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Can the U.S. patent system be saved?

By Gina Smith
July 19, 2012 06:00 AM ET

In a world where companies including Google and Apple pay more for patents and patent litigation than they do for R&D, Chien says, a real problem is evident: Basic research is being shunted aside.

"Google spent $12.5 billion in 2012 to buy Motorola Mobility and its patents, and only $5.2 billion in 2011 on R&D," Chien explains. "In 2011, Apple spent $2.4 billion on R&D but contributed more -- approximately $2.6 billion -- in a single transaction to buy patents from Nortel."

Jim Prosser, a lead Google spokesman, agrees there's a problem. "The industrywide rise in patent litigation is the legacy of overly broad and vague software patents being issued when they shouldn't have, and Google's success makes us a particularly attractive target. Our acquisition of patents, including Motorola Mobility's, strengthens our portfolio and lets us better protect our products from anti-competitive threats. We've never sued anyone offensively using patents."

Experts all agree on this much: New patent regulations, while they contain needed reforms in some important areas, don't truly address what ails U.S. innovation the most: the rise of billion-dollar patent trolls, companies allying and trading patents to reshape technical landscapes, the growing complexity of the system and the lack of protection for universities and other noncommercial entities to escape litigation.

Nor do the new rules address the issue that rankles some observers the most: Too many broad or overlapping patents that confuse the innovation landscape, cause litigation and create an overall delay in getting technology to market.

Enter the America Invents Act

The America Invents Act (AIA) is the biggest change to the 222-year-old patent system since 1952. Signed by President Obama in 2011, it is going into effect gradually.

Perhaps its biggest change -- a switchover to a first-to-file system from the existing first-to-invent system -- goes into effect in March 2013.

What this change means is that a patent will no longer be granted to the person who can prove he or she created an invention first. Instead, patent protection goes to the person who files the patent application first, with a grace period of one year if the inventor has publicly disclosed the invention before filing the patent application.

Moving the U.S. from its current first-to-invent system to a first-to-file-with-grace-period system is bound to upset many small companies, which will argue that it's easier for larger companies to win the race to the patent office than it is to actually invent.

So predicts Stephen Merrill, executive director of the program on science, technology and economy for the National Academies of Science (NAS). He co-authored a paper in 2004 calling for widespread patent reform, and the AIA includes some of those suggestions.

Surviving the battle, then losing the war

It was during the War of 1812. At 8 a.m. on August 24, 1814, some 200 soldiers led by England's Rear Admiral Sir George Cockburn captured the United States capitol of Washington, D.C.

But although soldiers burned or otherwise destroyed many government buildings -- including the Capitol, the Library of Congress, the White House and the Treasury -- they didn't touch the U.S. Patent and Trade Office.

Burning of Washington - 1814
Drawing, "Capture and burning of Washington by the British, in 1814;" 1876 publication. Image courtesy of Wikimedia Commons.

Indeed, the Patent Office building was the only government office left standing at the end of the siege because of the intervention of one man: Dr. William Thornton, who designed the Capitol building and later became the superintendent of patents.

Thornton made an impassioned plea to the soldiers that the building's contents -- thousands of inventions, at that point -- were important to all of humanity, not just to the United States.

Thornton's success, however, was relatively short-lived; just two decades later, the Patent Office did burn down, albeit under much different circumstances. On December 15, 1836, an accidental fire destroyed all of the building's contents -- 10,000 patents and thousands of related models, as well as all documentation. Thornton died in 1828 and didn't live to see it.

Other changes within AIA include a post-grant review process that allows the public to challenge a patent's basis during a nine-month window from the patent's grant date. There already is another process that allows the public to challenge a patent at any time.

Some observers wonder, though, if this won't introduce more cost and complexity. Former USPTO examiner Gill asks, "Who will hire and pay for judges?"

The act also allows for lower fees for companies it recognizes as "micro-entities" -- these are inventors with a gross income smaller than three times the national median income and who haven't previously filed patents. So-called micro-entities get up to a 75% reduction in fees.

The AIA also adds a budget to allow the USPTO to hire more patent examiners and examiners with more experience, which should help improve patent quality, experts say.

Patrick Ross, USPTO deputy communications director, says the agency is hiring now. It will add 1,500 examiners this year and reach 7,800 examiners by December, up from the current 6,800 examiners.

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