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Most of the largest IT companies in the US yesterday were buoyed when a sweeping patent-reform bill was approved by a House of Representatives panel. The bipartisan bill promises to overhaul the way patents are reviewed, approved and litigated, and change the way the US Patent and Trademark Office is funded.

By Rhonda Ascierto

Notably, the bill would bring the US patent system in line with its foreign counterparts by awarding patents to the party that is first to file a patent, rather than to the party that is first to invent.

The bill’s proponents, which includes most of the country’s IT industry, hope the bill will put an end to the alleged rubberstamping of questionable patents, which often leads to frivolous patent-infringements lawsuits and expensive compensation or settlement charges. The Patent Reform Act of 2007, which in its current form has several amendments, promises to do away with bad patents as well as limit litigation costs.

The current state of the US patent system has given rise to so-called patent trolls, which are IP shell entities that don’t make products but instead sue large companies for exorbitant amounts for allegedly infringing on their patents.

A coalition of some of the tech industry’s biggest names, including Google, Microsoft and Sun, called the Computer & Communications Industry Association hailed the passage of the bill. CCIA president Ed Black said it was “a step towards restoring balance to the patent system, rewarding those who create and hindering those who would abuse the system for unjustified gain,” in a statement.

The Software & Information Industry Association, which includes Accenture, Business Objects, IBM, Infosys, Intel, McAfee, Novell, Oracle, Red Hat, Salesforce.com, WebEx and Wipro, also applauded the bill’s passage.

“As the US faces increasing global competition, it is time to remove the obstacles to innovation and technological progress that the current system has created,” said SIIA SVP for public policy Mark Bohannon, in a statement.

However, a consortium of pharmaceutical and biotechnology companies, The Coalition for 21st Century Patent Reform, which includes 3M, General Electric, Procter & Gamble and Johnson & Johnson, said it “continues to have serious concerns regarding the overall impact the bill will have on US patents and the inventions they protect,” in a statement.

The coalition is arguing for more changes to the bill before it is approved the full House and Senate. Among its concerns are that the bill does not go far enough to protect the patent holders’ rights, which would potentially put a crimp in many of their businesses as more generic brand drugs could come to market.

Another, similar version of the bill last week is currently under consideration by a Senate panel. The House bill may potentially now move to the full House floor for a vote.