Patent Reform Bill Would Raise the Stakes for Small Business IP Practices

The U.S. patent system has long been an outlier in its approach to protecting intellectual property (IP) rights. While every other industrialized country awards IP protection to the first party to apply for a patent, the U.S. system bases its IP decisions on the first inventor of a particular technology. As foreign markets have become more important to high-tech companies seeking to go global from day one, this approach has complicated the country's ability to enter into international agreements that would protect the IP rights of U.S. firms around the globe.

 

In recent years, legislators and industry groups have attempted to harmonize U.S. patent laws with the first-to-file systems used in Europe and Asia. For the third session in a row, Congress is considering a reform package that would put an end to the first-to-invent system and, this time, some change seems more likely to pass. The Patent Reform Act of 2007 would bring U.S. patent regulation more in line with the IP policies of other nations and close many of the perceived loopholes left by previous overhauls of the patent system.

 

Though the first-to-invent system is frequently depicted as an odd anachronism within U.S. patent law, the system has offered some additional protections for smaller businesses. By protecting the original inventor of a new technology instead of the first filer, the first-to-invent system helped to ensure that inventors would not be denied profit from their work simply because another party beat them to the patent office. Filing for patents can be a complex and expensive process that favors larger companies with IP experts on staff.

 

The first-to-invent system, however, is fraught with difficulty since it can be difficult and expensive to determine the first inventor of a particular technology. The proposed legislation would create a more affordable provisional application that would allow smaller businesses to quickly register their patent. Proponents of the new reforms believe the first-to-file system will reduce the costs of litigation over claims to IP ownership and bring more technologies to the public's attention, since inventors now have an additional incentive to register their discoveries.

 

The legislation also would alter the process of challenging new patents. Under the new rules, anyone can challenge the validity of a patent issued within the previous 12 months. Hearings would take place through the patent office, which will reduce the amount spent on patent litigation through the federal courts. These changes are intended to streamline the patent challenge process and reduce the number of "obvious" and infringing patents issued each year. If more than 12 months have passed, the challenger may take the matter to the courts, but only if the case has not been previously heard by the patent office.

 

The changes would make it more important than ever for researchers, entrepreneurs and smaller companies to receive guidance on the patent application process. Filings would have to be made quickly through the patent office and be of sufficient quality to withstand any challenges from competitors or other IP owners. The California Healthcare Institute claims that the streamlined challenge process could do particular harm to biotech firms by making it too easy for competitors to prevent the protection of new life science discoveries. Small firms would have to be prepared for strong challenges to their patents, especially during the initial 12-month period.

 

Check the Library of Congress' THOMAS website for the status and text of the House resolution and the Senate bill.