House Votes 304-117 to Pass Patent Reform Legislation

On June 23, 2011, the House voted 304-117 to pass H.R. 1249, the "America Invents Act." The Act, a version of which passed the Senate as S.23, or the "Patent Reform Act of 2011," sets forth several changes to the Patent Laws in the United States. One notable change in both bills is the conversion from a first-to-invent system to a first-inventor-to-file system. The House bill differs, however, from the Senate bill with respect to the long standing practice of fee diversion - i.e. the House bill provides for an account dedicated to USPTO revenue in excess of appropriated budget funds (the USPTO will need to make appropriations requests to access that revenue), while the Senate bill allows the USPTO to retain all its revenue.

With respect to the first-inventor-to-file system, House Judiciary Committee Chairman Lamar Smith (R-Texas), the H.R. 1249 sponsor, recently issued the following comments in a press release:

Much-needed reforms to our patent system are long overdue. The last major patent reform was nearly 60 years ago. H.R. 1249, the America Invents Act, implements a first-inventor-to-file standard for patent approval, creates a post-grant review system to weed out bad patents, and helps the Patent and Trademark Office (PTO) address the backlog of patent applications.

The legislation will not be ready for the President's signature until the Senate and House reconcile the fee diversion matter and other incongruous language between the two bills. Regardless, it is almost inevitable that the U.S. will no longer have a first-to-invent patent system.

In the first-to-invent system, the inventor who conceives of an invention and diligently reduces the invention to practice is entitled to priority. Accordingly, it is possible for an inventor to claim priority for an invention when that inventor was the first to conceive of the idea, but second to file. The inventor may, if needed, swear behind certain prior art by submitting evidence of conception and diligence in reducing the invention to practice - e.g. by filing a patent application (constructive reduction to practice) or by creating a prototype (actual reduction to practice). The USPTO has certain procedural protections, e.g. interference proceedings, designed to properly determine priority in limited cases of overlap. The purpose of this proceeding is to determine which inventor was the first to conceive of the invention.

The first-inventor-to-file system is different in that the patent application filing date determines priority of the invention, not the date of conception. This system provides an easy way to determine priority and would hypothetically eliminate related litigation. Opponents of the first-inventor-to-file system have argued that it adds additional burdens to inventors - namely that inventors will need to "rush to the patent office" or risk losing priority. This may adversely affect rights to inventors where the business practice has been to delay filing in order to first ascertain the operability of the invention (e.g. by making a prototype) and/or the patentability of the invention (e.g. by doing a patentability search) prior to filing a patent application. Proponents of the new system argue that the first-inventor-to-file system promotes disclosure and increases competition among inventors to share their ideas with the public.

The main delay in sending the legislation to the President for signature is the fee diversion issue. In a press release, Senator Tom Coburn, M.D. (R-Oklahoma) said this about fee diversion:

For too long tomorrow's inventions have been stymied by today's incompetence in government. It is outrageous for Congress to take fees paid by Americans for a specific service and spend those dollars on other programs. Since 1992, Congress has pilfered nearly $1 billion in user fees dedicated to the Patent and Trademark Office and spent those dollars elsewhere. As a result, we have 700,000 patents waiting for a first review that, if approved, could help get our economy moving again.

Senator Coburn led the call for the House to reject H.R. 1249 because it fails to adequately rectify the fee diversion issue. It will be interesting to monitor how this issue plays out. The USPTO is certainly in need of more funding, given the backlog of patent applications and proceedings.

If you have any questions about this legislation and its impact on your patent matters, please feel free to contact us.  

Attorney Contact:  

 Scott M. Lowry (email | Tel: 818.584.6460)