The United States Senate has approved the America Invents Act, a major overhaul to patent law that switches to a "first to file" rule for granting patents, creates two new processes for challenging already-granted patents, and gives the United States Patent and Trademark Office (USPTO) power to set patent fees. Because the House of Representatives passed the bill with identical language earlier this year, the legislation will now go directly to President Obama for his signature. He is expected to sign it, and may tout it during tonight's prime-time address on the economy.

Sen. Patrick Leahy (D-VT) hailed the legislation as the most significant overhaul of the patent system in decades. But Sen. Maria Cantwell (D-WA) blasted the bill. "This is not a patent reform bill. This is a big corporation patent giveaway that tramples on the right of small inventors," she said.

Before approving the bill, the Senate voted down several amendments that would have required sending the bill back to the House for another vote in that chamber. Two amendments came close to passing. One concerned language that retroactively changes a key filing deadline. Critics have dubbed this provision, which is backed by a pharmaceutical company that lost a key patent due to a paperwork mistake, the "Dog Ate My Homework Act." An amendment from Sen. Jeff Sessions (R-AL) to strip out the language failed by a vote of 47-51.

A second amendment, offered by Sen. Tom Coburn (R-OK), would have given the USPTO control over all fees it collects, rather than requiring those fees to be appropriated by Congress. It failed by a vote of 48-50. Other amendments failed by wider margins.

The Senate approved the final bill by a 89-9 margin.

Weak sauce

Congress has been wrestling with patent reform legislation since 2005. When we last took an in-depth look at the issue in 2008, we concluded that the legislation then under consideration was not the kind of serious patent reform the nation needs. This year's legislation is weaker still.

For example, the 2008 Patent Reform Act would have reduced the profitability of litigation by reforming how damages for infringement are calculated. These provisions did not make it into the legislation that is now on its way to the Oval Office. Also out are limitations on forum shopping, the practice by which plaintiffs sue in obscure, patent-friendly jurisdictions such as the Eastern District of Texas. No wonder the experts we talked to in last month's Ask Ars story didn't think America Invents would do much good.

What is in the bill? The only significant reform to survive the Congressional meat-grinder is the creation of a "post-grant review" process. That provision creates a new avenue to challenge bad patents by presenting evidence of invalidity to the Patent Office.

Another widely discussed change is the switch from a "first to invent" rule for issuing patents to a "first to file" rule. As the name suggests, this new system would grant a patent to the first person to file an application with the patent office, even if someone else had previously invented the same technology (an original inventor can challenge a grant if he can show that the applicant got the idea from him).

Supporters of this change argue that it will streamline the patent application process and harmonize US patent law with the rest of the world. It's popular with large companies because they can afford to hire full-time patent attorneys to help them file patent applications quickly.

The legislation also overhauls the collection of fees, bringing the USPTO closer to self-sufficiency. Under the current system, both fee levels and the USPTO's budget are set directly by Congress. If the USPTO takes in more in fees than it spends, the difference is used to fund other government programs.

The America Invents Act gives the USPTO the authority to set its own fees. USPTO spending is still controlled by Congressional appropriations, but the fees the USPTO collects are saved in a separate account until Congress appropriates them for use by the USPTO. This will likely allow the hiring of more patent examiners to tackle the huge backlog of patent applications.

Will this change improve the patent system? It's hard to say. On the one hand, a better-funded USPTO may be able to give patent applications greater scrutiny. On the other hand, tying the USPTO's budget to fee revenues gives it an incentive to be more lenient in granting patents, since that may lead to more applications and a larger budget in the future.

Narrow exceptions

Two other provisions limit the reach of recently legalized business method patents. One section creates a special new process for invalidating patents related to a "a financial product or service." That provision comes courtesy of Wall Street and is widely believed to target DataTreasury, a patent troll whose broad patents on check-clearing software has made it a thorn in the side of the banking industry for the last decade.

The other provision precludes software and business method patents from covering tax strategies, though it's careful to stipulate that "nothing in this section shall be construed to imply that other business methods are patentable."

The hypocrisy of these provisions is obvious. There's a growing consensus that the courts' de facto legalization of software and business method patents during the 1990s has done more harm than good. But rather than pursuing broad reforms that would benefit everyone, powerful interest groups have focused on carving out narrow exceptions for themselves while leaving the underlying law unchanged.

In short, the long-running battle over patent reform legislation has ended in a standstill. The only winners are the large companies—which supported the switch to "first to file" and other procedural changes—and the patent office itself, which will enjoy a larger budget and greater autonomy. The rest of us lost, because almost all the serious reform ideas wound up on the cutting room floor.

Listing image by Photograph by Michael Caruso