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IP: This won’t be the year for patent reform

Patent reform, which would move the U.S. from a “first to invent” to “first to file” patent system, has stalled.

For a while, it looked like this might finally be the year that congressional cooperation would hold together long enough to pass patent reform. In March, following up on last year’s bipartisan push, the Senate passed its version of the patent reform bill by an overwhelming majority of 95-5. The House was making steady progress on its version as well, with the House Judiciary Committee approving the bill 32-3. Just last week however, mere days before the House Judiciary Committee planned to bring the bill to the floor, vociferous dissent broke out from a number of camps. While its not clear why the dissidents waited so long to make their views known, one thing seem certain— this won’t be the year for patent reform.

Opposition to the proposed patent reform package centers on two main changes to the U.S. Patent system, one substantive and one pecuniary. Substantively, patent reform proposes to change of the U.S. Patent system from a “first to invent” system to a “first to file” (or, as its proponents phrase it, “first inventor to file”) system. Generally, a “first to invent” system awards a patent to the first person to invent something, whereas a “first to file” system awards a patent to the first person (or entity) to file for a patent on an invention. While most countries have “first to file” systems, the U.S. system has always been “first to invent.” Proponents of moving to a “first to file” system argue that it brings the U.S. in line with the rest of the world and eliminates the complexity involved with determining priority among multiple potential inventors. Opponents of “first to file” argue that such a system favors businesses that have the resources to expeditiously file patent applications, over individual inventors, who typically take longer to scrape together the resources necessary to file. 

Opponents of “first to file” also claim that the proposed change is unconstitutional. The U.S. Constitution authorizes “Congress . . . [t]o promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The argument goes that those who file first but did not come up with an invention first are not “inventors” and Congress has no authority under the U.S. Constitution to award them patents. It is unclear whether a court would ever construe the constitutional grant so narrowly, but the availability of this argument certainly gives those in opposition some moral high ground.

Moral high ground, however, seems to be completely absent in the debate over the second main sticking point in the patent reform bill, regarding the question of whether the Patent Office gets to keep its own fees. The Patent Office charges various filing and processing fees to those filing and prosecuting applications before the office. Historically, however, the Patent Office has not been allowed to keep those fees, which go into the government’s general fund. The Patent Office receives its operating budget by way of Congressional funding. Since the early 1990s, experts estimate that Congressional funding has lagged Patent Office’s fees received by over a billion dollars. It’s not surprising that those who hold the purse strings in Congress are reluctant to give up this windfall.

And although these two issues dominate the debate, additional gripes are popping up daily from various special interest groups. For a while it seemed like patent reform was finally going through the goal posts, but I’ll be darned if I don’t see Lucy winking as she pulls that ball away once again. 

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Mark C. Scarsi

Mark Scarsi is a partner in the Intellectual Property Group of Milbank, Tweed, Hadley & McCloy, LLP, resident in the Los Angeles office.

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