The America Invents Act (S. 23), originally titled the Patent Reform Act of 2011, passed the Senate by a vote of 95 to five. The bill’s author was Judiciary Committee Chairman Patrick Leahy (D-Vt.), and Chuck Grassley (Iowa) the Ranking Republican on the Judiciary Committee, and Orrin Hatch (R-Utah) were original co-sponsors of the bill. An amendment to strip S. 23 of its troubling grace-period provision by striking the section of the bill containing the conversion of America’s first to invent patent priority system to a first to file patent system introduced by Sen. Diane Feinstein (D-Calif.) was defeated 87-13.
The first to file (FTF) provision eliminates the current first to invent filing system that goes back to the earliest beginnings of our nation. The FTF transition would eliminate the current one-year grace period that allows inventors to prove they were first to invent within one year from the date of their invention. Retaining the current grace period and filing system received little attention as small inventors were largely left out of the previous Congressional hearings on patent reform in 2009 and 2010, and no hearings were held by the Judiciary Committee of the new Congress prior to vote on the Senate floor.
According to Patent and Trademark Office Director, David Kappos, the U. S. is already operating as a “first to file” patent system because in 2007, the total number of interference cases for all applications was seven, and only one interference claim involving a small or medium sized entity was decided based on priority alone – out of 441,637 patent granting decisions. Interference cases are where two inventors file their patents nearly simultaneously and rely on the first to invent criteria during interference proceedings.
“Reforming the nation’s antiquated patent system will promote American innovation, create American jobs. It will grow our economy,” Leahy said on the Senate floor. President Obama praised the Senate action, saying “This long-overdue reform is vital to our ongoing efforts to modernize America’s patent laws and reduce the backlog of 700,000 patent applications – which won’t just increase transparency and certainty for inventors, entrepreneurs and businesses, but help grow our economy and create good jobs.”
The bill allows the Patent and Trademark Office (PTO) to determine fees and stops the practice of Congress diverting patent fees to the general Treasury to ensure that the office has the resources to hire more qualified examiners and modernize its computer systems. Like a thief in the night, Congress raided the PTO fund and diverted $53 million of fees to other Congressional programs. The new Congress hasn’t made any attempt to refund that amount to the PTO. PTO funding is completely dependent on user fees paid to the PTO for patent and trademark applications, examinations, and maintenance. Zero taxpayer dollars are used to fund the PTO, which means Congress is using resources paid by inventors and innovators on programs not related to the patent or trademark applications those inventors and innovators filed. In addition to the $53 million stolen last year, over $750 million was stolen by Congress over the last 15 years. (CONNECT Policy eNews 1.31.11)
When Director Kappos was in San Diego in May 2010, he told the San Diego Inventors Forum that they were hiring 300 more patent examiners in 2010 and planned to hire 1,000 more in the next two years to help reduce the backlog of 750,000 patent applications. He said they were also providing training to the current 7,000 patent examiners to accelerate the processing of patent applications.
The bill creates a new micro-entity category that would allow fees to be reduced by 75 percent for inventors with five or fewer employees and fewer than five prior patent applications. The PTO currently offers a 50 percent discount for small entities (under 500 employees) in virtually every fee category, which is further reduced by another 50 percent for small entities and independent inventors who use the electronic filing system.
Under the bill, the PTO could set up an expedited review program under which, for a higher fee, it would guarantee a final decision on an application within a year. It now takes about three years, on average, for a patent application to be approved, and the office has such a backlog that it takes two years for examiners to begin work on a new application.
The legislation garnered a broad spectrum of support from pharmaceutical companies, large corporations such as IBM and Motorola, academic groups such as the Association of American Universities, and labor groups, including the AFL-CIO. The Coalition for 21st Century Patent Reform, a group whose 50 members includes Caterpillar, General Electric, Eli Lilly, and Procter & Gamble, said “this legislation will make our national more competitive in the global marketplace.”
Independent inventors (individuals who are not part of corporations) had been anxiously watching the outcome of the proposed Patent Reform Acts of 2009 and 2010, in which the new process would be a first to file system in contrast to the current first to invent system. The concern of independent inventors was that this bill would favor large companies who can afford to file applications for patents before vetting the new technology because it would alter patent law to effectively kill the grace period by conditioning it on early disclosure. In other words, an inventor would have to publicly disclose the invention in order to trigger a grace period. Startups and small business inventors do not publicly disclose the details of their inventions right after they are conceived because it would tip off competitors to essential details of their new technology. The ability to secure a patent is critical for an inventor or startup company to be able to obtain licensing agreements or early stage investment funding by angel investors or venture capitalists.
Several groups representing inventors and small business have long campaigned against any provision that would weaken the legal mechanisms available to their members to assert their patents. In December 2009, a group of organizations announced that they banded together to form the Small Business Coalition on Patent Legislation. The Coalition is a national consortium of non-profit organizations representing and assisting early-stage startup companies, small businesses, individual and academic inventors, researchers, and new innovative market entrants who depend on patent protection. The Coalition included San Diego’s CONNECT organization, the National Small Business Association (NSBA), IP Advocate, the American Innovators for Patent Reform (APIR), the National Association of Patent Practitioners (NAPP), the Professional Inventors Alliance USA (PIAUSA), and the United Inventors Association (UIA)
Ed Black, president and CEO of the Computer and Communications Industry Association, a trade group whose members include Google, Microsoft and Oracle, warned that excluding the post-grant review provisions could make “the current situation even worse for the tech industry.” Sen. Mark Udall (D-Col.) one of the co-sponsors of the amendment said he would seek to include it in the final version of the bill negotiated by the reconciliation committee with the House bill that passes.
The Coalition for Patent Fairness, which represents high-tech companies, such as Apple, Google, Intel, Cisco, and Oracle had been a leading voice of dissent on the legislation and announced they would continue to work with Congress to address the concerns of America’s top innovators.
When the bill was first introduced by the new Congress in January, Timothy Tardibono, CONNECT’S Washington D.C. Office Director said, “The bill makes it harder for inventors to perfect their invention before filing while ignoring a major Supreme Court case that will further exacerbate the patent application backlog and pendency time. There is no need to rush this bill through until it fully protects innovation instead of hurting innovation and killing job creation.” This legislation he mentioned is Microsoft v. i4i patent infringement case, in which Microsoft is petitioning the U. S. Supreme Court to lower the standard needed to prove a patent invalid from the current standard of clean and convincing to preponderance of the evidence.
In a February 2, 2011opinion article in The Hill’s Congress Blog, U. S. business & Industry Council President, Kevin Kearns, and Research Fellow, Alan Tonelson, wrote, “The principal advocates of the Leahy bill are the governments of Europe and Japan – along with boosters in China and India. They want the United States to ‘harmonize down’ to their inferior systems. They and the bill have it backwards. Advocates also include a handful of Big Tech transnational corporations that want to make easier and less costly the infringement of other’s patent rights. Their business model has a unique name, ‘efficient infringement.’”
They also pointed out that the reforms of the Clinton era “doubled from 18 to 36 months the time required to process a patent, required the Patent Office to publish full patent applications on the Internet 18 months after filing – encouraging theft of American IP worldwide, and created a new post-grant challenge process to patent validity that can consume three or more years in bureaucratic proceedings inside the Patent Office. As a result, individual inventors who received 15 percent or more of all U. S. patents before the Clinton reforms got barely 5 percent last year.”
The action now moves to the House, where Judiciary Committee Chairman Lamar Smith (R-Texas) has indicated that he plans to introduce a companion bill in the near future..
As a member of the steering committee of the San Diego Inventors Forum, I stand on the side of the individual inventor and small business owner and oppose the conversion to the first to file system. Each month, our meeting is packed with 60 to 80 inventors and entrepreneurs with innovative ideas for new products and technologies. These inventors need the protection of the first to invent system to be able to fully vet their technology before publicly disclosing it after filing for a patent.
Now is the time to express your opinion. Contact your Congressional representative and let them know how you stand on the America Invents Act, especially whether you support or oppose the conversion from a first to invent to a first to file system.
I am an inventor with more than twenty U.S. issued patents, and several active provisional applications. There is an element of U.S. Patent Law that is even more important to me, than “first to invent”.
Since 1984, Chinese patent law has imposed an obligation to manufacture on patent holders. A “duty to manufacture” was part of the English law, that was the basis for the U.S. early patent law. Sadly, to the detriment of small U.S. manufacturers, this duty has never been a part of U.S. patent law. this means that large U.S. corporations are free to patent and shelve inventions, preventing U.S. manufacture and sale.
Several of my own inventions are in this “shelved” state. I urge savingusmanufacturing.com to join me and my non-profit, Orbic Institute, in bringing this to the attention of the public and congress. A simple no-cost change to patent law, could bring a surge of new manufacturing in the U.S. of innovations, presently shelved.
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