Big changes in US patent law

September 16, 2011
| By Pete Daly |
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Sweeping changes in the U.S. patent process just passed by Congress may generate increased funding for the Patent Office, which everyone hopes will ultimately reduce the amount of time it takes the government to issue a patent.

Conversely, another major change may increase the number of applications filed.

“It’s really the biggest change we’ve had in 59 years,” said Chuck Burpee, a partner at Warner Norcross & Judd LLP in Grand Rapids and chair of the firm’s Technology and Intellectual Property Group. A patent attorney for more than 25 years, Burpee said the biggest change is the shift from a “first-to-invent” system to a “first-to-file” system.

“What that means is, the Patent Office is simply going to look at who’s got the earliest filing date if two people file (a patent application) on the same thing, and whoever has the earlier filing date is the one who is going to get the patent. That’s very different from the first 200-plus years (of U.S. patent law).”

Up to now, under the U.S. law, “we’ve tried to figure out who the first inventor is, regardless of whether he was the first one to the patent office, and we’ve given the patent to that person,” said Burpee.

However, the rest of the world decides by who filed the application first, so the change now brings the U.S. into compliance with the rest of the world, he said.

From now on, said Burpee, there will be “a very strong motivation to be the first to file (because) you can’t wait and rely on the fact that you’re the first inventor.”

“With the first-to-file system, you may want to put your foot in the door each time you think you have an incremental advance (in an invention)” he said.

He noted, however, that the Patent Office does require inventors or would-be inventors “to describe (in detail) how something actually works. So as long as you can do that, then you’ve got something worth filing on.”

Since the Patent Office collects a fee for each application, “frankly, they are pretty happy if people start filing more applications,” said Burpee. In general, the patent application fee for a company is $1,200; for an individual, it is $600. The fee should presumably stop people from filing without cause, he added.

Burpee said the former difference between U.S. law and the rest of the world led to some unusual situations where an American who came up with an invention first but didn’t file right away ended up controlling that product’s sales in the U.S., while someone else in a foreign country who had filed the first application there controlled the sale of the product abroad.

Another major change in U.S. patent law is a new provision: Once a patent is granted, there is a nine-month period during which any third party can challenge the patent for any reason, according to Burpee.

“This makes it more important, in my mind, to monitor the applications and patents of your competitors in order to see what’s issued and to object if you think something may be coming down the pike that is not really a valid invention,” he said.

“It’s pretty much a wide-open challenge period,” he added.

Burpee was asked if these changes would generate more work for patent attorneys.

“We kind of joke, just a little bit, that this is the Full-Employment Act for patent attorneys,” he replied. “Yes, there are unquestionably going to be many more challenges and much more use of the challenge systems.”

Grand Rapids has about 50 patent attorneys, estimates Burpee. About two-thirds are in private practice at law firms, with about one-third employed in-house at companies that have a growing portfolio of patents. A typical patent attorney probably works on about 50 patent cases a year, he estimates.

Another major change regarding the U.S. Patent Office, according to Burpee, is that Congress is moving toward allowing the Patent Office to keep all the money it collects. At one time, the Patent Office kept control of the fees it collected, but about 20 years ago, Congress started dipping into Patent Office revenue and spending it on other things. According to Burpee, the total amount commandeered by Congress from the Patent Office now totals about $1 billion.

“That created a situation where the Patent Office did not have the (financial) resources it needed to do its job, and that led to a current backlog” of about 700,000 pending patent applications, he said. With the amount of time required for most patents to be granted being about three years, that backlog continues to grow.

The Patent Office is self-funded, but its budget is set by Congress, so the office couldn’t touch its annual revenue surplus.

“We’re hoping that by providing greater certainty to the Patent Office that it can keep its money, they’ll be able to start working through that backlog and catching up,” said Burpee.

Dan Clark, a founder of the Grand Rapids Inventors Network and managing director of the consulting firm Plum Crazy Development, said he expects to hear some people in favor of the patent law changes and others against them. In view of the main change to a “first-to-file” system, he said he is confident it is the right move because “it’s how they operate in other areas of the world and it works.”

Clark is not a patent attorney but has had extensive experience with intellectual property. In 1999, he founded Dahti Seating in Rockford, which produced products via a patented manufacturing process. In 2003, Illinois Tool Works acquired the company (now ITW Dahti) and Clark continued for several years there as general manager.

Clark said the new first-to-file system may pose a disadvantage for the small inventor because “they don’t necessarily have the resources — the funds — to go right out and file for a patent” when they think they have a novel idea. “What will probably happen is, bigger companies will just file patent applications sooner,” he said.

However, Clark said he is a staunch believer in the U.S. patent system, which he describes as “fantastic.” He said the U.S. Patent Office does provide an affordable way for inventors to “get in the door.”

Inventors and businesses “are going to have to change a lot in terms of how they normally operate with their intellectual property, but it does not lessen the capability or the value of the small inventor at all,” said Clark.

Clark said that in his consulting practice, he urges clients to keep quiet about their developments that might be patentable. In some cases, he might even advise against rushing out to get a patent.

“All you have to do — what you need to do — is be tight-lipped about what you are doing. The trade secrets that you have are a great tool, and as long as nobody knows what you are doing, it’s as valuable as a patent,” said Clark.

He said some intellectual property owners sometimes forgo patenting a new innovation and instead maintain the strictest secrecy around it. That alone can offer some protection that a patent doesn’t, he said, because a patent necessarily provides specific details to the world on how a certain technology or process works. And with your specific details in view, competitors may “try to navigate around you,” said Clark.

The changes to first-to-file and the open challenge period will not take effect until 18 months after signed into law by President Obama, which he has said he will do. On the change to allowing the Patent Office to use more of its revenue for faster processing of applications, Burpee said it will start with a reserve fund the patent fees go into, with the understanding that the money will eventually be available for use by the Patent Office.

“Of course, that’s subject to the whim of any future Congress,” added Burpee.

Burpee said that about 30 years ago, it took an average of 14 months for a patent to be issued, compared to three years now.

The legislation passed by Congress is called the America Invents Act, and several groups representing small business, entrepreneurs and early-stage investors already have objected to the first-to-file part, alleging it favors large corporations, according to a report in The New York Times.

The increase in the backlog of patents pending is due to a surge in applications sparked by the power of the Internet over the last decade, and the Patent Office computer systems are too out-of-date to keep up with the backlog, according to the report.

On Aug. 16, the 8 millionth U.S. patent was issued, for a “visual prosthesis” electronic device developed by Second Sight Medical Products of Sylmar, Calif. To illustrate the increasing rate of patents being issued — and their changing technological complexity — the 1,836,750th U.S. patent was issued 80 years ago this Dec. 15 for a “berry box crate” invented by William E. Daly of Benton Harbor.

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