By Susan Decker

Sept. 7 (Bloomberg) -- The House approved the most sweeping changes to U.S. patent law in more than half a century in a victory for computer and finance companies such as Microsoft Corp. and Goldman Sachs Group Inc.

The legislation, approved by the House by 220 to 175, would make patents harder to obtain and easier to challenge, and seeks to curtail litigation by limiting where patent owners can file suit and how much they can collect in damages if they win.

``There have been abusive practices that have grown up in the area of patents and certain inefficiencies,'' said Judiciary Chairman John Conyers, a Democrat from Michigan. ``These have been addressed with great care.''

Approval came after last-minute changes to appease critics, including labor groups, universities, the Bush administration and drugmaker Pfizer Inc., which said the original proposal went too far in weakening patent rights and might hurt investment in new technologies and cost American jobs.

Even with the changes, the measure faced opposition from manufacturers including Caterpillar Inc., drugmaker Eli Lilly & Co. and consumer-products maker Procter & Gamble Co. Opponents said the measure favors certain industries over others.

``It is a horror story for American inventors and a windfall for thieves,'' said Republican Representative Dana Rohrabacher of California. ``Foreign and domestic technology thieves are licking their chops.''

`Stealing Inventions'

Democratic Representative Marcy Kaptur of Ohio said the measure ``makes it easier for infringers to steal U.S. inventions.''

Intense lobbying has surrounded the issue, reflecting the importance of patents to the U.S. economy. U.S. intellectual property, dominated by patents, is valued at as much as $5.5 trillion, according to a 2005 study by USA for Innovation, a Washington group that advocates free trade. That's more than 40 percent of U.S. gross domestic product.

Pfizer, the world's biggest drugmaker, and Qualcomm Inc., the second-biggest maker of chips for mobile phones, have agreed to support the measure with changes, said Republican Darrell Issa of California, an inventor who holds 37 patents.

Computer-related companies Microsoft, the world's biggest software maker; Intel Corp., the world's biggest chipmaker; and Cisco Systems Inc., the world's biggest maker of computer- networking equipment, have been lobbying for changes for more than five years. They say they have been under siege from lawsuits seeking high royalties on small features.

`Legalized Extortion'

The companies are subjected to ``legalized extortion,'' said one of the sponsors of the measure, Republican Lamar Smith of Texas. ``Too many patents of questionable integrity have been approved and owners of these patents have found a unique way to make money.''

Both chambers of Congress started with identical proposals in April, and the Senate version may come to a vote before the end of this year. Democrat Howard Berman of California, lead sponsor of the House proposal, said additional concerns by opponents could be addressed when the House and Senate meet to reconcile the two measures.

The measure would change the rules at the U.S. Patent and Trademark Office so patents would go to the first person to file an application, not necessarily the first inventor. That would limit years-long debates over who was the first to invent new technology and bring the U.S. in line with patent offices in the rest of the world. It also would allow third parties to introduce evidence against applications, and create a system, called post- grant opposition, to challenge newly issued patents.

In litigation, it would limit where patent suits could be filed to eliminate forum shopping to court districts deemed friendly to patent owners, create a new way to calculate damages so they reflect the contribution of the invention to the overall product in determining a reasonable royalty and allow immediate appeals of court rulings on the interpretation of patent terms while the case is proceeding.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net .