The U.S. House of Representatives and Senate have each passed similar versions of a bill that will make big changes to the patent system, with only conference committee changes standing in the way of it becoming law. The America Invents Act makes several changes to the way patents are filed and protected, but the biggest one for small businesses and entrepreneurs is the change from the current "first to invent" system to a "first to file". Under the current system, if you invent a patentable invention, you have one year from the time you disclose it to file the necessary paperwork with the U.S. Patent and Trademark Office. This time is typically spent improving the concept, working with collaborators, or speaking with investors who could help fund the project. The new system takes away that "grace period" and gives to the first person to file the paperwork the right to patent the invention, regardless of whether they participated in the invention or not.
For example, an entrepreneur or small business might not have the necessary funds to file the patent on their invention in the first place (a patent can cost $15,000 or more to file). If that inventor describes the invention to investors as it tries to raise the money, the investor would be able to file for the patent before the inventor had raised the money. This will cause major changes to the way that entrepreneurs and investors interact with the investment community and would give a decided advantage to investors or corporations with deep pockets to trump the rights of individual inventors. That will have the effect of stifling innovation rather than supporting it.
Any inventor or entrepreneur is going to have to reevaluate their processes and be much more careful with their intellectual property once this bill becomes law, which is expected in the near future.