Big Firms, Independents at Odds on Patent Plan

The Senate is set to consider legislation that some independent inventors fear will reshape the U.S. patent system in favor of big corporations.

The sweeping bill would force some inventions to be made public before they are fully protected by a patent, tamper with the basic concept of a patent granting exclusive property rights to a patent holder, and loosen congressional oversight of the U.S. Patent and Trademark Office.

“From a large company’s point of view, it can be beneficial, but for independent inventors, it’s deadly,” said Kevin Delaney, president of the National Patent Assn. in Washington.

The House has already passed the bill, HR 1907. Given the pitched battle that has been waged by supporters and critics of the legislation, patent reform is unlikely to sail through the Senate on this, its third swing. But observers say recent compromises mean some form of patent legislation may be passed this session.

Some of the largest corporations in America, including IBM Corp., Ford Motor Co. and Monsanto Co., are determined to change what they consider an antiquated federal patent system. U.S. patent laws, which have undergone only one major overhaul, in 1953, were first written in the late 1700s.

The big companies that make up Intellectual Property Owners and the 21st Century Patent Coalition, which claim to account for 30% of patents issued by the U.S. Patent and Trademark Office, want speedier access to information about inventions, protection of trade secrets from patent holders and a more efficient patent office.

Patent reform legislation, which would move U.S. patent laws closer to those of Japan and many European countries, is important to U.S. companies’ ability to compete in a fast-paced global market, according to the legislation’s proponents.

Many small companies and individual inventors disagree. They worry about the growing influence of big business, including biotech and high-tech companies, on the patent system. They say legislation such as HR 1907 will make it more expensive and risky for individuals and small entities to try to patent their ideas, thus squelching the very innovation the U.S. needs in the global market.

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Here’s a brief look at key parts of the bill:

* Inventors’ rights: One of the few parts of the bill that is not controversial, it is meant to protect individual inventors from bogus invention-promotion firms. It would require an invention promotion service to disclose how many customers earn more money from their inventions than they paid to the promotion service and how many customers were able to license their inventions with help from the firm.

* First Inventor Defense: This part of the bill would turn the basic concept behind a U.S. patent on its head. The Constitution gives inventors the exclusive right to their discoveries for a limited time. Under U.S. law that right goes to the first inventor who files an application for and receives a patent on an invention. The “first to file” system is meant to encourage inventors to disclose their research--the information in a patent is made public after the patent is granted--in exchange for a time in which the inventor can exclude others from making or selling the invention.

If, after the patent is granted, another inventor or company comes forward or is found to have been using the same invention all along as a trade secret and thus never filed a patent on it, the company would be considered to be infringing the patent holder’s intellectual property.

Companies such as Union Carbide Corp. say the U.S. system puts them at a disadvantage globally. They say they often keep their inventions as trade secrets in part because of the high cost of filing and maintaining patents around the world. Most foreign countries give these “prior users” rights too.

“What we are proposing is to give us a level playing field with our foreign competitors and allow us to not have to disclose trade secrets that we could not get valuable patents on,” said Norman Balmer, chief patent counsel for Union Carbide and president of Intellectual Property Owners in Washington. This measure would allow companies to use “prior use” or “first to invent” as a defense against patent infringement lawsuits in some cases.

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Opponents say this measure undermines the U.S. patent system’s intent to encourage disclosure of inventions in order to speed technological advance and discourages inventors from spending time and money.

* Publication of patent applications: The information in a patent application is kept in strict confidence by the U.S. Patent and Trademark Office until it grants a patent to the inventor. That is meant to protect the inventor while the office reviews the application, which takes an average of 18 to 20 months but can be longer.

This part of the bill would force patent applications to be published worldwide 18 months after they are filed, whether or not a patent has been granted, if the application is also filed with a foreign patent office that requires publication after 18 months.

Opponents are horrified, saying publication would make their inventions vulnerable to being ripped off before they receive the protection of a patent. Proponents say they need to know what their competitors are working on as soon as possible . This is a compromise measure: Backers had pushed for all U.S. patent applications to be made public after 18 months.

* Third-party rights: This measure would give third parties a greater role in patent reexamination proceedings at the U.S. Patent and Trademark Office. Patent reexaminations--where an outside party disputes a federal patent examiner’s finding that an invention deserves a patent--are relatively rare and outside or third parties have had limited access during the procedure.

Those in favor of expanding the rights of third parties in the reexamination process say it will cut down on patent litigation by making it easier to address problems before they wind up in court. Spending thousands of dollars on pursuing a patent reexamination in the patent office makes more sense than spending millions in federal court, they say.

Opponents fear that giving outsiders an easier way to dispute a patent will allow a deep-pocket competitor to tie up the patent of a small company or individual, costing them thousands of dollars in legal bills.

* Patent and Trademark Office: This part of the bill would effectively make the U.S. Patent and Trademark Office an independent agency. Instead of a commissioner approved by Congress, the office would be run by a director appointed by the president. An advisory board, likely to be made up of large companies as well as independent inventors, would review policies, performance and budgets.

Proponents say the measure will give the office the infrastructure, autonomy, and budgetary power to operate effectively.

Opponents say it gives corporate America too much influence over every aspect of the patent office.

“Everything they want could be done by regulation . . . and you and I as Americans have nothing to say about it,” said Delaney of the independent inventors group.

Despite the heated rhetoric on both sides, patent legislation has failed to capture the attention of the American people. Still, momentum is growing for change--change that will have a lasting effect on independent inventors and businesses large and small.

Cyndia Zwahlen can be reached by e-mail at cyndia.zwahlen@latimes.com.