Start-up companies in Iowa could be the unintended losers in a battle that’s under way in Congress to reform the patent system, say experts in Iowa.

The Patent Reform Act of 2007 would rein in the multimillion-dollar lawsuits involving technology patents and increase the quality of patents that are issued, according to advocates.

However, the proposed changes would make it more difficult for biotechnology-related start-up companies in Iowa to protect their intellectual property, said Kurt Van Thomme, a Des Moines patent attorney.

Sen. Patrick Leahy, a Vermont Democrat and chairman of the Senate Judiciary Committee, with Sen. Orrin Hatch, a Republican from Utah, introduced the Patent Reform Act of 2007 in the Senate last month. The House is considering an identical bill.

Among the provisions of the bills are a change from the “first to invent” system now used by the U.S. Patent and Trademark Office to a “first to file” system, which advocates say would put the United States on an even footing with other countries, which predominantly practice first to file.

The legislation would also create a post-grant opposition process that would enable third parties to challenge the validity of a patent at any point during its 20-year life.

It includes a provision that limits the calculation of damages in a lawsuit to that portion of the patent that represents the improvement in technology. And it incorporates a venue statute that would limit “forum shopping” by plaintiffs for courts that are known to handle patent cases quickly.

The most significant change, and the one with the most potential to hurt startup companies in Iowa, involves the proposed shift to first to file, said Van Thomme, an attorney with McKee, Voorhees & Sease PLC.

“The goal, basically, is to get early disclosure to the Patent Office,” he said. “The term of the patent is 20 years from the earliest filing date. The goal, from the government’s perspective, is to get patents filed sooner so they expire sooner and the inventions get into the public domain more quickly.

“The downside of that is it can have a negative effect on small businesses,” he said, “because bigger companies that have bigger budgets will file patent applications on every conceivable incremental improvement that they make in order to get those earlier filing dates and thus potentially shut out smaller businesses, individual inventors or start-up companies.”

Major information technology companies such as Microsoft Corp. and Dell Inc. have formed the Coalition for Patent Fairness to support the legislation.

“Enactment of comprehensive patent reform legislation is needed now to help guarantee America’s continued economic growth and vitality,” according to a statement made last month by Anthony Peterman, a patent attorney for Dell.

Van Thomme said the proposed reform pits software and technology companies, who typically want weaker patents, against pharmaceutical and biotechnology companies, who generally want stronger patent protection.

“I think there isn’t any question that (the legislation) right now would favor [information] technology companies,” he said. “The reason for that is, the more complicated the science or technology, the harder it is to get a patent on it, because there’s more research involved; there’s more of an expenditure on the front end.” For example, the prescription drug Lipitor is covered by about 10 patents, compared with about 10,000 patents on the technology behind the MP3 digital music player, he said. “So the changes are trying to make it more difficult for those who don’t actually practice the invention to sue for infringement.”

Nita Lovejoy, associate director of the Iowa State University Research Foundation and the Office of Intellectual Property and Technology Transfer, said the legislation’s approach toward reducing costly litigation is “a little shortsighted, because they’ve shifted [the process] from the court system to the Patent Office.”

“You’re still going to have a team of lawyers arguing it in front of the USPTO, so the costs are still going to be there,” she said.

Additionally, changing to a first-to-file system would result in higher costs and less efficiency for the university’s efforts to file for patent protection, Lovejoy said.

ISU currently applies for an average of 35 to 40 new patents each year, at a cost of about $10,000 per application.

“What [the proposed change] will probably do is shorten that time period for us a bit,” she said. “So it’s very possible for us we would be filing on more things, because we would not have that time to perform that due diligence.”

The ISU Research Foundation funds its application fees from royalties it receives on existing patents, not from state funds. Under a first-to-file system, “we would be wasting money,” she said. “We wouldn’t be able to manage the funds the way we are now.”

Van Thomme said many of the changes proposed in the legislation appear to be merely addressing symptoms. Hiring more patent examiners and training them better may be a better way to address patent quality, he said.

“Currently, patent examiners are paid based on how quickly they dispose of individual patent cases, rather than on the quality of those cases,” he said. “If that’s addressed, some of these other problems may go away.”

Van Thomme said he would be “at least moderately surprised” if many of the major changes are enacted by Congress this year. “It’s not out of the realm of possibility, but I think the changes will be more incremental in nature,” he said.