The Senate takes up patent reform this afternoon -- a seemingly boring and complicated issue that has the potential to create jobs at little federal cost.
CEOs and industry organizations say new ideas and products are dying on the vine while waiting for patent protection from an increasingly burdened U.S. Patent and Trademark Office. The Harvard Business Review calls it “the biggest job creator you never heard of,” but when the Senate takes up consideration of the Patent Reform Act of 2011 today, it will be revisiting legislation that has, in one form or another, been stalled in Congress for five years.
Patents are the “lifeblood of technological advancement, economic growth, and job creation,” said Paul Michel, a retired chief judge for the U.S. Court of Appeals for the Federal Circuit, which has jurisdiction over patent cases. “If companies can’t get their products and ideas protected, they can’t find investors or monetize their innovation.”
The good news is that patent applications, from both U.S. and foreign companies, have increased almost fivefold since 1990. The bad news? The backlog of patents waiting for approval has increased nearly sevenfold over the same period. More than 700,000 patent applications are stuck in limbo at the PTO, with an average application taking almost three years to be approved.
Some patent applications at Tessera, a California-based microtechnology company, have been pending for as long as seven and a half years, said the company’s CEO, Hank Nothhaft.
“In some cases, we’ve had to go through other countries’ patent systems because it speeds up the process here,” Nothhaft said in a telephone interview. “But that’s not an option for a lot of smaller companies. There are millions of dollars being lost and many ideas that are never getting off the ground.”
Under current PTO Director David Kappos, the numbers have improved slightly, but both administration officials and business leaders say drastic reforms are needed. And what those reforms should be is still up for debate.
The legislation that the Senate is scheduled to debate today was authored by a bipartisan team, including Sens. Patrick Leahy, D-Vt., Chuck Grassley, R-Iowa, and Orrin Hatch, R-Utah, and the bill passed the Judiciary Committee with unanimous support from both sides of the aisle. But the committee largely kicked the most controversial issues down the road, setting up potentially critical debates for the Senate floor.
The backlog at the PTO is a direct result of a lack of resources, observers say, and almost everyone agrees. The PTO is funded entirely by the fees it collects, but over the past 20 years, Congress has siphoned off about $800 million in PTO fees to use for other projects.
Now proposals that would give the PTO authority to set its own fees as well as keep everything it brings in have gained wide support. Sen. Tom Coburn, R-Okla., is expected to offer an amendment to fix the fee problem, although it remains to be seen if a compromise has been worked out with congressional appropriators who claim authority over the agency’s finances.
But industry analysts are worried that, as in past years, the much-needed fix for the PTO may get bogged down by debates over the legislation’s more divisive issues.
Leahy’s bill makes significant changes to the current system, including transitioning the U.S. to a “first-to-file” system, as opposed to the current “first-to-invent” rules. Under the new rules, if two entities invent a product at practically the same time, a patent would be awarded to the first person who files an application, rather than whoever is determined to have actually invented the product first.
Although some companies have lauded this change because it puts the U.S. more in line with foreign patent systems, the first-to-file provision has also attracted the harshest criticism.
“People from all over the world come here because they know the U.S. system is the best,” said Alexander Poltorak, president and founder of American Innovators for Patent Reform. “This is a big mistake, and one that will weaken the system.”
Sen. Dianne Feinstein, D-Calif., is expected to offer an amendment that would strip the first-to-file provision from the bill, and industry lobbyists have said Senate Majority Leader Harry Reid, D-Nev., may join in supporting or even co-sponsoring the amendment.
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