes insufficient. Patent Docs reports that an amendment introduced by Senator Leahy “establish[es] that making tax strategies unpatentable shall not be construed to imply that other business methods are patentable or valid.” Patent Docs further reports that the amendment includes a modified version of the Schumer-Kyl Amendment that  accommodates industry and Patent Office concerns, which creates an administrative proceeding that would be a cheaper alternative to civil litigation for challenging business method patents.

Currently, although consensus appears to be building in the Senate, it remains to be seen what reception the bill will face in the House.

Lauren Henry is a 1L at the Harvard Law School.

Posted On Mar - 12 - 2011 Comments Off

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