Feds are Close to Patent Reform after Years in the Making

The most sweeping overhaul of the nation’s patent laws in 60 years is intended to streamline and simplify a backlogged system that’s out of step with the rest of the world — patent attorneys and business leaders agree it will make the system stronger and more predictable.

On March 8, the U.S. Senate passed the America Invents Act by an overwhelming margin with support from President Obama. A similar bill is now before the House of Representatives.

Business people, lawyers and the U.S. Patent and Trademark Office itself all favor of some type of reform to address a massive backlog of patent filings in recent years. Reform has been in the works for the past decade, but this year, the measure has gotten closer to passage than ever before.

According to attorney Jason Mirabito, co-chairman of the intellectual property section at Mintz Levin Cohn Ferris Glovsky and Popeo PC, the delay has been largely due to a fundamental disagreement between high-tech electronics and software companies on one hand, and pharmaceutical companies on the other, over whether to limit damages in patent infringement lawsuits.

“They have one thing in common — they want a strong patent system,” said Mirabito. “I think what they end up passing will be beneficial to patent holders.”

In the current bills, no damage limits would be imposed, the position favored by the drug-makers. But James D. Rooney of the Massachusetts High Technology Council said that there is a provision in the House version that would allow the director of the Patent Office to decide if there’s a “reasonable likelihood” that a lawsuit has merit. That, he said, would reduce some of the “frivolous” lawsuits that plague the high tech sector.

“My sense is, there is increasingly frustration at the backlog,” said Rooney. Even though the current reform may not address the issue of limiting damages, he said, there has been “more of a consensus to move the needle forward” toward reform among the high-tech businesses.

The bills would make three main changes. First, the reform would switch from a first-to-invent standard to a first-to-file one, the standard used by the rest of the world. Secondly, it would establish a process by which patents can be challenged for nine months after they are granted. And third, the bills would allow the USPTO to set and retain its own fees, ultimately giving the office more money to hire staff to address the massive amounts of patent filings.

All three changes will help create more well-defined patents and make the system more easily understood by business people, said Robert Coughlin, president & CEO of the Massachusetts Biotechnology Council, which represents more than 620 companies.

The biggest change businesses would face under the legislation would be a need to file patents as early as possible or risk losing money. But Mirabito says the current first-to-invent system, rooted in America’s entrepreneurial spirit, is largely a psychological issue and doesn’t affect most patents.

“The problem is, it involves a lot of fighting,” said Mirabito. Some smaller companies have argued that they don’t have the resources to file as quickly as large ones, and would therefore be at a disadvantage. But Mirabito contends that in practical terms, only a handful of the hundreds or thousands of patents filed per year are challenged on that basis.

“The amount of people affected is very little. In my view, it’s kind of a red herring,” he said.

Bill Geary, a partner in the intellectual property department at Nutter McClennen & Fish, LLP, agrees that the first-to-invent system “is more symbolic than anything else.” He also applauds that fact that the “archaic” method known as interference proceedings, by which third parties challenge whether someone was really the first one to invent something, would be eliminated.

While reform is not a done deal, Geary says businesses should assume it will pass and plan accordingly. Any patents filed before the law is passed will probably be grandfathered, he said, but the change could have immediate effects on the way businesses operate.

Mirabito says it will be more important for companies to disclose any similar products on the market up front in order to avoid costly legal battles later.

The legislation would allow for rival companies to maximize a delay in competitors’ patents, such as waiting until a few days before the nine-month period is up to challenge a new patent, said Mirabito. But in the end, he thinks it will benefit businesses as well as lawyers.

“It hopefully produces more patents that are stronger,” he said. “I guess it will be a good thing for patent attorneys.”