The Senate Judiciary Committee unanimously voted Thursday to approve bipartisan patent reform legislation, including provisions banning tax strategy patents.

The committee vote sent comprehensive patent reform legislation to the full Senate for the third time since 2008.  The Patent Reform Act is authored by Senators Patrick Leahy, D-Vt., Orrin Hatch, R-Utah, and Chuck Grassley, R-Iowa. The American Institute of CPAs and other groups have urged Congress to preserve a provision in the bill that would prohibit patents on tax strategies (see Groups Urge Passage of Tax Strategy Patent Ban).

Congressional efforts to reform the nation’s patent system first began in 2005.  The legislation approved by the Judiciary Committee on Thursday is the product of years of work and compromise. Enactment of the Patent Reform Act of 2011 will make the first significant changes to the patent system in nearly 60 years, and will create and protect American jobs without adding to the nation’s deficit.

“A balanced and efficient intellectual property system that rewards invention and promotes innovation through high quality patents is crucial to our nation’s economic prosperity and job growth,” said Leahy in a statement.  “The Patent Reform Act will allow our inventors and innovators to flourish.  And it will do this without adding a penny to the deficit.  I hope that the Senate will act quickly, so that we can win the future by unleashing the American inventive spirit.”

Leahy is the chairman of the Senate Judiciary Committee.  Hatch is the Committee’s senior Republican member and a former chairman, and Grassley is the panel’s incoming ranking Republican.

“The United States is the most innovative and entrepreneurial nation in the world,” said Hatch. “If we are going to maintain our enviable position at the forefront of the world economy, it is absolutely essential for us to have an efficient and streamlined patent system. This bipartisan legislation, which would be the first major overhaul of our patent system in nearly six decades, is an important step toward maintaining our global competitive edge.”

Grassley introduced the tax strategy patent provision. “An effective and efficient patent system will help spur innovation and inventions and improve patent quality, and as a result, will provide incentive for entrepreneurs to create jobs,” Grassley said. “I hope the full Senate will soon have an opportunity to debate this bipartisan legislation.”

In addition to banning tax strategy patents, the Patent Reform Act makes changes to “inter partes” review, Patent and Trademark Office funding, and supplemental examinations. The legislation will also transition the nation’s patent system to a first-inventor-to-file system, create a first-window post-grant review process, provide certainty in damages calculations and findings of willful infringement, and includes important provisions to improve patent quality. The bill is based largely on a bill introduced in the 109th Congress by House Judiciary Committee Chairman Lamar Smith, R-Texas, and Rep. Howard Berman, D-Calif.

The compromise legislation on which the patent Reform Act of 2011 is based was supported by the Obama administration and by industries and stakeholders, including the AICPA, the National Association of Manufacturers, the United Steelworkers, the National Venture Capital Association, the Association of American Universities, and companies representing all sectors of the patent community that have been urging action on patent reform proposals for years.

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