United States Patent Reform Act

By: John C. Scheller and Matt Brown

On March 8, 2011, the Senate passed the America Invents Act. The Act’s most significant change to U.S. patent law would be to implement a “first-to-file” system, which gives patent rights to the first inventor who files a patent application for an invention, even if another inventor conceived of the invention prior to the inventor that filed first. This would create greater pressure to file an application for an invention as soon as possible.

Many think a first-to-file system would give bigger companies, such as Apple and Google, a competitive advantage over smaller companies, start ups, and entrepreneurs, because bigger companies inherently have more resources to file patents quicker and with more frequency. Thus, if the Act becomes law, it will be critical for smaller entities, many of which drive innovation in certain technology areas, to ensure they have quick and responsive patent counsel that can file patent applications for inventions as soon as possible.

Recognizing the potential disadvantage for smaller businesses, the Act also includes several provisions that would create new advantages for smaller businesses, start ups, and entrepreneurs. First, the Act would make it more difficult for large patent infringers to harass small business patent owners through continuous administrative challenges of a patent, or through challenges that have no likelihood of success, tactics commonly used to avoid license fees or to discourage an infringement suit. Second, the Act would eliminate interference proceedings as the method for determining the right to a patent between competing inventors, a costly proceeding which is almost always won by larger corporations. Third, because the Act will improve patent quality overall, it will be easier for start ups and entrepreneurs to raise capital from inventors, who would be more confident that an eventual patent would be less likely to be invalidated. Finally, the Act will require the PTO to provide a 50 percent reduction in fees for small businesses and will create a new “micro-entity” designation for truly small and independent inventors. This new micro-entity class will receive a 75 percent reduction in fees, which will greatly benefit start-ups and new inventors.

The America Invents Act, which passed in a bipartisan 95-5 vote in the Senate, still must make its way through the House to become law. Although the House is expected to vote in support of a compromise bill, final passage could be blocked by a late-stage “hold” in the Senate.

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