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Patent bill may hurt the little guy

- The Washington Times - Thursday, July 19, 2007

The laws on American inventiveness are being rewritten in a bill headed for a vote in Congress.

The Senate Judiciary Committee is scheduled to begin debate today on legislation that seeks to reduce the number of patent lawsuits. It also could give big companies an advantage over small inventors, patent lawyers say.

A House committee yesterday unanimously approved a similar bill and sent it to the full House for a vote.

"Litigation abuses, especially ones committed by those which thrive on low-quality patents, impede the promotion of the progress of science and the useful arts," Rep. Howard L. Berman, California Democrat, said when he introduced the Patent Reform Act of 2007 three months ago.

The legislation is Congress' response to complaints from big businesses about being deluged with infringement lawsuits by inventors with questionable patent rights.

It is the most sweeping patent legislation in the past half-century, said patent lawyers who discussed the bill recently at a Capitol Hill seminar.

U.S. businesses have invested about $1 trillion in intellectual property and other intangible assets, roughly the same as their investments in equipment, factories and other physical assets, according to the Federal Reserve. The number of patent applications has more than doubled in the past 13 years.

"The kind of suits we're seeing from patent trolls and others are extremely problematic," said Diane Smiroldo, spokeswoman for the Business Software Alliance, a trade group for computer companies. "Companies are forced to divert funds to defend themselves in these lawsuits, and that takes away from [research and development] dollars."

"Patent trolls" refer to people or companies that file frivolous infringement lawsuits against patent owners merely to get settlement money.

While computer giants such as Microsoft Corp., Dell Inc. and Cisco Systems Inc. support the legislation, small companies and independent inventors say the proposed Patent Reform Act could devastate them.

A group of inventors calling themselves the Innovation Alliance wrote a letter to key members of Congress recently, saying the bill would "hinder innovation across the diverse sectors of the American economy we represent."

The bill would give applicants priority for new patents based on who is first to file an application. Now, priority is determined by who can prove they are the first to invent a technology or device.

A "first-to-file" rule leaves little doubt about who owns a patent, thereby reducing the number of lawsuits, patent lawyers say.

Other provisions would reduce some damage payments for infringing a patent and expand opportunities to challenge the validity of a patent even after it is granted. Damages could be based on the degree that a patent improves on previous inventions, rather than only the market value of the technology.

The Patent Reform Act is worrying small companies and inventors, which together produced nearly one-third of the nation's patents last year.

Of the 196,400 patents that the government issued in 2006, about 62,900 went to "small entities," according to the Patent and Trademark Office. Of the roughly 1.6 million patents in force, about a half-million are owned by small entities, which generally means small businesses or independent inventors.

"Some people call it the patent deform act," said Glen Kotapish, president of the Inventors Network of the Capital Area, a group of Washington-area independent inventors.

"Independent inventors don't like the idea of first to file, first to patent," Mr. Kotapish said.

Large corporations tend to have large research and development budgets and lawyers to help them file patent applications quickly after they create an idea.

Small inventors lack the budgets and personnel to prepare and file patent applications quickly, Mr. Kotapish said.

Human Genome Sciences Inc., a large biotechnology company in Rockville, listed 561 patents on its Web site by yesterday. The company often adds several of them monthly.

A likely result if Congress approves the legislation is that small inventors would rush to file patent applications to beat competitors even before they complete their research, Mr. Kotapish said.

"The patent office might find itself more overwhelmed by poorly put-together patents," he said.

Patent office officials said they received about 440,000patent applications last year. A little more than 5,000 patent examiners review applications, then approve or reject them. The patent office plans to add 1,200 examiners this year but says it is having difficulty keeping up with the pace of patent applications.

"I think there's a lot of pressure on the system," said John Whealan,a U.S. Patent and Trademark Office deputy general counsel.

He questioned whether all of the patents represent valuable assets for U.S. commerce and technology.

"The good stuff is getting caught up in the chaff."