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Congress approves patent overhaul bill

By Diane Bartz

WASHINGTON (Reuters) - Congress gave final approval to an overhaul of the U.S. patent system on Thursday, sending the bill aimed at reducing litigation by improving patent exams to President Barack Obama for his signature into law.

In a 89-9 bipartisan vote, the Democratic-led Senate passed the measure which had cleared the Republican-led U.S. House of Representatives in June.

The legislation would allow the U.S. Patent and Trademark Office to set its own fees and to do the hiring and technical upgrades needed to catch up on a backlog of nearly 700,000 patent applications.

The measure would also grant patents to the first inventors to file, rather than requiring inventors to show they were the first to develop an innovation.

This would bring the U.S. patent process in line with that of many other countries, although some critics say the "first to file" provision hands an advantage to deep-pocketed companies over individual inventors.

Another provision would create a post-grant review process to allow challenges to bad patents before they are used in litigation.

"This is bipartisan, common-sense legislation that will spur the innovation that drives the American economy," said Senate Judiciary Committee Chairman Patrick Leahy, a chief sponsor of the measure, which is a product of six years of battles and compromise on Capitol Hill under two presidents.

The bill was also praised by Republicans like House Majority Leader Eric Cantor and Representative Darrell Issa, himself a patent holder.

"This bipartisan bill will allow inventors and entrepreneurs to more efficiently launch new products by streamlining the nation's patent system," said Cantor.

The patent reform effort began at the urging of the tech industry, which has faced growing numbers of patent infringement lawsuits.

There were 2,296 patent lawsuits in 2000 in U.S. district courts. That number rose 23 percent to 2,833 in 2010 and is on track to hit 3,000 this year unless the economy softens further, according to Joshua Walker, head of Lex Machina, which tracks patent litigation.

In addition, the number of defendants per lawsuit has risen, from an average of two in 2000 to three in 2010.

Tech industry supporters of the bill believe a better-financed, better-run patent office will issue fewer bad patents, which would help reduce litigation.

Half of the patents challenged in court now are invalidated, which means they never should have been issued, says Daniel Ravicher, who teaches at the Benjamin N. Cardozo School of Law.

FEE DIVERSION TOO TEMPTING?

The legislation ends the practice of fees paid to the patent office being diverted to the U.S. Treasury, leaving it strapped for cash.

Congress, under pressure to cut the U.S. deficit, might still be tempted to appropriate them.

"We've seen this sort of last minute diversion take place before," said patent attorney Neil Smith, a partner at Ropers Majeski Kohn Bentley PC.

The bill also bans patents on strategies to lower tax bills, a measure sought by Senator Chuck Grassley, a Republican from Iowa.

"Tax strategy patents are on the rise. More and more legal tax strategies are unavailable or more expensive for more and more taxpayers," Grassley said.

(Reporting by Diane Bartz; Editing by Phil Berlowitz and Tim Dobbyn)

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