June 24, 2011 - 2:15am
House Passes First-to-File Patent Reform Bill: America Invents Act Closer to Becoming Law Posted by:

On June 23, 2011, The U.S. House passed the America Invents Act, H.R. 1249, by a bipartisan majority of 304 to 117, supported by 168 Republicans and 136 Democrats. In March, the Senate passed a similar bill by a wide margin of 95 to 5. Both patent reform bills would move the United States from a first-to-invent to a first-to-file patent system. Before final passage, however, the House and Senate bills must be reconciled and then approved by both chambers before heading to President Obama’s desk.

By adopting a manager’s amendment offered by House Judiciary Committee Chairman Lamar Smith (R-TX), the House proposed a compromise to the debate over whether the U.S. Patent and Trademark Office (“PTO”) should be able to set its own application fees and retain the revenue from those fees. Currently, fees collected by the PTO are sent to the U.S. Department of the Treasury and the PTO must later request the return of those funds from Congress. Both the Senate version of the bill and the House version approved by the House Judiciary Committee contained provisions that would allow the PTO to set, collect, and retain those fees. In a press release praising the amendment’s passage, Representative Smith stated that

Since 1992, nearly $1 billion has been diverted from the PTO. The average wait time for patent approval is three years. The Manager’s Amendment ends fee diversion by creating a fund for fees collected by the PTO. The money in the fund will be reserved for and used by the PTO and only the PTO. This maintains congressional oversight, while making sure that fees collected by the PTO can no longer be diverted.

This compromise was developed in part due to recent demands from Representatives Paul Ryan (R-WI), Chairman of the House Budget Committee, and Harold Rogers (R-KY), Chairman of the House Appropriations Committee. In a June 6 letter to Representative Smith, they wrote that

Oversight of the PTO belongs with the Congress, and should not be abdicated to the Executive Branch of government…. It would be both irresponsible and unwise to allow the PTO to operate solely under the authority of bureaucrats and White House political appointees – without being held accountable to the American public through their elected Representatives in Congress.

Senator Tom Coburn (R-OK), the sponsor of the Senate amendment to end PTO fee diversion, urged the House to reject the compromise version of the bill, stating that “The House, unfortunately, decided to water down this language and allow the Appropriations Committee to control this account. Unfortunately, the Appropriations Committee has a poor record of managing such accounts responsibly and honestly in this area and others.” Despite this objection, Senator Patrick Leahy (D-VT), sponsor of the Senate patent reform bill, S. 23, was optimistic that the differences between the House and Senate versions were small enough to overcome:

The House-passed bill differs slightly from what the Senate approved overwhelmingly in March, but the core reforms are consistent. Just as the Senate did when it passed the America Invents Act in a significant 95-5 vote, we should come together and approve this bill once again, and send it to the President’s desk to be signed into law.

One of the significant “core reforms” in both bills is the move to a first-to-file patent system. This first-to-file system would grant priority of invention to the first inventor who files a patent application with the PTO. While most countries have adopted the first-to-file system, the United States is an exception in that it currently uses a first-to-invent system.

In contrast to the proposed reform, the current U.S. system grants priority to an inventor who first conceives of the invention, instead of an inventor who first files a patent application. This priority is contingent, however, on the first inventor’s reasonable diligence in reducing the invention to practice. Supporters of the first-to-file system argue that it would reduce the number of priority disputes that frequently arise between parties, while those who oppose the reform argue that it would disadvantage small businesses and individuals.

More information on both the House and Senate bills can be found in our previous posts on the subject: Patent Reform.