From "Wealth of Ideas" e-newsletter, October 2005

Beneath the usual intellectual property headlines of big lawsuits and settlements, a major change in the patent law is quietly making its way through the U.S. House of Representatives. H.R. 2795, or "the Patent Reform Act of 2005", as it has become known, seeks to make major changes to some fundamental aspects of U.S. patent law.

One of the proposed changes - and one which will have a negative effect on small businesses and individual inventors - is the change from a first-to-invent to first-to-file patent regime. Unlike foreign patent offices, the USPTO has allowed inventors to make or sell an invention and still file a patent application on it within a year of their first public disclosure of the invention (and for more on that topic, see our December 2004 feature article on Patent Basics: Statutory Bars). So long as the inventor proceeds with developing the invention and preparing a patent application, and did not abandon or conceal the invention, filing within one year of the date of first sale or disclosure will secure a patent to the first-to-invent rather than first-to-file applicant.

The first-to-file system will put pressure on inventors to turn inventions into patent applications quickly and set off a race to the Patent Office. Needless to say, large corporations with their in-house legal departments and law firms on retainer will have a significant advantage over an independent inventor or small R&D firm who first have to find a patent attorney and scramble for funds to pay for their patent application.

Other provisions of the bill, such as the limitation on damages, if passed, will significantly affect the economic value of patent rights for small inventors.

The USPTO would also have more avenues available for settling patent disputes without litigation, including a post-grant administrative process for answering questions of validity. Proponents of this change hope that it will help to both improve the quality of patents by subjecting them to more examinations and also help to reduce the number of costly patent lawsuits.

Many of these changes are designed to cut back on patent litigation, especially on cases brought by the so-called "patent trolls" - those who buy a patent solely for the purpose of enforcing it, rather than practicing the patented invention. (See "On Patent Trolls and Other Patent Myths" [PDF file], by Alex Poltorak, for more information.) However, with the current version of the patent reform bill sporting wide changes to the patent system, inventors and innovation will suffer if this bill becomes law.