U.S. President Barack Obama has signed the America Invents Act, the first major overhaul of the U.S. patent system in about 50 years.

The America Invents Act, passed 89-9 by the U.S. Senate last week, would allow new challenges to patents granted by the U.S. Patent and Trademark Office (USPTO). It allows third parties to file a challenge to a patent within nine months of it being awarded.

The new law modernizes the U.S. patent system, said Mark Elliot, executive vice president at the U.S. Chamber of Commerce's Global Intellectual Property Center.

"The legislation will help ensure that the USPTO is adequately staffed, efficiently operated, fully funded to reduce backlog, and process patent and trademark applications in a high-quality and expeditious fashion," he said in a statement. Reducing the backlog of patents at the USPTO "is essential to encouraging innovation and bolstering the U.S. economy."

The new law also creates a new challenge for finance-related business-method patents by companies that have been sued or accused of infringing them. The new mechanism for challenging business-method patents will apply retroactively to those patents, and the law opens an eight-year window for the USPTO to review business-method patents.

"Reforming the U.S. patent system will enable businesses of all sizes to obtain clearer and more reliable intellectual property rights in a more expedient fashion, so they can attract investments, develop their products, and hire employees sooner," U.S. government CTO Aneesh Chopra wrote on the White House blog. "By transitioning to a simpler, more objective, and more inventor-friendly system of issuing patents, the new act helps ensure that independent inventors and small entities have greater clarity and certainty over their property rights and will be able to navigate the patent system on a more equitable footing with large enterprises."

The America Invents Act allows the USPTO to set fees for patents, and it will allow the agency to keep all of its patent fees, instead of having some money to back to the U.S. treasury. Congress has diverted about US$900 million from the patent office over the past two decades.

Those provisions will generate money the USPTO needs to address a backlog of about 1 million patent applications, said supporters, including sponsors Senator Patrick Leahy, a Vermont Democrat, and Representative Lamar Smith, a Texas Republican.

Tech Companies Demanded Reform

Several large tech companies, including Intel, Apple and Microsoft, have called for patent reform in recent years, and lawmakers have been trying to pass a bill for nearly six years. Earlier this year, the Senate stripped out limits on patent lawsuit damages that some large tech companies had supported.

The law streamlines the patent review process at the USPTO and it would change U.S. patent rules by giving a patent to the first person to file for it, not the first person to create a new invention. Changing to a first-to-file system puts the U.S. in step with most other countries.

Some opponents of the bill have said it favors large patent holders over small inventors. The first-to-file provision will create a race to the USPTO and disadvantage small inventors who may not have the money to immediately file a patent application, said opponents, including Senator Maria Cantwell, a Washington Democrat.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.