Major patent change wins House approval

The House approved the most sweeping changes to U.S. patent law in more than 50 years in a victory for computer and finance companies such as Microsoft and Goldman Sachs Group.

The legislation, approved in a 220-175 vote, would make patents harder to obtain and easier to challenge. It also would seek to curtail litigation by limiting where patent owners can file suit and how much they can collect in damages if they win.

"There have been abusive practices that have grown up in the area of patents and certain inefficiencies," said Judiciary Chairman John Conyers, D-Mich. "These have been addressed with great care."

Approval came after last-minute changes to appease critics, including the Bush administration, labor groups, universities, and drug-maker Pfizer, which said the original proposal went too far in weakening patent rights and might hurt investment in new technologies and cost U.S. jobs.

White House spokesman Tony Fratto had no comment on whether the changes were enough to garner administration support.

Rep. Howard Berman, D-Calif., lead sponsor of the House proposal, said more changes to address complaints will come as the proposal goes through the Senate and when the House and Senate meet to reconcile the two measures.

Even with the amendments, the measure faced opposition from manufacturers including Caterpillar, drug-maker Eli Lilly and consumer-products maker Procter & Gamble. Opponents said the measure favors certain industries over others.

"It is a horror story for American inventors and a windfall for thieves," said Rep. Dana Rohrabacher, R-Calif. "Foreign and domestic technology thieves are licking their chops."

Rep. Marcy Kaptur, D-Ohio, said the measure "makes it easier for infringers to steal U.S. inventions."

Intense lobbying has surrounded the issue, reflecting the importance of patents to the U.S. economy. U.S. intellectual property, dominated by patents, is valued at as much as $5.5 trillion, according to a 2005 study by USA for Innovation, a Washington, D.C., group that supports free trade. That's more than 40 percent of U.S. gross domestic product.

The measure passed Friday "favors infringers" by making it easier to challenge patents, according to a statement by a group representing 3M, Johnson & Johnson and Procter & Gamble.

"For America to maintain its position as a technological leader, we must encourage and support our inventors, and those who invest and rely on their efforts, and deter those who seek to profit from infringement."

Lobbying for change

Microsoft, the world's biggest software maker; Intel, the world's biggest chip-maker; and Cisco Systems, the world's biggest maker of computer-networking equipment, have been lobbying for changes for more than five years. They say they have been under siege from lawsuits seeking high royalties on small features.

A group lobbying on behalf of the computer and financial-service companies called the vote "a victory for American innovators and consumers."

The companies are subjected to "legalized extortion," said one of the sponsors of the measure, Rep. Lamar Smith, R-Texas. "Too many patents of questionable integrity have been approved and owners of these patents have found a unique way to make money."

Both chambers of Congress started with identical proposals in April, and the Senate version may come to a vote before the end of this year.

The measure would change the rules at the U.S. Patent and Trademark Office so patents would go to the first person to file an application, not necessarily the first inventor.

That would limit years-long debates over who was the first to invent new technology and bring the U.S. in line with patent offices in the rest of the world.

Provision of bill

It also would allow third parties to introduce evidence against applications, and create a system to challenge newly issued patents.

In litigation, it would limit where patent suits could be filed to eliminate forum shopping to court districts deemed friendly to patent owners.

The legislation also would create a new way to calculate damages so they reflect the contribution of the invention to the overall product in determining a reasonable royalty and allow immediate appeals of court rulings on the interpretation of patent terms while the case is proceeding.