New Patent Law Won't Curb Tech Lawsuits

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A HTC smartphone and an Apple iPhone at a mobile phone shop.
Since, Japan is one of the world's largest economies, it is said that business activities of some of the U.S. communication technology (CommTech) companies could be disrupted in near term.

Congress is preparing to pass the first major changes to patent law in more than a half a century, but some experts say it may not make much difference in the current spate of technology company lawsuits.

The U.S. Senate on Tuesday passed the America Invents Act, by a vote of 95-5. The new law's major provision is moving the U.S. from a first-to-invent system of granting patents to first-to-file. Most of the rest of the world operates on a first-to-file system. Tax preparers will be unhappy with one part of the law that bans patenting tax strategies.

Other major changes are changes to the review process in cases where patents are challenged. At present, a challenge goes through several stages, and when a case gets to the court system litigation can drag on for years. The new law would have a trial board at the Patent and Trademark Office deal with challenges in a single step and that such challenges have to be resolved within 18 months.

For the PTO, one huge difference is that the fees it collects will remain with the PTO. Often the money be collected by the PTO is used by another agency. The new law would end that.

The America Invents Act will now go before the House of Representatives and is widely expected to pass.

Scott McKeown, a patent lawyer at Oblon, Spivak, McClelland, Maier & Neustadt, said the changes in the review process may help, but the effect won't be felt for several years at least. He added that the current system for reviewing patents was first set up in 1999 and it took until 2007 for it to really start working, in part because the PTO didn't have the staff in place. If the PTO can implement the new system of review more quickly, then that will make a big difference, he said, but the effects won't be felt until the middle of the decade at least.

Either way, he said, the changes would not affect existing patents and thus will not affect the current pending suits, such as that between billionaire Paul Allen and several Internet companies, including Google.

McKeown says the biggest driver for patent trolls - companies that buy patents and then sue others for infringement as their primary business - is contingency fees for attorneys. By filing dozens, if not hundreds, of suits, which cost little to file, a patent-holding company can collect millions, McKeown said, and if an attorney loses one case there is always another. The new law doesn't address that at all.

Dan Ravicher, a law professor at the Cardozo Law School, agrees that this bill doesn't address the real problem in the patent system, which is the quality. The real problem, he says, is a bias towards issuing patents that is built into the system because of the fee structure - it costs money not only to file a patent but to maintain it, which is an incentive to issue patents rather than examine them carefully.

McKeown said one part of the bill that may end up helping the most is eliminating the fee diversion. Patent examiners are always dealing with a huge backlog of applications, and they don't always have the expertise in the relevant fields. By keeping the money from fees at home in the PTO, the agency can reinvest in itself. They have IT systems from the early 90s, he said. They can't update them because the money goes to fund some other program.

To contact the reporter responsible for this story call (646) 461 6917 or email j.emspak@ibtimes.com.

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