– Time Is Not on Your Side
By Jeff Dalton
The America Invents Act will make patent protection more important than ever for startups, individual inventors and small businesses.
The new law contains sweeping changes. These include funding revisions for the U.S. Patent and Trademark Office and new rules for re-examining existing patents
But the biggest change re-defines inventorship from “first-to-invent” to “first-inventor-to-file.”
In my mind, this puts small businesses and individual inventors at a disadvantage and will require new strategies for all companies seeking to protect their intellectual property.
Let’s look at this hypothetical: Companies A and B compete in the skateboard market.
Engineers at both companies worked on a better material for skateboard wheels. The engineer at Company A invented a material with lower rolling resistance in July and contacted the company’s attorney, who filed a patent application in October.
Meanwhile, an engineer at Company B invented the same material in August. Company B’s attorney was faster and filed the patent application in September.
In the “first-to-invent” system, Company A would get the patent because its engineer invented the material first (provided he had documented proof of date of conception).
In the “first-inventor-to-file” system, Company B gets the patent – end of story.
No amount of documentation or diligence matters. Company B is entitled to the patent because it won the race to the Patent Office.
The consequences are clear. Inventors will have to act quickly to initiate a patent application. Patent agents and attorneys also must quickly prepare and file applications. Haste will rule the day.
In the above example, the engineer at Company A may have taken extra time to ensure the wheel material would last as long as the current material or still had enough friction to prevent the wheels from slipping.
If his extra diligence costs him patent rights, in the future he won’t perform this type of diligence. Patents, then, inevitably will be filed on poorly developed, inadequately researched ideas.
This gets to the heart of the dilemma facing a startup or a small business.
Funding is always tight and patents are expensive to draft and file. Large companies can more readily absorb the costs of patent applications, prosecution and maintenance fees.
At a cost of, say, $15,000 per patent, a relatively small portfolio of 15 patents can add up to $225,000. That’s a lot of money for a small company and a small fortune for an individual inventor, especially if all available resources are allocated to perfecting the product and growing the business.
The element of time also is critical. Large companies can afford to hire in-house patent attorneys who can prepare and prosecute patent applications all day, every day.
One of my clients has a patent group of seven attorneys. I’ve seen them file a patent application within a week of the date of an invention.
At the very least, a large company has a relationship with one or more patent law firms and can expedite applications as needed.
The small company, startup or individual inventor doesn’t have a stable of patent attorneys. Typically, small businesses and sole proprietors work with a multi-service law firm that can prepare patent applications along with other business legal matters.
Moreover, finding a patent agent or attorney who has a background in an inventor’s field of technology may not be easy or fast.
An attorney may be able to jump right on the assignment, but may need time to understand the technology to competently write a complete and adequate patent application. Yet time is a luxury small businesses cannot afford.
Now that the America Invents Act has become reality, demand for patent professionals will increase.
If winning the race to the Patent Office is paramount, faster and more frequent patent filings will be required.
The law of supply and demand predicts more demand on patent agents and attorneys will drive up the price for producing patent applications. This will increase the cost of patent filings, which will further penalize small companies.
What happens if inventors are timely, but their attorneys are slower to file than than competitors? Inventors likely would sue the slower attorneys. These suits could become more common.
Another consequence: more patent applications will increase the backlog at the Patent Office.
As of June this year, the average time it took from filing a patent application to getting a first response from the Patent Office was 27.2 months. One of my clients has waited more than three years for the first response from the Patent Office.
The Patent Office has proposed an accelerated examination option to expedite review of an application for a fee of $4,000 ($2,000 for small businesses).
This represents another cost of doing business that gives large companies an advantage over small companies and startups.
Those who can afford the fee get pushed to the front of the line; those who can’t fall further behind. The Patent Office wants to hire more examiners. But patent examiners require training and practice – don’t expect the backlog to shrink anytime soon.
More bad news: The original language of the bill allowed the Patent Office to keep its fees. The bill now puts the fees in an account that Congress can divert to other spending.
To be sure, the American Invents Act allows inventors to file a civil lawsuits in cases where the “first-to-file” inventor has derived (i.e. stolen) the invention from the earlier inventor.
However, the suit must be filed within one year of the application’s filing date. The problem is patent applications aren’t published until 18 months after the filing date. So by the time you discover someone has filed a patent application on your invention, it’s already too late to file the civil suit.
The end result is the “first-inventor-to-file” system gives large companies a structural advantage based on their ability to leverage their access to the legal support system.
The new America Invents Act changes the way patents are granted. The “first-inventor-to-file” system rewards those who act quickly and have a strong relationship with a patent professional.
Like in the Old West, it’s the quick or the dead.
Don’t get left in the dust.
The America Invents Act will impact investors
- If a startup hasn’t filed applications on its technology, any investment could be rendered worthless by the filing of an application from somebody else.
- Investors likely will insist startups have close relationships with patent professionals to keep innovations protected with timely filings.
- Investors will have to come to grips with the increased costs of patent protection and account for them in funding.
- Develop a close relationship with a patent agent or patent attorney. Patent professional needs to be up to speed on your technology and be able to produce an application without having to start at the bottom of the learning curve.
- Set realistic time expectations for the preparation and filing of patent applications.
- Request that your IP firm have the capacity to expedite important applications. You might even have to retain more than one firm to handle critical applications.
- Prioritize patents with the company’s business objectives. Ensure IP resources are spent on patents that provide the most bang for the buck.
- Licensing your patent to a competitor can provide a significant revenue stream while you grow your penetration of the market.
Jeff Dalton is founder and president of Patent Strategies, a company focused on helping inventors and companies leverage their intellectual property to boost their businesses. He’s worked in a variety of sectors, including sporting goods, biotech and consumer products. Visit www.patent-strategies.com
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