A move by the Federal Trade Commission to overhaul patents could hurt entrepreneurs, experts say. Among the suggestions the FTC has proposed to Congress: The U.S Patent and Trademark Office should be allowed to declare more design innovations to be "obvious" and therefore unworthy of a patent. The PTO should also consider the "harm to competition" that a patent might cause--and reject a claim that's too disruptive to competitors. The FTC would also make it easier to challenge a patent by expanding evidentiary guidelines.

Many venture capitalists and inventors worry that the reform will have a chilling effect on innovation. The system we have now "provides a mechanism for innovators to recoup research investments," says John Reich, of Minneapolis law firm Merchant & Gould, who has represented both inventors and global corporations. Take away patent protection, he adds, and "there's not a lot of incentive to bring products to market."

Not surprisingly, corporations are more enthusiastic about the overhaul. "The changes would as a general matter reduce the potency of a tool used more by small companies," says Polk Wagner, a law professor at the University of Pennsylvania.