Obama’s Patent Process Overhaul… for Better or Worse?
Last month, President Obama signed into law the Leahy-Smith America Invents Act, an overhaul of the U.S. patent system which is purported to be the most significant reform in decades. The Act aims to create jobs and foster economic growth by speeding up the filing process and reducing filing fees for certain defined small entities, thereby encouraging independent entrepreneurs to file for patents.
However, there is significant debate among certain industries that the Act will benefit large corporations and harm small businesses and independent inventors. Some of the Act’s provisions are already in effect and some will go into effect 18 months after its passage, so its ramifications are still unclear. However, many are already speculating about how some of the Act’s more significant changes will affect the patent process and the economy as a whole.
The first major change is that patent disputes will now be settled by a first-to-file system instead of the current first-to-invent. It is argued that this change will put smaller companies at a disadvantage, because they can no longer be as selective in which inventions they choose to patent. The system puts pressure on inventors to file as soon as possible, which benefits large corporations with pockets deep enough to pay for the substantial costs associated with obtaining a patent. However, the Act also expands prior user rights for alleged infringers. A prior use defense is now available if an accused infringer can demonstrate use of the subject matter at least one year prior to the effective date of the claimed invention.
Even though the system has its detractors, first-to-file ends what is often a very time-consuming process of determining who came up with an idea first. The system also adds more certainty to patent litigation. Since speed and efficiency was one of the main goals of the Act, the first-to-file system seems to be in line with Congress’s mission, as well as bringing the U.S. in line with most of the world.
There are also additional rules created by the America Invents Act which may offset the arguable disadvantages of the first-to-file system for smaller entrepreneurs. The Act creates a new class of inventors called the “micro entity.” These applicants would qualify for a 75% reduction in filing, maintenance fees and other types of fees. To qualify for micro entity status, an inventor must: 1) qualify as a small entity (already defined in current patent law); 2) not have been named as an inventor on more than four previously filed patent applications; 3) not have, in the preceding calendar year, had a gross income exceeding three times the median household income for that preceding year, and; 4) file an application not assigned nor under an obligation to be assigned to an entity not meeting the other guidelines.
This change could encourage independent inventors to file because the discounts could save an inventor thousands of dollars over the life of the patent. However, even though small and micro entity status inventors will be receiving a discount under the America Invents Act, patent filing fees in general are being raised.
The Act raises filing fees across-the-board by 15%. This change is an attempt to deal with the huge backlog of almost 700,000 patents that have been filed and are waiting for examination. With the added user fees, the U.S. Patent & Trademark Office hopes to hire 2,000 more examiners in the coming year. This, the Office hopes, will reduce applicant wait times, enable inventors to market their products quicker, create jobs, and stimulate the economy.
Another way that the Act purports to speed up the process is by establishing a fast track option, which offers applicants the option of having their application examinations expedited for an additional fee. The fast track option guarantees turnaround time of less than twelve months, far less than the three year average. Small and micro entity status applicants will receive a discount for this service as well.
Even though proponents and opponents of the Act have valid arguments, we can only wait and see how substantial an affect the Act will have on job creation and economic growth, and who the Act will benefit most. However, a look at the website of the Coalition for Patent Fairness, one of the Act’s biggest lobbyists, is telling. Partners include Apple, Cisco, Dell, and Google, among other behemoths of industry. This leads us to ask the most obvious question: patent fairness for whom?