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Senate passes patent fix, but experts scold

| Friday, Sept. 9, 2011

WASHINGTON -- After six years of squabbling over how to fix the country's patent system, the Senate passed a bill on Thursday touted by lawmakers as important for creating jobs and encouraging innovation.

But a wide range of patent experts said the bill has been so watered down after years of debate and lobbying that it will do little to repair the country's dysfunctional patent system and is unlikely to spur much job growth.

"Every time I've heard either a Republican or Democrat talking about jobs relating to the patent bill, I feel like I'm in 'Alice in Wonderland,'" said Ed Black, president and chief executive of the Computer and Communications Industry Association. "Unless they're counting patent lawyer jobs, it's very unlikely."

The bill emerges as many of the country's biggest technology firms increasingly arm themselves with patents to start or protect themselves from costly lawsuits. Google paid $12.5 billion for cell phone maker Motorola Mobility this summer, in large part to increase its patent arsenal as rivals sue the company and its partners.

The patent system was designed to protect and encourage companies that develop novel ideas. But critics, including many technology firms, say the system is now ridden with low-quality patents that are so vaguely defined that companies have become vulnerable to frivolous lawsuits alleging patent infringement. Technology companies have long complained about patent trolls, firms whose sole business is to hoard patents that they can use to go after bigger businesses in court.

The agency that reviews patents, the U.S. Patent and Trademark Office, also faces a backlog of about 750,000 applications.

Recognizing the growing problem, Congress began crafting a reform bill in 2005. The proposed changes ran into stiff opposition from the pharmaceutical industry, which benefits more from the current patent system than technology companies since its products tend to be easier to define.

"For a chemical, it's very clear whether you're infringing or not," said James Bessen, a lecturer at the Boston University School of Law who has studied the economics of patents.

The legislation passed yesterday would make a few changes to how patents are handled. For one, the United States would switch to a system in which the first person to file for a patent takes precedent, not the first to invent, as the current system works. Bessen pointed out, however, that such disputes are relatively rare.

It also would create a review process to allow challenges to any new patent issued by the Patent and Trademark Office. Experts said this measure would help curb the number of frivolous patents.

Sen. Patrick Leahy, D-Vt., author of the bill, and President Obama have said the legislation would help create jobs.

"The America Invents Act is a true jobs bill at a time when we need it the most," Leahy said in a statement. His office pointed to a study by the Commerce Department showing the importance of innovation for economic growth.

But technology companies have pointed out that more patents don't necessarily mean more innovation.

"The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation," said Kent Walker, senior vice president and general counsel at Google, in a company blog post in April. "The patent system should reward those who create the most useful innovations for society, not those who stake bogus claims or file dubious lawsuits."

As Leahy's bill heads to Obama's desk to be signed, fighting continues among technology companies, with Google in the middle of a litigation maelstrom relating to its Android phones. The company's rival, Apple, has sued HTC, Samsung and Motorola, firms that make phones with the Android platform, for patent infringement. On Wednesday, HTC lashed back against Apple, citing a patent it bought from Google at an undisclosed price.

Additional Information:

What does the law do?

-- Switches the basic standard of patent approval from a 'first-to-invent' to 'first-inventor-to file.'

-- Gives the Patent and Trade Office more authority to set fees and keep the fees it collects so that it has enough money to reduce the backlog in processing patent applications.

-- Seeks to improve patent quality by allowing third parties a chance to submit information on pending applications and establishing a review process to challenge faulty patents.

-- Provides more certainty to patent owners by reducing administrative challenges.

-- Encourages manufacturing by expanding prior user rights for manufacturers using a process before a patent is granted.

-- Creates a way to weed out invalid but existing patents on methods of conducting business.

-- Creates a supplemental examination system where applicants, particularly small inventors and startups that may lack filing expertise, can return to the patent office with additional material to clarify issues with their applications.

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