Sen. Patrick Leahy (D-Vt.), chair of the U.S. Senate Committee on the Judiciary, announced last week that he had reached a “tentative agreement in principle” on a compromise patent reform bill with Sen. Jeff Sessions, the committee’s ranking Republican member. The Senate Judiciary Committee approved the Patent Reform Act (S. 515), on April 2, 2009, but it did so with the understanding that the legislation would be modified before the full Senate considered it.

NSBA’s initial objections to S. 515 centered largely on two key elements: its conversion of the U.S. patent system from a first-to-invent to a first-to-file system and its provisions pertaining to post-grant patent challenges. NSBA believed that these provisions would result in a U.S. patent system strongly titled in favor of large incumbent firms at the expense of America’s small-business innovators.

While the draft compromise appears to have addressed many—but not all—of the most egregious aspects of the post-grant patent challenge provisions, the small-business innovators of NSBA believe that troublesome areas remain and that the proposed legislation would result in patent challenges that pose greater risk to small-business patentees than under the current system.

Perhaps most troubling, however, is the fact that the legislation continues to propose a conversion to a first-to-file system, but lacks any analysis of how this conversion would affect innovative small firms and independent inventors. This is no small matter. 

Small businesses are the front of breakthrough innovation in America, and the source of most new jobs. Small companies produce five times as many patents per revenue dollar as large companies and 20 times as many as universities—and more small-business innovations are commercialized. 

Congress has failed to investigate how a conversion to a first-to-file conversion would affect these critically important firms. This failure should be corrected before such a conversion is enacted and an untold number of cutting-edge small businesses are impaired.  Please click here for a detailed look at NSBA concerns.

NSBA urges Congress to take into account the unique circumstances and needs of small innovative businesses, which are distinct from those of large firms, and resist enacting provisions that would prove a disservice to the U.S. economy.

NSBA proposes replacing the first-to-file conversion provisions of S. 515 with a provision mandating a study and a report to Congress on the impact such a conversion would likely have on America’s small innovators.