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Obama signs patent reform bill

By the CNN Wire Staff
  • Obama signs a bill overhauling the U.S. patent system for the first time since 1952
  • The bill creates a "first-to-file" system, replacing the current "first-to-invent" system
  • The bill also establishes a more reliable funding stream for the patent office

(CNN) -- President Barack Obama signed legislation Friday that will overhaul the U.S. patent system for the first time since 1952.

"We have to do everything we can to encourage the entrepreneurial spirit wherever we find it," Obama said at a signing ceremony at a high school in Arlington, Virginia. This measure "cuts away the red tape that slows down our inventors and entrepreneurs."

Obama used the occasion to promote his $447 billion jobs plan, calling patent reform a "part of our (larger) agenda for making us competitive over the long term."

Among other things, the measure, dubbed the America Invents Act, will transition the country to a "first-to-file" system, instead of the current "first-to-invent" approach. Issuing patents to the first person or company to file will help provide clarity in the patent-granting process, the U.S. Patent and Trademark Office says. It will also prevent inventors from coming out of the woodwork to challenge pending patents.

The first-to-file system is the predominant method used by the vast majority of industrialized countries throughout the world.

The measure also will help provide adequate funding to the overwhelmed patent office by allowing it to set and keep its own fees. Currently, all patent-filing fees are sent to Congress, and the patent office is allocated a set amount that is unrelated to how many patent applications are filed in a given year.

Congress will continue to allocate funds to the patent office, but any fees that the office collects in excess of its allocation would be placed in escrow. The patent office will then need to appeal to Congress to release that money, allowing Congress to maintain a certain level of oversight.

The patent office currently examines roughly 500,000 applications every year. Underfunding has led to a 700,000-patent backlog and a three-year waiting period for the average patent to receive final approval.

Finally, the bill will create a post-grant review process intended to clear up legal battles before they start. The measure allows inventors or companies to contest the validity of a patent for nine months after it is issued. The patent office will then go back and review the case.

The idea is to keep more expensive, lengthy patent fights out of the courts.

CNN's David Goldman and Alan Silverleib contributed to this report