If you read the legislation summary that the House passed last week, it doesn’t look so bad at first glance. Yet there are unresolved issues that could change the pace of innovation dramatically and alter who gets rewarded radically.

At issue is protection for individuals in terms of their ability to reap the rewards of their invention and their ability to get substantial damages from those who infringe on their patented work.

The issue also involves a time-of-invention debate. “The damages section in the House-passed bill proposes a new, untested ‘prior art subtraction’ requirement that is fundamentally flawed and unworkable,” according to the National Association of Manufacturer’s (NAM) ShopFloor.org blog on Monday.

“If made into law, the legislation will make patents harder to obtain and easier to challenge. It would also try to cut down on the amount of litigation by limiting where patent owners can file suit and how much they can collect in damages if they win,” according to intellectual property blog Patent Baristas.

Part of the proposed law, as posted on the Congress-tracking Web site GovTrack.us, now reads:

Derivation, Prior Disclosure, and Common Assignment Exceptions
Subject matter that would otherwise qualify as prior art only under subsection (a)(2) shall not be prior art to a claimed invention if –

(C) the subject matter and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.

ShopFloor.org adds:

The damages methodology mandated by H.R. 1908 heavily favors infringers, as most inventions are not as valuable at the time they are first conceived as they are after the inventor invests time and money to develop, manufacture and market them. Moreover, it is widely accepted that the economic value of an invention at the time it is made is largely unrelated to its current commercial value.

Other features of the bill, in summary (bullets):

• Modifies conditions under which a patent may be obtained for an invention or discovery, including by: (1) defining “inventor” to include a joint inventor and co-inventor; (2) making the effective filing date of a claimed invention the filing date of the patent or the patent application; and (3) revising procedures for patent interference disputes.

• Revises requirements for an inventor’s oath or declaration to allow substitute statements in specified circumstances (e.g., death or disability) and supplemental and corrected statements.

• Allows a third-party assignee (other than the inventor) or a person with a proprietary interest to file a patent application.

• Modifies provisions relating to damages for patent infringement to: (1) require a court to conduct an analysis of a patent’s specific contribution over prior art; (2) allow increased damages for willful patent infringement; and (3) expand the prior user defense.

• Renames the Board of Patent Appeals as the Patent Trial and Appeal Board.

• Revises provisions relating to the Board’s composition, duties, and authorities.

• Allows a person who is not the patent owner to file a petition with the Board to cancel a patent as invalid (post-grant review). Sets forth procedures for the consideration of such petitions, including provisions to prevent harassment of patent owners and abuse of process.

• Allows third parties to submit documents relevant to the examination of a patent application.

• Revises venue requirements for civil patent actions against individuals and corporations to allow actions to be brought in the judicial district where either party resides (currently, where the defendant resides) or where the corporation has its principal place of business or was incorporated.

“Reservations … about the bill come from groups like the Innovation Alliance, which represents Qualcomm and a number of smaller companies that depend on licensing technology, as well as the Coalition for 21st Century Patent Reform, composed of about 40 large companies, including 3M, Bristol Myers Squibb, Caterpillar, Eli Lilly, Johnson & Johnson, Motorola, Procter & Gamble, PepsiCo, Pfizer and Texas Instruments,” according to CNET.

Among the opponents is the Professional Inventors Alliance, “which plans to fight the bill hard in the Senate,” according to CNET. With only a 45-vote margin in the House, the Senate will not see the House vote as a “mandate,” ZDNet notes Ronald Riley, president of the trade group, as having said.

Earlier: Obvious or Ingenious?

Resources

Statement of Administration Policy: H.R. 1908 – Patent Reform Act of 2007
Executive Office of the President, Sept. 6, 2007

Patent Reform Has Problems, More Work to Do
by Carter Wood
National Association of Manufacturers, Sept. 10, 2007

House Passes Amended Version of Patent Reform Act of 2007
by Stephen Albainy-Jenei
Patent Baristas, Sept. 10, 2007

H.R. 1908: Patent Reform Act of 2007
GovTrack, Sept. 4, 2007

House OKs Revamp of Patent Reform
by Anne Broache
CNET, Sept. 7, 2007

Reform Opponents Promise Patent Fight in Senate
ZDNet, Sept. 10, 2007

Additional

Final Vote Results for Roll Call 863
U.S. House of Representatives, Sept. 7, 2007

House Approves Comprehensive Patent Overhaul
by Catherine Rampell
The Washington Post, Sept. 8, 2007

Labor Surprises Dems with Intervention on Patent Law
by Ian Swanson
The Hill, Sept. 5, 2007

Speaking Out on Patent Reform
The Coalition for 21st Century Patent Reform

Coalition to Continue to Work for Consensus Patent Legislation
The Coalition for 21st Century Patent Reform, Sept. 7, 2007

Patent Fight
by Brian Wingfield
Forbes, Sept. 7, 2007